DAILY MORNING NOTE | 25 April 2023

Trade of the Day

Prime US REIT (SGX: OXMU)

Analyst: Zane Aw

(Current Price: US$0.280) – TECHNICAL BUY
Buy price: US$0.270 Stop loss: US$0.250 Take profit 1: US$0.295
Take profit 2: US$0.335

Singapore shares gained 0.1 per cent or 2.73 points to close at 3,324.55 points on Monday (Apr 24), as data showed local inflation rates in March matching economists’ median estimates. Across the broader market, gainers outnumbered losers 285 to 278, with 1.2 billion securities worth S$839.7 million traded.

Wall Street stocks were mixed at the end of a choppy session Monday (Apr 24), ahead of closely-watched corporate earnings and economic data in the coming days. After trading sideways much of last week, investors are gearing up for a week that could prove more dynamic with earnings reports from tech giants like Amazon and Google parent Alphabet, along with major economic data releases. The Dow Jones Industrial Average finished 0.2 per cent higher at 33,875.40. The broad-based S&P 500 added 0.1 per cent at 4,137.04, while the tech-rich Nasdaq Composite Index dipped 0.3 per cent to 12,037.20.

SG

Singapore’s inflation fell across the board in March – with the exception of energy – largely in line with economists’ expectations, according to official figures on Monday (Apr 24). Headline inflation was 5.5 per cent year on year, down from 6.3 per cent in February and matching private-sector economists’ median estimate in a Bloomberg poll. This was the slowest pace in 11 months as private transport inflation declined. Core inflation – which excludes accommodation and private transport – decelerated to an eight-month low of 5 per cent, from 5.5 per cent in February. This was marginally lower than economists’ 5.1 per cent forecast, led by lower inflation for services, food as well as retail and other goods.

Aims Apac real estate investment trust (AA Reit) announced that it is divesting 541 Yishun Industrial Park A in Singapore for S$12.9 million. The Reit has entered into a sales and purchase agreement with Cantal United for the Yishun property. The S$12.9 million sale price is a 8.2 per cent premium on the property’s valuation of S$11.9 million as at Mar 31. “This divestment is part of our proactive asset management strategy to optimise and rejuvenate AA Reit’s portfolio,” said Russell Ng, chief executive officer of AA Reit Management. The Yishun property is a four-storey factory building with a total gross floor area of 8,770 square metres. AA Reit says that the property has limited redevelopment potential and a remaining land lease of 31 years as at Mar 31.

Preliminary independent valuations have pointed to an overall decline in the value of Dasin Retail Trust’s portfolio as at end-December 2022. On Monday (Apr 24) the China-focused real estate investment trust’s (Reit) trustee-manager said its portfolio valuation fell 14 per cent in renminbi terms when compared to the seven properties’ aggregate value as at end-June, 2022. This translates to a steeper 23 per cent decline in Singapore-dollar terms. The fall in valuation was attributed to factors such as a general decline in market performance and rental rates, lower passing rent, and a lower projected growth rate in rent. There were also negative reversion rental rates from some leases contracted in 2022 along with higher vacancy rates, noted the trustee-manager.

IReit Global has secured a 15-year lease with a German federal government body for approximately 25 per cent of Darmstadt Campus, according to a bourse filing on Monday (Apr 24). Its new tenant performs construction and facility management, and will take up approximately 6,200 square metres (sq m) of office space and 1,400 sq m of storage space. The “pivotal anchor lease” will commence on Jun 1 and has two prolongation options of five years. It will generate an annual rental income of about 1.2 million euros (S$1.8 million) per annum.

US

Walt Disney Co began letting go thousands of employees on Monday (Apr 24) in the entertainment giant’s ongoing push to cut about 7,000 jobs this year. This is the second of what is expected to be three rounds of cuts, Disney said in a statement. The first reductions to Disney’s 220,000-person workforce came in March. This round, which will last till Thursday, should bring the total positions eliminated to around 4,000, the company said. Disney’s latest job reductions, which Bloomberg reported last week, are part of chief executive officer Bob Iger’s ambition to save US$5.5 billion in annual costs.

Coca-Cola on Monday (Apr 24) topped estimates for first-quarter revenue and profit on resilient demand for its sodas and multiple price increases by the beverages maker to combat higher commodity and shipping costs. Average selling prices increased 11 per cent, the maker of Fanta and Sprite said, while global unit case volumes rose 3 per cent. The company’s shares were up about 2 per cent in premarket trading. Coca-Cola said in February it would raise soda prices further in 2023 “across the world” to combat the stubbornly high costs but at a moderating pace, while rival PepsiCo hit a pause on price hikes.

Tesla increased its forecast for capital expenditures again and is now budgeting at least US$7 billion for this year. The electric-car maker expects to spend as much as US$9 billion in 2023, according to a regulatory filing. As of January, Tesla provided a forecast range that was US$1 billion less at both the low and high end. While Tesla executives have been emphasising cost-cutting efforts recently, as the company has repeatedly reduced vehicle prices, the carmaker has increased its capex forecast several times in the last nine months.

LVMH’s market value surpassed US$500 billion, becoming the first European company to reach that milestone, thanks to booming sales of luxury goods in China and a strengthening euro. The achievement comes less than two weeks after LVMH joined the ranks of the world’s 10 biggest companies, powered by a surge in first-quarter sales. Rival Hermes International subsequently published its own strong numbers, reinforcing the view that China’s reopening from pandemic lockdowns is fuelling growth across the industry. The company’s rising value has swelled the wealth of the world’s richest person, Bernard Arnault, who built LVMH into a global powerhouse through a series of acquisitions. His fortune stands at almost US$212 billion, according to the Bloomberg Billionaires Index.

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

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