DAILY MORNING NOTE | 24 August 2023

Singapore stocks gained 0.5 per cent or 14.3 points to 3,174.18 on Wednesday (Aug 23). Across the broader market, gainers beat losers 318 to 242 after one billion securities worth S$824.1 million changed hands. Singapore on Wednesday posted lower headline and core inflation rates in July, largely in line with economists’ estimates. Core inflation for the month stood at 3.8 per cent year on year, while headline inflation was 4.1 per cent year on year. Japan’s Nikkei 225 climbed 0.5 per cent, while the Hang Seng Index gained 0.3 per cent and South Korea’s Kospi fell 0.4 per cent.

Stocks ended higher on Wednesday as Wall Street awaited the latest quarterly figures from Nvidia, the high-flying chipmaker that’s been bolstered by the artificial intelligence craze on Wall Street. A decline in yields also buoyed sentiment among investors. The Dow Jones Industrial Average closed 184.15 points higher, or 0.5% at 34,472.98. The S&P 500 gained 1.1% to end the day at 4,436.01, its best daily performance since June 30. The tech-heavy Nasdaq Composite climbed 1.6% to 13,721.03, making for three straight days of gains.

SG

Local ride-hailing and deliveries platform Grab announced a set of very positive results during its 2Q23 earnings call. Revenue came in at US$567mn, a YoY increase of 77%, buoyed by growth across all segments even as total GMV growth remained fairly slack. Net losses continued to narrow, improving by 74% YoY to -US$148mn as incentives and corporate costs declined. The company now sees FY23 Adj. LBITDA of US$30mn-US$40mn, compared to its earlier forecast of US$195mn-US$235mn.

Comments: With its continued focus on optimising spending and improving margins, along with healthy monetisation, there now seems to be a much clearer path to bottom line profitability for Grab, which we believe could happen either towards to later part of 2024 or early part of 2025. Its recent acquisition of Transcab should also help to further reduce cost to serve and increase its driver supply in Singapore, hopefully improving affordability for customers.

Jonathan Woo
Senior Research Analyst
jonathanwookj@phillip.com.sg

Food and beverage (F&B) owner and operator RE&S Holdings on Wednesday (Aug 23) posted a 65.3 per cent fall in net profit for its second half year ended Jun 30 to S$2.1 million, from S$6 million in the same period last year. Revenue in H2 grew 2.9 per cent to S$86.1 million, from S$83.6 million last year. Earnings per share declined to S$0.006 in the period, from S$0.017 in H2 2022. The group declared a final dividend of S$0.009 per share for H2 2023, bringing the total distribution for the year to S$0.018 per share. For the full year, net profit was down 19.1 per cent to S$7.6 million. Other operating income fell sharply to S$3.7 million, down 48.2 per cent from S$7.2 million a year ago. This was due to the absence of government and landlords’ support in relation to Covid-19. Full-year revenue, meanwhile, rose 12.4 per cent to S$174.1 million from S$154.8 million.

The manager of ESR-LOGOS REIT (E-LOG) has completed the divestment of three of the REIT’s non-core assets for a total of $182.9 million. E-LOG had previously announced its intention to divest seven of its non-core assets for approximately $337.0 million on June 23. On Aug 23, the divestments of 3 Pioneer Sector 3 for $95.0 million, 21 Changi North Way for $30.1 million and 30 Toh Guan Road for $57.8 million were completed. According to the REIT’s bourse filing on SGX, the completion of the divestment of the remaining assets is currently underway with relevant announcements to follow. Following the completion of the three divestments announced today, E-LOG’s portfolio consists of 77 properties, excluding 48 Pandan Road held through a joint venture, located across Singapore, Japan and Australia, as well as investments in three property funds in Australia.

US

Nvidia announced its 2Q24 results that beat its own guidance and consensus estimates. Revenue doubled YoY to US$13.5bn, beating its own guidance of US$11bn and analyst estimates of US$11.2bn. The strong revenue growth was mainly driven by the 171% YoY jump in its Data Centre segment revenue to US$10.32bn. Net income also jumped to US$6.19bn from just US$656mn in 2Q23. Adding to the strong results, Nvidia also issued another very strong guidance for 3Q24 where it is expecting an overall revenue of US$16bn, suggesting a 170% YoY growth that blows out analysts’ estimates of US$12.6bn. Given the strong demand for its products, the company’s CFO also said that Nvidia would not be immediately affected if the US government decides to pose additional export restrictions.

Maximilian Koeswoyo
Research Analyst
maximilian@phillip.com.sg

Oil prices dipped 1 per cent on Wednesday (Aug 23) as demand woes stemming from a build in US petrol stocks and weak manufacturing data globally outweighed optimism around a larger-than-expected drop in US crude stocks. Brent crude was down 82 US cents, or 0.98 per cent, at US$83.21 a barrel, bouncing off a 2.5 per cent decline earlier in the session. US West Texas Intermediate crude was down 75 US cents, or 0.9 per cent, at US$78.89. At the session low it was down 3.4 per cent. US petrol stocks climbed 1.5 million barrels last week, compared with analysts estimates for a 888,000 barrel drop. Meanwhile, US crude inventories fell by 6.1 million barrels in the week to Aug 18, the Energy Information Administration (EIA) said, helped by strong refining activity and high levels of exports. Analysts had expected a 2.8 million-barrel drop.

Cloud data analytics company Snowflake beat second-quarter revenue and profit estimates on Wednesday, boosted by rising data management and storage needs of businesses amid a surge in the use of generative artificial intelligence. The company’s revenue rose about 36% to $674 million for the quarter ended July 31, above analysts’ average estimate of $662.2 million, according to Refinitiv data. Excluding items, the second-quarter adjusted profit per share was 22 cents, compared with analysts’ average estimate of 10 cents. Shares of the company rose more than 3% in trading after the bell.

Autodesk stock climbed 5% after reporting second-quarter results. Autodesk earned $1.91 per share after adjustments on $1.35 billion in revenue, while analysts polled by Refinitiv predicted $1.73 per share in earnings and $1.32 billion in revenue. The company, whose AutoCAD software is used by construction, engineering and manufacturing companies, expects third-quarter revenue to be in the range of $1.38 billion to $1.40 billion, above estimates of $1.38 billion, according to Refinitiv data. It expects third-quarter earnings per share to be in the range of $1.97 to $2.03, above estimates of $1.92.

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

RESEARCH REPORTS

Singapore Telecommunications Ltd – Currency down, margins under

Recommendation: BUY (Upgraded); TP S$2.80, Last close: S$2.33; Analyst Paul Chew

– 1Q24 revenue and EBITDA were within expectations at both 23% of our FY24e forecast. The 9% decline in the Australian dollar and drop in Optus margins were the drag on earnings.

– Maiden disclosure of the Digital infraco (data centre, submarine cable, satellite), reflected an 11% YoY growth in EBITDA from higher pricing and satellite deployment services. Meanwhile, Bharti registered a 34% YoY growth in earnings to S$112mn.

– Optus remains the weakest spot for the group with EBIT declining 28% YoY in local currency terms to S$56mn. Despite the larger revenue and market size, Optus EBIT is only 23% of Singapore operations. We incorporated a modest decline in our FY24e revenue and EBITDA estimates by 2% to account for the weakness in the Australian dollar. The SOTP TP is lowered to S$2.80 (prev. S$2.84). We upgrade to BUY from ACCUMULATE due to recent price weakness. Valuations are attractive but any re-rating for Singtel will come from its S$6bn asset monetization efforts, better cost controls at Optus, mobile price restoration and broadband growth.

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