DAILY MORNING NOTE | 20 October 2023

Singapore shares ended Thursday’s (Oct 19) trading session lower, reflecting a similarly downcast mood seen in key major markets within the region as well as in the US. It fell 1.2 per cent or 37.02 points to close at 3,099.60 after 1.7 billion securities worth S$1.2 billion were traded. Across the broader market, decliners outpaced advancers 405 to 219. Regionally, key markets were pulled into negative territory following a sea of losses in Wall Street a day earlier. The Kospi closed down 1.9 per cent to 2,415.80; Australia’s ASX 200 finished 1.4 per cent lower at 6,981.60 and the Nikkei 225 fell 1.9 per cent to 31,430.62. The biggest loser of all was Hong Kong’s Hang Seng Index, which dropped 2.5 per cent at the close to finish at 17,295.89.

Wall Street stocks fell on Thursday (Oct 19) as investors monitored rising bond yields and assessed the latest comments by the Federal Reserve chief. The yield on the 10-year US Treasury note, seen as a proxy for US interest rates, hovered just below five per cent – a level it last breached in 2007. The Dow Jones Industrial Average lost 0.8 per cent to end at 33,414.04. The S&P 500 Index slipped 0.9 per cent to 4,277.99, while the tech-heavy Nasdaq Composite Index slumped 1.0 per cent to 13,186.18. Fed chair Jerome Powell said on Thursday that US inflation is “still too high” despite a recent slowdown. He told a New York conference that if additional data showed “persistently above-trend growth” or a reversal in labour market cooling, the central bank could reconsider its current pause in rate hikes.

SG

Keppel Corp 3Q Business Update

Keppel Corp issued 3Q business update without financial details. 9M23 revenue grew 5% YoY to S$5.3bn, implying 3Q23 fell 6.1% YoY. Real estate segment (-53.9% YoY) was hit by lower home sales in its key China and India markets, and reduced contribution from listed REITs and private funds.

Infrastructure 3Q23 revenue rose marginally by 1.3% YoY. Revenue is likely to remain stable, as 100% of its customers are locked in with fixed or indexed electricity price plans for next two years. We believe Keppel earns a fixed spread, with costs pass-through including the higher carbon taxes in 2024 and 2026. Infrastructure accounts for 67.5% of 9M23 revenue.

Connectivity 3Q revenue rose 6.1%, as M1 captured more enterprise customers (as at Sep 23: +29.4% YoY), higher roaming income, and contributions from data centres in Beijing and Singapore. Net gearing has risen to 0.89x (Jun 23: 0.86x) after the distribution of dividend.

Management stated that 3Q23 and 9M23 net profit was higher YoY (1H23: +2.3% YoY). We maintain our FY23e net earnings estimates (excluding discontinued operations) at S$886mn (+5.0% YoY). After the distribution of KREIT shares at S$0.18 per Keppel share, our SOTP TP is revised to S$7.52 (from S$7.70). Maintain BUY.

Peggy Mak
Research Manager
peggymak@phillip.com.sg

The application for the third fortnightly October tranche of MAS 6-month T-bills was open yesterday (19th Oct) for investors to apply. The Auction Date, where the cut-off yield for this tranche will be announced on 26th Oct 2023.

Latest Singapore 6-Month Treasury Bill result
Cut-Off Yield: 3.87%
% of Non-Competitive Application Allotted: 79%

A consortium led by ST Engineering Urban Solutions has been awarded a contract by Abu Dhabi’s Integrated Transport Centre (ITC) to design, build and maintain the emirate’s first multimodal, intelligent transport-management platform. From now until 2027, ST Engineering’s urban solutions unit will design and build the Intelligent Transportation Central Platform (ITCP), and be responsible for system integration and overall project management. Its consortium partner, Injazat Data Systems, will provide the IT, security infrastructure and system interfaces.

Net revenue for Marina Bay Sands (MBS) grew 34.3 per cent to US$1 billion for the third quarter ended September 2023 from US$756 million the year before, as travel and tourism spending in Singapore continued to recover over the quarter. Las Vegas Sands’ (LVS) integrated resort in Singapore reported topline improvements across all its segments. Its casino segment remained the largest revenue contributor at US$698 million, up 36.9 per cent from US$510 million in Q3 FY2022. Rolling chip volume grew 19.1 per cent to US$8.1 billion, from US$6.8 billion in the same quarter a year earlier. Revenue from rooms at MBS grew 35.9 per cent year on year to US$125 million from US$92 million, as hotel occupancy improved by 0.3 percentage point to 96.3 per cent in the latest quarter. The average daily rate improved to US$681 from US$515 in the year-ago quarter, resulting in revenue per available room of US$656 compared with US$494 a year earlier. Adjusted property earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 43.1 per cent year on year to US$491 million from US$343 million.

