DAILY MORNING NOTE | 21 March 2023

Samudera Shipping Line Ltd (SGX: S56)

Analyst: Zane Aw

(Current Price: S$1.32) – TECHNICAL SELL
Sell price: S$1.32 Stop loss: S$1.40 Take profit: S$1.19

Singapore shares tumbled 1.4 per cent on Monday (Mar 20), the trio of local lenders all suffered losses – DBS fell 1 per cent or S$0.33 to S$32.22, UOB shed 1.2 per cent or S$0.33 to close at S$28.21, and OCBC dropped 1.5 per cent or S$0.18 to finish at S$12.08.

Wall Street stocks overcame early weakness to end higher Monday (Mar 20). The Dow Jones Industrial Average jumped 1.2 per cent to end at 32,244.58, while the broad-based S&P 500 Index rose 0.9 per cent to 3,951.57. The tech-heavy Nasdaq Composite Index picked up 0.4 per cent to 11,675.54.

SG

Shares of Golden Energy and Resources (Gear) were up 5.0% on Monday (Mar 20), rising S$0.045 to S$0.945. This is the highest the counter has traded since it listed on the Singapore Exchange. This comes after the mining group announced on Sunday that it would raise its offer to take the company private by 13 per cent to S$0.181 per share, from S$0.16. The cash alternative price will also be raised by 18 per cent to 6,500 rupiah, from 5,500 rupiah, with the revised cash alternative price being paid in Singapore dollars based on a fixed exchange rate of S$1 to 11,432.09 rupiah.

Comment:
The offer is aggressive from two perspectives. Firstly, the cash exit offer price of S$0.973 represents the highest price since listing. Prior to the revised offer the highest close was S$0.925. Secondly, the revised offer (17% higher) is one of the highest recorded. Most revised offers are generally higher by 4% to 8%. Also, in the cash exit offer, the price minority shareholders can exchange their Golden Energy Mines Tbk (GEMS) is raised from Rp5500 to Rp6500. And the additional cash exit price is raised by S$0.16 to S$0.181. The minority shareholders’ exit offer has jumped from S$0.83 to S$0.973.

Paul Chew
Head of Research
paulchewkl@phillip.com.sg

A Financial Services and Markets (Amendment) Bill was introduced in Parliament on Monday (Mar 20) to provide for information sharing when combating illicit financial activities. These include preventing and detecting money laundering, terrorism financing and the financing of proliferation of weapons of mass destruction. The new Bill, if passed, will empower the Monetary Authority of Singapore (MAS) to set up and maintain an electronic information-sharing system. It also sets out the circumstances under which MAS and a suspicious transaction reporting officer may obtain or access such information and how they can use the information.

Thai conglomerate DTGO is weighing listing its UK hospitality assets via a real estate investment trust in Singapore as soon as next year, according to people with knowledge of the matter. The Bangkok-based company is in talks with potential advisers on the initial public offering of the Reit, which could raise about £200 million (S$327.3 million), the people said. The UK hospitality assets involved could be worth about £500 million, said the people, who asked not to be identified as the process is private.

Boustead Projects will be delisted after its offeror, Boustead Singapore has received valid acceptances of around 90.69% of the total number of shares in the former on March 17. With less than 10% of Boustead Project’s shares now held by the public, Boustead Singapore will proceed with its intention to privatise and delist the company from the SGX-ST. Trading of shares in Boustead Projects has been suspended.

Lippo Mall Indonesia Retail Trust’s (LMIRT) manager says that it has informed holders of its $140 million perpetual securities tranche issued in September 2016 that they will not be paying distributions scheduled for March 27.

Real estate company Second Chance Properties announced that the group’s net profit for the first half of its financial year ending Feb 28, 2023, will “increase significantly” compared to the net profit of S$4.6 million a year ago, based on a preliminary review of unaudited financial statements. The expected increase in net profit is due to the sale of a few investment properties. Gains of S$9.46 million have also been realised upon cash acquisition as well as disposal of a few equity instruments held by the group and classified as financial assets, at fair value through other comprehensive income.

US

Amazon.com said on Monday (Mar 20) it would cut 9,000 jobs, making it the latest Big Tech company to announce a second round of layoffs in the face of a possible recession. CEO Andy Jassy said the company had added substantial amount of staff in the past few years, but the uncertain economy has forced it to choose cost and headcount cuts. The cuts will be concentrated in its cloud services, advertising and Twitch units.

Comment: This round of layoffs mainly affects employees in the AWS business as the company has been expecting a further growth deceleration for the segment in 2Q23. Although the 9,000 figure is huge, it only represents about 0.6% of Amazon’s total number of employees or 2.6% of its corporate workforce. This brings the number of affected employees to 27,000 (~1.8% of the total as of FY22). Although the magnitude of cost reduction is yet to be seen, we still like the move as it shows that the company remains committed to cut down on costs and improve margins, especially coupled with the recent announcement that it will be sourcing products directly from brand owners and bypassing its EU distributors.

Maximilian Koeswoyo
Research Analyst
maximilian@phillip.com.sg

The Federal Deposit Insurance Corporation (FDIC) on Monday (Mar 20) decided to break up Silicon Valley Bank (SVB) and hold two separate auctions for its traditional deposits unit and its private bank, after failing to find a buyer for the failed lender last week. It will seek bids for the bridge bank until Mar 24. For Silicon Valley Private Bank, which is housed within SVB’s retail operations and caters to high-net-worth individuals, the FDIC will seek bids until Mar 22. Bank and non-bank financial firms will be allowed to bid on the asset portfolios.

A subsidiary of New York Community Bancorp has entered into an agreement with US regulators to buy deposits and loans from New York-based Signature Bank. The Federal Deposit Insurance Corporation (FDIC) said the deal would see the subsidiary, Flagstar Bank, assume substantially all of Signature Bank’s deposits, some of its loan portfolios and all 40 of its former branches. Roughly $60 billion of Signature Bank’s loans and $4 billion of its deposits would remain with it in receivership, the agency said.

Sea Ltd. has made the changes it needs to deliver profits over the long haul, billionaire founder Forrest Li said in a memo to staff, assuring workers who had survived months of steep job cuts that the worst is over. “I want to assure you that, assuming no major shift in our external environment, our large-scale changes are complete, and we do not foresee further major changes,” Li said. But he warned the company still needs to prove that it can sustain a profit. “The world will be watching to see whether this quarter’s result is just a momentary blip or the start of a long-term trend,” he said. “Our job is not yet done.”

China’s PDD Holdings missed Wall Street’s estimates for fourth-quarter revenue on Monday (Mar 20) as a rise in Covid-19 cases in the country curtailed consumer spending. PDD booked revenue of 39.82 billion yuan (S$7.8 billion) for the quarter ended Dec 31, compared with estimates of 41.01 billion yuan, according to Refinitiv data. Revenue from merchandise sales fell 29 per cent during the quarter.

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

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