DAILY MORNING NOTE | 22 March 2024

Trade of The Day

AbbVie Inc. (NYSE: ABBV)

Analyst: Zane Aw

(Current Price: US$176.27) – TECHNICAL SELL
Sell price: US$176.27 Stop loss: US$182.00 (-3.25%)
Take profit 1: US$168.00 (+4.69%) Take profit 2: US$163.00 (+7.53%)

Factsheets


Tesla Inc. (NASDAQ: TSLA)

Analyst: Zane Aw

(Current Price: US$175.66) – TECHNICAL BUY
Buy price: US$175.66 Stop loss: US$166.00 (-5.50%)
Take profit 1: US$194.00 (+10.44%) Take profit 2: US$206.00 (+17.27%)

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Trades Initiated in the past week

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Singapore shares rallied after the US Federal Reserve overnight made clear its commitment to three rate cuts, putting the flattish performance in the past few days behind them. The banks closed 1.1 to 2.1 per cent higher. UOB : U11 +1.07% logged the smallest rise and closed up S$0.31 at S$29.22. DBS : D05 +2.06% had the highest increase and rose S$0.72 to end the day at S$35.66. OCBC : O39 +1.64% was up 1.6 per cent or S$0.22 at S$13.64.

Wall Street stocks finished at all-time highs for a second straight day Thursday on a mix of optimism about the economy and Federal Reserve policy, offsetting a big drop in Apple shares. All three major indices climbed to fresh records, led by the Dow Jones Industrial Average, which moved nearer to 40,000 points. The Dow Jones Industrial Average finished at 39,781.37, up 0.7 per cent. The broad-based S&P 500 advanced 0.3 per cent to 5,241.53, while the tech-rich Nasdaq Composite Index added 0.2 per cent at 16,401.84.

Top gainers & losers

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Events Of The Week

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SG

Olam Group’s indirect 64.57 per cent-owned subsidiary, Olam Agri, has launched a non-binding indicative offer to acquire all shares in Australian-listed cotton ginning company Namoi Cotton for A$122 million (S$107.8 million). The consideration of A$0.59 per Namoi share comprises A$0.58 in cash and a permitted special dividend of A$0.01 per share, said Olam on Thursday (Mar 21) morning before the market opened. Louis Dreyfus’ offer made on Jan 19, 2024, was at a total cash consideration of A$0.51 per share, to acquire a remaining 83 per cent interest in Namoi which the agriculture company did not own at the time. Olam Agri intends to finance the acquisition with existing cash reserves as well as external debt funding. However, it emphasised that the deal is not conditional on funding, nor is any equity raising being considered to fund it.

Restaurant operator No Signboard said on Thursday (Mar 21) that it will sell its trademarks under a settlement agreement with its former executive chairman, Lim Yong Sim, former controlling shareholder GuGong and Mattar Road No Signboard Seafood Restaurant (MRNSSR). The move comes a day after GuGong and Lim said they would sell their combined 254.4 million shares in the company to three investors for S$500,000. Lim also tendered his resignation on Wednesday. Under the terms of the settlement agreement, GuGong, Lim and MRNSSR agreed to release and discharge No Signboard and its board from all claims, demands, liabilities and rights that each of them may have. The company also agreed to release Lim, GuGong and MRNSSR from all claims, demands and liabilities. GuGong and Lim, on their part, will not take further steps to call for an extraordinary general meeting of the company. The company further announced that it will sell its “No Signboard” trademarks to GuGong for S$10,000. It noted that the trademarks are not capitalised as intangible assets and have no net book value or open market value.

Singapore Airlines (SIA) has issued notes worth US$500 million ($670 million) under its $10 billion multicurrency medium term note programme on March 21. The 10-year notes, which are due in March 2034, will carry a coupon of 5.25% per annum, payable semi-annually in arrear. They will be issued in denominations of US$200,000 and in higher integral multiples of US$1,000. The notes are expected to be admitted to the Official List of the SGX-ST with effect from 9.00am on March 22.