US

US existing home sales dropped to a 13-year low in September as surging mortgage rates and tight supply combined to reduce affordability for many first-time buyers. Existing home sales fell 2.0 per cent last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010, the National Association of Realtors (NAR) said on Thursday (Oct 19). They are counted at the closing of a contract and last month’s sales likely reflected contracts signed in August, when the rate on the popular 30-year fixed mortgage vaulted above 7 per cent. Economists polled by Reuters had forecast home sales slipping to a rate of 3.89 million units. Sales dropped 1.1 per cent in the South and decreased 4.1 per cent in the Midwest. They rose 4.2 per cent in the Northeast and slumped 5.3 per cent in the West. Home resales, which account for a big chunk of US housing sales, declined 15.4 per cent on a year-on-year basis in September.

The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week, suggesting that strong job growth persisted in October as the labour market remains tight. The unexpected decline in initial jobless claims reported by the Labor Department on Thursday (Oct 19) added to solid retail sales and factory production in September in suggesting sustained momentum in the economy. The stream of upbeat economic data bolstered expectations that the Federal Reserve could keep interest rates higher for longer. Financial markets continued to discount a rate hike next month because of soaring US Treasury yields. Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 198,000 for the week ended Oct 14, the lowest level since January. Economists polled by Reuters had forecast 212,000 claims for the latest week.

American Airlines on Thursday (Oct 19) beat estimates for third-quarter adjusted profit and said bookings for the upcoming holiday season have been stronger than last year. US airlines with international operations are seeing relentless demand for long-haul flights as a stronger dollar encourages more Americans to plan trips abroad for leisure and recreation. “I see demand, especially as we approach the holidays, very strong,” chief executive officer Robert Isom said on Thursday in an interview with CNBC. “Overall, I feel really good about where demand is, not just now. People want to connect. People want to travel.” American Airlines reported an adjusted profit of 38 US cents per share for the quarter ended Sept 30, beating analysts’ average estimates of 25 US cents per share, according to LSEG data. However, the Fort Worth, Texas-based company cut its forecast for the year as it grapples with higher expenses. Jet fuel prices increased in the quarter through September due to tight oil supplies, raising operational costs for carriers. It now expects an adjusted profit of US$2.25 per share to US$2.50 per share for the year, compared with its previous forecast of US$3 to US$3.75 per share.

Taiwanese chipmaker TSMC posted a 24.9 per cent fall in third-quarter net profit on Thursday (Oct 19) as global economic woes hit demand for chips used in applications from cars to cellphones and servers and coming off a high base last year. Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract chipmaker and a major Apple supplier, saw July-September net profit fall to T$211 billion (S$8.95 billion) from T$280.9 billion a year earlier. The profit beat a T$195.5 billion LSEG SmartEstimate, which is weighted towards forecasts from analysts who are more consistently accurate. TSMC, Asia’s most valuable listed company, said third-quarter revenue dropped 14.6 per cent to US$17.3 billion, in line with the company’s previous forecast of US$16.7 billion to US$17.5 billion. Capital expenditure in the third quarter was US$7.1 billion, TSMC said, compared with US$8.17 billion in the previous quarter. As the biggest maker of advanced chips, TSMC must navigate an uncertain industry outlook and a US-China chip spat that could make it vulnerable.

Finnish telecom gear group Nokia on Thursday (Oct 19) said it will cut up to 14,000 jobs as part of a new cost savings plan after third-quarter sales dropped 20 per cent due to slowing sales of 5G equipment in markets such as North America. The company is targeting between 800 million euros (S$1.16 billion) and 1.2 billion euros in cost savings by 2026 as it seeks to be on track to deliver its long-term comparable operating margin plan of at least 14 per cent by 2026. The programme is expected to lead to a 72,000-77,000 employee organisation compared to the 86,000 employees Nokia has today, the company said. “Nokia expects to act quickly on the programme with at least 400 million euros of in-year savings in 2024 and a further 300 million euros in 2025,” the company said. Comparable net sales fell to 4.98 billion euros from 6.24 billion euros last year, missing the estimated 5.67 billion euros, according to a LSEG poll.

Nestle posted lower-than-expected nine-month sales growth on Thursday (Oct 19) as higher product prices made shoppers baulk and hurt volumes, and said it had not seen any impact from weight loss drugs on its sales. The packaged goods industry has for over two years hit shoppers with higher prices, citing higher input costs that started with the Covid-19 pandemic and were exacerbated by Russia’s invasion of Ukraine. Everything from sunflower oil to freight has become more expensive, taking a toll on global supply chains. Nestle’s 8.4 per cent price increase was below the average analyst estimate of 8.6 per cent. Real internal growth (RIG) – or a measure of sales volumes – fell 0.6 per cent, meeting expectations. In the third quarter, RIG improved to a decline of 0.3 per cent, Nestle said. Total reported sales decreased by 0.4 per cent to 68.8 billion Swiss francs (S$105.2 billion).

Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR

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