DAILY MORNING NOTE | 21 November 2023

Singapore stocks closed lower on Monday (Nov 20), bucking a regional trend where most markets ended positive. It fell 0.4 per cent or 13.09 points to close at 3,111.58. ST Engineering, which was trading ex-dividend, was the top decliner, after falling 2.3 per cent or S$0.09 to close at S$3.78. The three local banks also ended the session in the red, with DBS slipping 0.8 per cent, OCBC falling 0.9 per cent and UOB declining 0.1 per cent. ThaiBev was the top gainer, rising 2.9 per cent to S$0.54. Across the broader market, advancers outnumbered decliners 308 to 276 after 1.1 billion securities worth S$818.1 million were traded. Singtel was the most actively traded by value, with 43.8 million shares worth S$100.9 million changing hands. The counter – which was trading ex-dividend – slipped 0.9 per cent to S$2.31.

Tech shares led the US stock market higher on Monday, extending an upturn on retreating US Treasury yields and bullish sentiment about artificial intelligence. Stocks have been on the front foot since late October, as yields have fallen and markets became more confident the Federal Reserve is done hiking interest rates. The Dow Jones Industrial Average finished up 0.6 per cent at 35,151.04. The broad-based S&P 500 gained 0.7 per cent to 4,547.38, while the tech-rich Nasdaq Composite Index gained 1.1 per cent to 14,284.53.

SG

Singtel shares hit 52-week low of $2.28 after Optus chief executive officer (CEO) Kelly Bayer Rosmarin has tendered her resignation, weeks after a network-wide outage left over 10 million customers without phone or Internet services for 12 hours. The outage resulted in disruption to critical services, such as hospitals and train services, and an uncomfortable senate hearing for Rosmarin on Nov 17.The move came after she fronted a Senate inquiry on Friday morning, where she expanded on the cause of the network outage and how Australia’s second-largest telco recovered and responded, along with the telco’s commitment to restore consumer trust. Optus has appointed chief financial officer (CFO) Michael Venter to assume the role of interim CEO as it starts its global search for a new chief. The Australian telco will also appoint former StarHub CEO Peter Kaliaropoulos as chief operating officer – a newly created position.

Food processing and retail company Far Ocean Sea Products and one of its directors have been convicted of multiple offences under the Wholesale Meat and Fish Act (WMFA). Singapore Food Agency (SFA) said on Monday (Nov 20) that Far Ocean and one of its directors, Quek Ruiming Jordan, were handed fines of S$223,000 and S$155,000 respectively. The charges were for offences committed in July 2019 including failure to mark food with expiry dates; mislabelling of food products; operating an unlicensed food processing room; and obstructing officers in the execution of their duties.

Boustead Singapore has made an unconditional cash offer of $1.18 to the shareholders of Boustead Projects Limited (BPL) . Following the completion of the offer, BPL will be delisted from the Singapore Exchange. The company had previously made an unconditional cash offer of 95 cents on March 27. At the close of its previous offer, Boustead Singapore had acquired 20.63% of BPL’s shares to increase its shareholding of BPL to 75.5%.

US

Citigroup is eliminating more than 300 senior manager roles as part of chief executive officer Jane Fraser’s efforts to simplify the Wall Street giant. The company started announcing the cuts – which affect staffers two levels below Fraser’s executive management team – on Monday (Nov 20). They amount to roughly 10 per cent of the workers at that level, according to the person, who asked not to be identified discussing personnel information.

The US dollar slid to a more than two-month low on Monday (Nov 20), extending a downtrend from last week as traders reaffirmed their belief that US rates have peaked and turned their attention to when the Federal Reserve could begin to cut. The US dollar index hit a low of 103.46 in European trade, its weakest level since Sep 1, extending a nearly 2 per cent decline from last week – the sharpest weekly fall since July. Against the weaker greenback, the euro hit its highest since August at US$1.0937, while the yen firmed to a 6½ week high of 148.1 per US dollar.

Mcdonald’s said on Monday (Nov 20) it would acquire investment firm Carlyle’s 28 per cent stake in a partnership that manages its business in mainland China, Hong Kong and Macau, as the burger chain looks to simplify its structure in the region. The deal will help McDonald’s raise its holdings to 48 per cent, while a consortium led by state-backed conglomerate Citic will maintain its controlling ownership with a 52 per cent stake in the business. The move comes nearly six years after the burger chain agreed to sell 80 per cent of its China and Hong Kong businesses to Citic, its investment arm Citic Capital and Carlyle for up to US$2.1 billion. McDonald’s, which currently has 5,500 stores in China, has been increasing the market share in its fastest-growing region by banking on promotions to drive demand higher in a weak consumer spending environment.

Zoom Video Communications raised its annual revenue and profit forecasts on Monday, as hybrid work trends and the integration of artificial intelligence technology into its products boosted demand. Platforms including Zoom, Microsoft’s Teams and Cisco’s Webex became household names during the Covid lockdowns and have enjoyed resilient demand as many businesses shifted to hybrid work models. Zoom expects annual adjusted profit per share between US$4.93 and US$4.95, higher than its prior forecast of US$4.63 and US$4.67.

Oil prices climbed more than 2 per cent on Monday as further supply cuts in Opec+ production are expected to be announced following a meeting of member countries early next week. Brent crude futures settled up US$1.71, or 2.1 per cent, at US$82.32 a barrel. The front-month December West Texas Intermediate crude (WTI) expired at US$77.60, up US$1.71, or 2.3 per cent. The more active January futures gained US$2.39 to US$77.83, up 1.8 per cent.

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

RESEARCH REPORTS

Silverlake Axis Ltd – Earnings hurt by project-related revenue

Recommendation: Buy (Maintained), Last done: S$0.27, TP: S$0.38, Analyst: Glenn Thum

– 1QFY24 earnings of RM48.9mn were slightly above our estimates. 1QFY24 earnings were at 27% of our FY24e. The 15% YoY dip in earnings came from lower-than-expected project-related revenue and higher-than-expected OPEX.

– 1QFY24 recurring revenue comprising maintenance and enhancement services, insurance ecosystem transactions and services, and retail transactions processing revenue grew 12% YoY, while project-related revenue comprising software licensing and software project services fell 12% YoY. Orderbook is RM720mn-730mn with the total deals pipeline at RM1.8bn. One new Indonesian bank secured for SIBS with two potential new banks to be secured in FY24.

– Maintain BUY with an unchanged target price of S$0.38. Our FY24e estimates remain unchanged. Silverlake’s recurrent revenue continues to build up from new products (MOBIUS, Symmetri) and maintenance revenue expanding with rising security enhancement of core SIBS software. Our target price is pegged to 20x P/E FY24e. We expect MOBIUS and the recovery in bank IT spending after two cautious pandemic years to be the key growth drivers for the company.

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