US

FedEx plans to buy back US$5 billion of its shares as cost-cutting efforts have helped boost the courier’s profits. Adjusted earnings were US$3.86 a share for the period ending Feb 29, topping Wall Street’s third-quarter expectations of US$3.46 a share, FedEx said on Thursday (Mar 21). Sales of US$21.7 billion fell slightly short of estimates compiled by Bloomberg. Chief executive officer Raj Subramaniam is in the process of restructuring the company’s delivery networks, part of a sweeping plan that has included tens of thousands of job cuts. The overhaul, announced last year, marks a shift from the strategy of founder Fred Smith, who started FedEx in 1971 and long defended a two-network approach as a competitive advantage. The shares rose as much as 13 per cent after regular trading in New York, while competitor United Parcel Service advanced 4.6 per cent. FedEx had gained 4.7 per cent this year to Thursday’s close, trailing the broader market.

Lululemon Athletica offered a sales outlook for the first quarter and full year that fell short of Wall Street’s expectations, driving shares down in extended trading. The company sees net revenue in the current fiscal year in the range of US$10.7 billion to US$10.8 billion, according to a statement. That would represent growth of 11 to 12 per cent, which is well below the 19 per cent it posted the previous year. The upper limit is also below analysts’ average estimate. The shares fell 10 per cent at 5.08 pm in late New York trading. The stock has slipped 6.3 per cent so far this year to Thursday’s (Mar 21) close, compared to a 9.9 per cent gain for the S&P 500 Index. Lululemon’s performance has slowed in recent quarters following a stellar post-pandemic run. It is a relative slowdown, however: Quarterly sales have still grown by double digits while many US apparel companies have reported declines as consumers shift spending elsewhere.

Nike shares fell after the athletic-wear retailer forecast a drop in revenue early in its next fiscal year as it realigns its product offerings. The world’s largest sportswear retailer expects revenue in the first half of the next fiscal year to be down low single digits, but sees revenue and earnings growing for the full year, minus the impact of an ongoing restructuring. It expects revenue in the fourth quarter of this year to be up slightly. Nike is shifting its sneaker offerings as it tries to find sweet spots across categories. It will reduce the supply of classic shoes such as Air Force 1s and will dial back its Pegasus running shoes ahead of new product launches. Shares fell 5.6 per cent at 5.45 pm in after-market trading in New York on Thursday (Mar 21). The stock had been down 7.1 per cent this year to the day’s close. Nike reported sales for the quarter ended Feb 29 that were stronger than anticipated as the company ramps up a multiyear cost-cutting plan in the face of weaker demand for its sneakers and apparel.

Social media platform Reddit’s shares ended their first day of trading in New York up 48 per cent, signalling that investor appetite for initial public offerings (IPOs) of promising yet loss-making companies could be returning. Reddit, which has not turned an annual profit since launching in 2005, lured investors by positioning its content as training grounds for artificial intelligence (AI) programs. Reuters reported last month that Reddit struck a data licensing deal with Google worth about US$60 million a year. While Reddit still relies on advertising for the vast majority of its revenue, it touted AI in its IPO marketing roadshow as an area of growth. It also disclosed last week that the US Federal Trade Commission is looking into its AI data licensing deals. Shares of the San Francisco-based company opened at US$47 on the New York Stock Exchange on Thursday (Mar 21) after pricing at US$34 in the IPO, the top of the company’s indicated price range. They ended trading at US$50.44. The IPO valued Reddit at US$6.4 billion, and the company and its selling shareholders raised US$748 million. Reddit was valued at US$10 billion in a private fundraising round in 2021, and the strong stock market reception indicated that the company may not have needed to curb its valuation expectations so much to get the IPO off the ground.

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


RESEARCH REPORTS

Phillip Macro Update – Key Points for March FOMC Meeting

Analyst: Shawn Sng

  • Forthcoming but not appropriate yet – In this FOMC meeting, the committee mentioned economic activities are aligned with their dual mandate, as job gains remained strong while the unemployment rate remained low. But inflation remains elevated. Therefore, for the 5th consecutive meeting, the Federal Reserve Committee has chosen to keep its rates steady at a level of 5.25-5.5%.
  • Bumps along the way before reaching the targeted range of 2% – In the latest inflationary data releases, the Consumer Price Index (CPI) saw a slight uptick. The path towards the Fed’s 2% target range isn’t all that smooth sailing, but it is surely moving towards the right direction.
  • Federal Reserve Projection/Guidance – In this month’s meeting, a Summary of Economic Projection (SEP) was released, and a dot plot graph was provided (Figure 2). The projected rate for 2024 remained as per the SEP that was released back in December’s meeting last year at 4.6% (equating to 3 probable 25bps cuts this year, and a further 3 cuts each in 2025 and 2026).


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