DAILY MORNING NOTE | 23 August 2023

Trade of the Day

Nike, Inc (NYSE: NKE)

Analyst: Zane Aw

(Current Price: US$102.86) – TECHNICAL SELL
Sell price: US$102.86 Stop loss: US$108.00
Take profit 1: US$92.00 Take profit 2: US$82.00

Singapore shares posted gains on Tuesday (Aug 22) as the country’s presidential hopefuls filed their nomination papers. Singapore stocks snapped a seven-day losing streak, rising 0.2 per cent or 5.85 to 3,159.88. Across the broader market, gainers outnumbered losers 334 to 257 as 1.2 billion securities worth S$925.4 million changed hands. Japan’s Nikkei 225 climbed 0.9 per cent, while South Korea’s Kospi Composite Index was up 0.3 per cent. The Hang Seng Index gained 1 per cent and the FTSE Bursa Malaysia KLCI increased 0.1 per cent.

The S&P 500 fell Tuesday, weighed by concerns over rising Treasury yields ahead of a key speech later this week from Federal Reserve Chairman Jerome Powell, as well as declines in banking and retail shares. The S&P 500 edged 0.3% lower to 4,387.55, while the Dow Jones Industrial Average slid 174.86 points, or 0.5% to 34,288.83. The tech-heavy Nasdaq Composite eked out a small gain to close at 13,505.87.

SG

A unit of Boustead Singapore has secured a contract related to once through steam generators (OTSGs) worth around S$31 million, the company said on Tuesday (Aug 22). As part of the contract, wholly-owned subsidiary Boustead International Heaters will design, engineer and supply the generators for a floating production, storage and offloading vessel, to be deployed in Latin America. This is the second contract for OTSGs secured by the unit in the past year, and rides on its efforts to bolster its product offerings and enhance capabilities in OTSGs. The contract will raise the group’s engineering order backlog to S$587 million. Boustead Singapore expects the contract to have a positive material impact on its profitability and earnings per share for its financial year ending Mar 31, 2024, although it will unlikely have a material impact on its net tangible asset value per share.

ComfortDelGro on Tuesday (Aug 22) said it will pay out its interim dividend of S$0.029 per ordinary share a day earlier than planned, because the original payment date – Sep 1 – has been declared a public holiday for the Presidential Election. The interim dividend, for its financial year ending Dec 31, 2023, was declared on Aug 14. The land transport company said the dividend would be issued on the back of its strong performance for its fiscal half ended Jun 30. The S$0.029 interim dividend represents a dividend payout ratio of 80 per cent of Patmi, the group emphasised in its statement, noting that it has generally paid out 70 to 80 per cent of Patmi in dividends over the years. With the change in payment date, ComfortDelGro said it closed the share transfer books and register of the members of the company at 5pm on Tuesday, to determine shareholders’ entitlement to the declared interim dividend.

Seatrium Group’s unit Seatrium New Energy, formerly known as Keppel Fels, on Tuesday (Aug 22) delivered its second jackup rig to Adnoc Drilling. Announcing this in a bourse filing, the Singapore-based shipbuilder, which was renamed from Sembcorp Marine, said this was significant as the rig, called AlSila, was delivered on schedule, showcasing the group’s ability to “deliver world-class assets on time and on budget”. Seatrium and Seatrium New Energy were given new names following Sembcorp Marine’s merger with Keppel Offshore & Marine (Keppel O&M) earlier this year. The jackup rig delivered on Tuesday was built at Seatrium’s Pioneer Yard in Singapore, and is part of a series of five rigs that Seatrium New Energy had been building for Borr Drilling.

US

The Subway sandwich chain is near a deal to be acquired for more than US$9 billion in a transaction that could be announced as soon as Wednesday, a person familiar with the matter said. Bids for the sandwich chain were due on Tuesday, the person said, with competing offers from Roark Capital and a consortium that includes private equity firms TDR and Sycamore. The winner is expected to be the high bid in an all-cash deal. Originally founded in 1965 as an Italian-style submarine sandwich shop, Subway today has nearly 37,000 restaurants in more than 100 countries. The fast-food chain announced in February it hired JPMorgan to advise it on a possible sale, while saying it “remains committed to the future,” according to a February 14 press release.

