DAILY MORNING NOTE | 25 May 2023
Singapore shares fell 0.1 per cent or 3.87 points to 3,214.21 on Wednesday (May 24), amid fears of further rate hikes. Across the broader market, losers beat gainers 295 to 245 after 1.2 billion securities worth S$898 million changed hands. Markets in the region were also in the red. Hong Kong’s Hang Seng Index fell 1.6 per cent, and Japan’s Nikkei 225 fell 0.9 per cent; South Korea’s Kospi closed flat.
Wall Street stocks fell again Wednesday (May 24) on rising anxiety over US debt ceiling talks as a critical deadline nears without an agreement. President Biden offered to freeze government spending at current levels, a move that would reduce the deficit by US$1 trillion and marks a concession to congressional Republicans. The US government could run out of money to pay for its existing obligations as early as Jun 1, according to Treasury Secretary Janet Yellen. The Dow Jones Industrial Average dropped 0.8 per cent to 32,799.92. The broad-based S&P 500 shed 0.7 per cent to 4,115.24, while the tech-rich Nasdaq Composite Index declined 0.6 per cent to 12,484.16.
Manulife US Real Estate Investment Trust (Manulife US Reit) has entered into a letter of intent to sell Phipps Tower in Atlanta, Georgia, to The Manufacturers Life Insurance Company. The purchase consideration should be no more than the average of two independent valuations commissioned by the Reit’s manager and its trustee, DBS Trustee. On Wednesday (May 24), the Reit’s manager said its proposed divestment aims to “enhance unitholder value”. It intends to redeploy proceeds into debt repayment or capital expenditure such as tenant incentives.
Healthcare technology company Meta Health has commenced legal proceedings in the High Court of Singapore against Vasanthan Metupalle, the former chief medical officer of its wholly owned subsidiary, 5Digital. Other parties in the suit, which aims to recover “some of the group’s losses and wrongful payments made”, include a former director of a subsidiary of the group, and entities which are not part of the company, Meta Health said in a bourse filing on Wednesday (May 24). The announcement comes after the group reported in an Apr 12 bourse filing that it had discovered “alleged irregularities” in March this year in some sale transactions of another wholly owned subsidiary, Gainhealth.
Oversea-Chinese Banking Corporation (OCBC) has partnered with global private market exchange ADDX to distribute its first tokenised equity-linked structured note to accredited investors. The fixed coupon note, launched in early May, is the first product issued by a Singapore bank to land on ADDX’s shelf. “It marks the start of a long-term partnership between ADDX and OCBC Bank that will see both parties work together to put out a wider variety of investment products,” says the bank on May 24.
Concert and live shows producer UnUsUaL has posted earnings of $1.8 million for its FY2023 ended March, a reversal from net loss of $4.38 million in FY2022. This follows a 713.4% y-o-y surge in revenue to $25.6 million, mainly due to the lifting of capacity restriction limit in April 2022 which resulted in more projects resuming post-pandemic. On the back of the increased projects, cost of sales increased by 393.2% y-o-y to $21.7 million in FY2023, while gross profit stood at $7.6 million compared to a gross loss in FY2022.
Atlantic Navigation Holdings’ significant shareholders, Saeed Investment and Bill Wong Siew Cheong, have been exploring “strategic options” in relation to their interest in the company. The company says it was just notified on May 24. Saeed Investment, which invested in the company back in 2018 at around 9.9 US cents (13.3 cents), holds 50.22%; Wong, the company’s CEO, holds a direct stake of 31.82%. Atlantic Navigation Holdings’ announcement comes after it received a query from the Singapore Exchange Regulation (SGX RegCo) on its “unusual price movements”.
NVIDIA on Wednesday (May 24) forecast second-quarter revenue more than 50 per cent above Wall Street estimates, with the company saying it is boosting supply to meet surging demand for its artificial intelligence (AI) chips, which are used to power ChatGPT and many similar services. Shares of Nvidia, the world’s most valuable listed semiconductor company, jumped as much as 21 per cent to a record-high US$370 in extended trade. Nvidia’s surge after the bell increased its stock market value by nearly US$150 billion to more than US$900 billion, extending the Silicon Valley company’s lead as the world’s most valuable semiconductor firm.
Alphabet and the European Commission aim to develop an artificial intelligence (AI) pact involving European and non-European companies ahead of rules to govern the technology, European Union industry chief Thierry Breton said on Wednesday (May 24). Breton had earlier met Alphabet chief executive Sundar Pichai in Brussels. “Sundar and I agreed that we cannot afford to wait until AI regulation actually becomes applicable, and to work together with all AI developers to already develop an AI pact on a voluntary basis ahead of the legal deadline,” Breton said in a statement after the meeting.
