Daily Morning Note – 24 February 2022

Stocks closed lower on Wednesday (Feb 23) even as the Asia-Pacific markets recovered some of their losses after the US and its allies settled on a modest “first tranche” of penalties over Russia’s incursion into disputed Ukrainian territory. The benchmark Straits Times Index (STI) fell 0.2 per cent or 7.58 points to close at 3,393; major indices in Hong Kong, South Korea, Australia, Malaysia and Indonesia closed up between 0.5 per cent and 0.9 per cent.

Wall Street stocks finished decisively lower on Wednesday after an early rally sputtered amid worries over the Ukraine crisis and shifting Federal Reserve policy. It was the fourth straight drop for major indices, reflecting unease at the deteriorating outlook in Ukraine, especially after Russian President Vladimir Putin recognized two eastern provinces’ independence earlier this week. The Dow Jones Industrial Average dropped 1.4 per cent to 33,131.76. The broad-based S&P 500 sank 1.8 per cent to 4,225.50, while the tech-rich Nasdaq Composite Index fell 2.6 per cent to 13,037.49.

Stocks to watch: OCBC, SATS

SG

OCBC‘s fourth quarter profit came in at S$973 million, down 14 per cent from S$1.13 billion a year ago, but its top executives reiterated during an earnings call on Wednesday (Feb 23) that the banking group’s profitability is back to pre-pandemic levels. Annualised earnings per share stood at S$0.85 for the quarter ended Dec 31, 2021, down from S$0.99 a year ago. The bank’s earnings missed the S$1.18 billion average estimate based on 4 analysts polled by Refinitiv. Net earnings for the full year rose 35 per cent to S$4.86 billion, fuelled by growth in non-interest income and lower allowances, which offset a decline in net interest income amid a low interest rate environment. The lender declared a final dividend of 28 Singapore cents per share. This brings the total dividend for FY2021 to 53 cents, in line with 2019 levels, and represents a payout ratio of 49 per cent.

Mainboard-listed inflight caterer and ground handler SATS reported earnings of S$5.1 million for the third quarter, reversing a S$2.8 million loss a year ago, thanks to more business activities and improved performance from its associates and joint ventures. The firm would, however, have clocked a loss of S$33 million for the quarter if not for state reliefs, said SATS in a business update on Wednesday (Feb 23). Earnings per share came in at 0.5 cent, compared to a loss per share of 0.2 cent for the corresponding period a year ago. Top line rose by 22.6 per cent to S$307.8 million from S$251 million, as passengers, flights, freight and ship calls handled as well as meals served all rose year on year. SATS benefited from the “gradual recovery” the travel industry was making as borders reopened.

United Hampshire US Reit reported a distribution per unit (DPU) of US$0.0305 for the second half of the fiscal year ended December 2021, up 0.7 per cent from a DPU of US$0.0303 in the comparable year-ago period. This took the Reit’s DPU for the full FY2021 to US$0.061, some 26.8 per cent higher than the DPU of US$0.0481 in FY2020. The DPU for FY2021 also exceeded the Reit’s forecast by a marginal 0.2 per cent. Gross revenue for H2 was up 7.9 per cent year on year to US$28.4 million from US$26.3 million, but 1.4 per cent lower than the forecast. Property expenses for the period were up 6.7 per cent to US$7.8 million from US$7.3 million, but this was 7 per cent lower than the forecast. United Hampshire US Reit attributed the variance to slower leasing activities than was forecast – which was made prior to the outbreak of the Covid-19 pandemic. This was, however, offset by contributions from Colonial Square in Richmond, Virginia, and Penrose Plaza in Philadelphia, Pennsylvania; these were acquired last November and contributed about 1.5 months’ worth of revenue to the H2 results.

Certificate of entitlement (COE) premiums rose across the board in the latest bidding exercise on Wednesday (Feb 23), the first after higher new taxes for luxury cars kicked in. The Category B COE, for cars with more than 1,600 cc or 130 horsepower under the bonnet and the one most relevant to luxury cars, soared to S$93,590 at the close of bidding, an increase of 8.69 per cent from the S$86,102 seen after the last auction two weeks ago. The price of the Open Category COE, which can be used for all vehicle types except motorcycles but is almost certainly deployed only in the Category B market, jumped in tandem to S$93,102. That 7 per cent leap follows a closing price of S$87,000 a fortnight ago, already the highest seen since early 2013.

US

Facebook is launching its short video feature Reels to more than 150 countries, its owner Meta Platforms said on Tuesday (Feb 22), in a move to expand its fastest growing content format. The social media giant, which recently lost a third of its market value after a dismal earnings report, has highlighted Reels as a key priority. Meta launched Reels on Instagram in 2020 and on Facebook in 2021 as its answer to the explosively popular short-video app TikTok, which is owned by Chinese tech giant ByteDance. “Reels is already our fastest growing content format by far, and today we’re making it available to everyone on Facebook globally,” Meta CEO Mark Zuckerberg said in a Facebook post on Tuesday. The company, which says video now accounts for half of the time people spend on Facebook, also announced new ways for creators to make money through the Reels feature. It said it was expanding its programme to pay creators bonuses to more countries and was testing overlay ads using banners and stickers for creators to earn ad revenue. It would roll out full-screen ads between Reels soon.

Microsoft is expanding its product for finding and monitoring security weak spots in cloud-computing to include rival Alphabet’s Google Cloud Platform. Microsoft Defender for Cloud will include support for Google Cloud starting on Wednesday (Feb 23), 3 months after adding support for Amazon’s market leading products. Microsoft, which sells the rival Azure, used open programming interfaces to hook into its competitors’ products, Google Cloud and Amazon Web Services and provide its cybersecurity services. Customers increasingly use multiple cloud platforms and have different products to secure and monitor them. There are so many different products from cybersecurity companies, as well as Microsoft, Amazon and Google, that it can be difficult for security professionals to keep track of them. With damaging cyberattacks on the rise, Microsoft is hoping to make it simpler and better protect customers.

Zoom Video Communications unveiled an updated product aimed at enhancing customer support for businesses after a failed US$14.7 billion bid last year for now rival call center software vendor Five9. The release of Zoom Contact Center on Wednesday (Feb 23) is the latest move by the company to expand beyond its video conferencing platform that surged in use during the pandemic and helped solidify Zoom as one of the most well-known names in enterprise software. However, investors remain concerned over how the company plans to capitalise on the huge growth in sales. The updated call centre product propels Zoom further into a highly competitive market focused on helping businesses connect with customers across different channels – from phone calls with a live agent to Web-based chat tools – and ultimately provide more tailored service.

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

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