Call of Duty maker Activision Blizzard will sell its streaming rights to Ubisoft Entertainment in a fresh attempt to win approval from Britain’s anti-trust regulator for its US$69 billion sale to Microsoft. Microsoft announced the biggest gaming deal in history in early 2022, but the acquisition was blocked by Britain’s competition regulator, which was concerned the US computing giant would gain too much control of the nascent cloud gaming market. After months of back-and-forth, the Competition and Markets Authority (CMA) said on Tuesday (Aug 22) it had stuck by its original decision to veto the deal, forcing Microsoft to come forward with new terms. Under the restructured deal, Ubisoft will acquire the cloud streaming rights for Activision’s existing PC and console games, and any new games released by Activision in the next 15 years.

Macy’s said Tuesday it will open four more stores that look a lot different than its typical giant mall anchors as it tries to refresh a brand that has lost luster with many shoppers. The struggling retailer thinks the format is working. The new shops will open in the fall in Boston, Las Vegas and San Diego, and another debuted this month in suburban Indiana. The locations will be smaller and situated in strip malls. They will host events and frequently swap out merchandise. CEO Jeff Gennette said on Tuesday (Aug 22) Macy’s smaller stores outperformed the company in the most recent quarter. Those that have been open for more than a year posted sales growth in the three-month period. Across the company overall, comparable sales on an owned-plus-licensed basis dropped 7.3%.

Dick’s Sporting Goods reported a 23% drop in profits and slashed its earnings guidance for the year after it saw an uptick in retail theft and implemented aggressive markdowns to clear out excess inventory in its outdoor category, the company announced Tuesday. For the first time in three years, Dick’s fell short of Wall Street’s estimates on the top and bottom lines. It also announced cuts to its global head count. The company’s shares closed 24% lower Tuesday, wiping out the stock’s 22% year-to-date gain through Monday’s close. The company’s reported net income for the three-month period that ended July 29 was $244 million, or $2.82 per share, compared with $318.5 million, or $3.25 per share, a year earlier. Sales rose to $3.22 billion from $3.11 billion a year earlier.

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

RESEARCH REPORTS

Hyphens Pharma International – Year of investment and challenges

Recommendation: BUY (Maintained); TP S$0.35 Last close: S$0.28; Analyst Paul Chew

– 2Q23 PAT was down 29% YoY and below expectations. 1H23 revenue and PATMI were 46%/39% of our forecasts. The discontinuation in Biosensors distribution, absence of a major hospital tender and supply disruptions of several specialty pharma products was a drag on earnings.

– Hyphens announced a 3.6 cents special interim dividend for the 5th anniversary of its IPO.

– We maintain our FY23e revenue but lower our PATMI by 11% to S$8.0mn. Our operating expense forecast is raised as Hyphens will be investing more in senior hires and building up the DocMed platform. Our DCF target price is lowered to S$0.35 (prev. S$0.39). Our BUY recommendation is maintained.

NetLink NBN Trust – Waiting for tariff review

Recommendation: NEUTRAL (Maintained); TP S$0.87, Last close: S$0.85; Analyst Paul Chew

– Results were within expectations. 1Q24 revenue and EBITDA were 25%/25% of our FY24e forecasts. Core residential fibre revenue was up 1.4% YoY to S$61.5mn.

– 1Q24 EBITDA was up 3% YoY to S$75mn excluding the 38% surge in interest expense to S$4.3mn. Residential connections during the quarter was 4,023, below our trendline growth of 5,500 per quarter.

– No change to our FY24e forecast and DCF target price of S$0.87. Our NEUTRAL rating is unchanged. The new fibre rates NetLink can charge its customers is expected to be announced soon. Our base case is that fibre rates will see a modest decline. The distribution yield is sustainable from stable operating cash-flows from 1.48mn subscribers and access to financing.

PSR Stocks Coverage

For more information, please visit:

https://www.stocksbnb.com/singapore-stocks-coverage/