Amazon.com has agreed a deal to take space from WeWork at a City of London office building. The tech giant will occupy about 6503 square metre (70,000 square feet) at Moore Place which has recently been refurbished by WeWork, according to people familiar with the agreement. The space can accommodate about 1,000 people and the deal includes an option to take on more space in the building, the people said, asking not to be identified as the details are private.
Meta Platforms started carrying out the last batch of a three-part round of layoffs on Wednesday (May 24), according to a source familiar with the matter, as part of a plan announced in March to eliminate 10,000 roles. Meta in March became the first Big Tech company to announce a second round of mass layoffs, after showing more than 11,000 employees the door in the fall. The cuts brought the company’s headcount down to where it stood as of about mid-2021, following a hiring spree that doubled its workforce since 2020.
Boeing Co is deploying experienced pilots to airlines that are training their employees to fly Boeing aircraft, as part of a wider push to reduce aviation safety risks after two 737 MAX crashes in 2018 and 2019. In 2022, a total of 125 so-called “flight operations representatives” worked with more than 60 airlines, Boeing officials told reporters in during a media event in Washington.
HSBC is reviewing a possible exit from as many as 1 in 5 of the countries the lender operates in to sharpen its focus on Asian expansion, chief financial officer Georges Elhedery told Reuters in his first interview since taking the role. These reviews, which could see the British bank deciding to sell or streamline businesses in 12 countries, follow pressure from Chinese shareholder Ping An Insurance, which wants HSBC to prioritise growth in its money-spinning Asian business which generates 78 per cent of group profit.
Airbnb is enacting an “anti-party crackdown” for the US summer holidays, extending measures aimed at retaining hosts after a pilot last year led to fewer reported parties over long weekends. The vacation rental company said in a blog post on Wednesday (May 24) that it will implement its “anti-party” system for the Memorial Day and Fourth of July weekends, as it works to ease the strained relationship between hosts and guests. Airbnb revamped its platform earlier this month after chief executive Brian Chesky said the volume of complaints it was receiving was a “wake-up call”.
Citigroup will pursue an initial public offering (IPO) of its Banamex unit that consists of its consumer, small business and middle-market banking operations in Mexico, the bank said on Wednesday (May 24). Mexico’s conglomerate Grupo Mexico had been in talks to buy the unit, a person familiar with the matter told Reuters earlier this month. Citi announced plans to offload the unit more than a year ago, as part of a strategic overhaul by chief executive officer Jane Fraser to exit 14 consumer banking markets in Asia, Europe, the Middle East and Mexico.
Uber Technologies is planning to launch 25,000 electric vehicles (EVs) in India, taking advantage of the country’s clean-energy push to expand its local presence. The ride-sharing company is teaming up with local fleet operators such as Lithium Urban Technologies, Everest Fleet and Nigeria-based Moove to get EVs on the country’s roads, Prabhjeet Singh, president of Uber’s India operations, said at an event in New Delhi on Wednesday (May 24).
Xiaomi Corp reported a 18.9 per cent drop in quarterly revenue on Wednesday (May 24) as consumer demand for smartphones remained weak even as the economy recovered from the Covid-19 pandemic. Sales in the first quarter of 2023 reached 59.5 billion yuan (S$11.4 billion), down from 73.4 billion yuan in the same quarter a year earlier, roughly in line with analyst estimates of 59.4 billion yuan. Net income rose to 3.2 billion over the period, an increase of 13.1 per cent from 2.9 billion yuan a year earlier.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: Buy (Maintained), Last done: S$31.40, TP: S$41.60, Analyst: Glenn Thum
– Guidance of a medium-term (3 to 5 years) ROE of 15-17% and a baseline for dividends to increase by 24 cents per year. Further upside of S$3bn based on optimal CET-1 operating range which could be distributed in further ordinary dividend step-up, special dividend or share buyback.
– Technology has transformed the way they manage with the use of a hybrid multi-cloud strategy with in-house infrastructure as a service. Other business segments such as Consumer and SME, Private banking, Global transaction services, and Treasury markets have also benefited from the digital transformation.
– Maintain BUY with an unchanged target price of S$41.60. Our FY23e estimates remain unchanged. We assume 1.90x FY23e P/BV and ROE estimate of 16.6% in our GGM valuation.
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