DAILY MORNING NOTE | 25 August 2023

The application for the second fortnightly August tranche of MAS 6-month T-bills is open on Thursday for investors to apply. The Auction Date, where the cut-off yield for this tranche will be announced on 31st Aug 2023.

Latest Singapore 6-Month Treasury Bill result
Cut-Off Yield: 3.73%
% of Non-Competitive Application Allotted: 100%

Singapore shares advanced 6.54 points or 0.2 per cent to 3,180.72. Across the broader market, 1.6 billion securities worth S$939.1 million changed hands. Gainers outnumbered losers 327 to 200. Hong Kong’s Hang Seng Index advanced 2.1 per cent, while Japan’s Nikkei 225 was up 0.9 per cent. The FTSE Bursa Malaysia KLCI rose 0.3 per cent. South Korea’s Kospi Composite Index climbed 1.3 per cent after the central bank left rates unchanged at 3.5 per cent.

Stocks fell sharply Thursday after a tech rally, sparked by stronger-than-expected Nvidia results, was short-lived. Traders also braced for a key speech from Federal Reserve Chairman Jerome Powell. The Dow Jones Industrial Average closed 373.56 points lower, or 1.08%, at 34,099.42. The S&P 500 lost 1.35% to end the day at 4,376.31. The tech-heavy Nasdaq Composite shed 1.87% to 13,463.97.

SG

PropertyGuru on Thursday (Aug 24) reported a net loss of S$6.5 million in the second quarter ended June 2023, reversing from its net income of S$3.8 million in the same period last year. However, the group’s revenue for the second quarter rose 11.7 per cent to S$36.9 million, from S$33 million in the year-ago period. This came on the back of higher contributions from both its marketplaces segment as well as its fintech and data services segment. Its Singapore marketplaces saw the highest increase in revenue, up 24.5 per cent to S$21.5 million from S$17.3 million last year. The only segment which registered a fall in revenue was its Vietnam marketplaces, where revenue for Q2 fell 26.9 per cent to S$5.1 million, from S$6.9 million a year earlier. Loss per share for the group stood at S$0.04.

Taka Jewellery Holdings on Thursday (Aug 24) posted a 32 per cent drop in net profit for the fiscal second half from the year before. Net profit for the six months ended Jun 30 stood at S$2.7 million, compared with a net profit of S$4 million in the same period a year ago. The results translate to earnings per share of 0.7 Singapore cent, against earnings per share of 0.72 Singapore cent in the year-ago period. H2 revenue was up 26 per cent at S$74.2 million. For the full year, net profit for the jewellery retailer and wholesaler grew to S$9 million, from S$5.9 million a year ago, translating to earnings per share of 1.61 Singapore cents, against FY2022’s earnings per share of 1.05 Singapore cents. The company attributed this to increased activities from overseas exhibitions and change of product sales mix. Full-year revenue grew 40 per cent to S$145.9 million on an increase in international trade fair sales as a result of further easing of Covid-19 travel restrictions around the world.

The trustee-manager of RHT Health Trust (RHT) on Thursday (Aug 24) filed an application with the High Court to wind up the mainboard-listed trust. This comes almost four years into a suspension of the securities’ trading. In a bourse filing, the trustee-manager said it has sought an order that Victor Goh and Khor Boon Hong of Baker Tilly Consultancy (Singapore) be appointed as the joint and several liquidators of RHT. Further announcements will be made when the application’s hearing date has been fixed, and when arrangements for unitholders to obtain copies of sealed papers in relation to the application have been made, it pointed out. Trading of RHT’s units, last priced at S$0.019, has been suspended since Nov 28, 2019, and will continue to be suspended.

US

Gap shares rose almost 2% in spite of a mixed quarterly report. Gap posted 34 cents per share, after adjustments, beating Refinitiv estimates of 9 cents per share. Revenue, however, missed expectations. The clothing retailer reported $3.55 billion in revenue, shy of the $3.57 million estimate. Management reported a significantly improved inventory position, but expects revenue in the third quarter to decline at a low double-digit pace year-over-year, compared with analyst forecasts of a 6.8% decline.

Chipmaker Marvell Technologies posted a fall in second-quarter revenue, as weak enterprise market along with economic uncertainty weighed on demand for its chips and networking hardware. Its revenue fell 12% from a year earlier to $1.34 billion. On an adjusted basis, the company earned 33 cents compared with estimates of a profit of 32 cents. The company, which makes equipment such as switches and adaptors, projected revenue of $1.40 billion, plus or minus 5%, for the third quarter, the lower end of which is below analyst expectations of $1.39 billion. Marvell forecast per share earnings of 40 cents, plus or minus 5 cents for the third quarter, which was in line with expectations, according to Refinitiv data. Shares of the California-based company fell 5% in after-market trading.

Roark Capital is buying Subway, ending the sandwich chain’s more than five decades of family ownership and marking a new era for the struggling company. The announcement Thursday ends the chain’s lengthy sale process, which publicly kicked off in February. Subway reportedly sought $10 billion, a high price that alienated many potential suitors like restaurant conglomerates, leaving only private equity firms to duke it out in an auction. Other reported bidders included TDR Capital and Sycamore Partners. Subway and Roark did not announce a transaction price, but The Wall Street Journal reported Monday that the firm’s final bid was roughly $9.6 billion.

Nordstrom on Thursday surpassed Wall Street’s quarterly sales and earnings expectations, as it showed signs of progress in turning around its lagging business. Nordstrom’s net income in the quarter rose to $137 million, or 84 cents per share, from $126 million, or 77 cents a share, a year earlier. Net sales decreased 8.3% compared with a year ago. The company said some of that decrease is due to the wind-down of its business in Canada and a one-week shift in timing for its annual anniversary sale. If those two factors were taken out, net sales would have been down about 4% year over year, the company said. The company expects revenue to fall 4% to 6% and adjusted earnings per share to range between $1.80 and $2.20 for the fiscal year, excluding the impact of winding down its stores and online business in Canada. Shares fell over 4% in extended trading Thursday, after initially rising.

Ulta Beauty’s shares gained more than 2% after its second-quarter results came in better than expected. Ulta earned $6.02 per share on $2.51 billion in revenue. Analysts had forecasted earnings of $5.85 per share on $2.51 billion in revenue, according to Refinitiv. The company also raised its full-year forecast bolstered by resilient demand for its premium cosmetics and fragrances despite a broader decline in discretionary spending. It now expects 2023 net sales between $11.05 billion and $11.15 billion, compared with its earlier forecast of $11.0 billion to $11.1 billion. Ulta now expects annual earnings per share between $25.10 and $25.60 per share, compared with its previous forecast of profit between $24.70 and $25.40 per share.

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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