DAILY MORNING NOTE | 25 October 2023

Trade of the Day

Singapore Airlines Ltd (SGX: C6L)

Analyst: Zane Aw

(Current Price: S$6.09) – TECHNICAL BUY
Buy price: S$6.09 Stop loss: S$5.87 (-3.61%) Take profit: S$6.55 (+7.55%)

Singapore shares rose 1 per cent as local stocks broke a four-day losing streak on Tuesday (Oct 24). Across the broader market, gainers beat losers 336 to 275 after 1.2 billion securities worth S$900.6 million changed hands. Singtel was the biggest gainer, rising 3.5 per cent or S$0.08, to S$2.39. The trio of banks were also in the black. UOB gained 0.2 per cent, or SS$0.04, to S$27.66. DBS gained 0.4 per cent, or S$0.14, to S$33.15. OCBC rose 0.5 per cent, or S$0.06, to S$12.77.

Wall Street stocks shrugged off recent weakness on Tuesday following a round of mostly solid corporate earnings as US Treasury yields retreated. The Dow Jones Industrial Average finished up 0.6 per cent at 33,141.38. The broad-based S&P 500 gained 0.7 per cent to 4,247.68, while the tech-rich Nasdaq Composite Index jumped 0.9 per cent to 13,139.87.

Top gainers & losers





Frasers Centrepoint Trust reported a DPU of 6.020 Singapore cents for the six month period from 1 April 2023 to 30 September 2023 (“2H23”). This brings total DPU for financial year ended 30 September 2023 (“FY23”) to 12.150 Singapore cents. 2H23 gross revenue rose 1.8% year-on-year to S$184.1 million on higher rental income attributed to higher portfolio occupancy, higher rental reversions, increased contributions from atrium leasing and car park income. The growth was partially offset by lower rental contributions from Tampines 1 due to ongoing AEI. Gross revenue for FY23 was up 3.6% to S$369.7 million. 2H23 property expenses rose S$1.9 million or 3.6% year-on-year due to higher utilities expenses, higher repair and maintenance costs, higher staff costs and lower write-back of doubtful receivables. NPI for 2H23 was 1.1% higher at S$129.6 million. For FY23, property expenses rose 5.9% year-on-year to S$104.1 million but NPI was up 2.7% at S$265.6 million due to stronger gross revenue. FCT’s aggregate leverage as at 30 September 2023 stood at 39.3%. This is expected to decline to 36.1% on a pro forma basis, upon the completion of the divestments of Changi City Point and the interest in Hektar REIT. The average cost of borrowing for FY23 is 3.8%, a slight increase from 3.7% reported in the previous quarter ended 30 June 2023. Interest coverage ratio remains healthy at approximately 3.47 times. The retail portfolio registered committed occupancy of 99.7%, up 2.2%-points from 97.5% in the previous year and up 1.0%-point from the previous quarter. The retail portfolio registered improved income performance across its properties, driven by higher rental income and atrium contribution. The improved rental income was underpinned by a combination of higher portfolio occupancy, better average portfolio rental reversion at 4.7% (on an average-to-average basis), compared with 4.2% for FY22, as well as stronger tenant sales which yielded higher turnover rents. Retail portfolio tenants’ sales for FY23 was 7.3% higher than FY22, and averaged approximately 17% above pre-COVID levels. All properties registered positive tenants’ sales growth and their tenants’ sales are above pre-COVID levels. With higher tenants’ sales, average occupancy cost for the retail portfolio improved to 15.6% from 16.2% in FY22, providing headroom for rental growth.

The manager of Mapletree Logistics Trust (MLT) reported a distribution per unit (DPU) of S$0.02268 for the second quarter ended Sep 30, 2023, up 0.9 per cent from S$0.02248 in the same period a year ago. The amount distributable to unitholders in Q2 FY23/24 rose 4.2 per cent to S$112.5 million, from S$108 million previously. This was due mainly to higher revenue from existing assets, along with a divestment gain of S$8.8 million during the quarter. Gross revenue for the quarter rose 1.5 per cent to S$186.7 million, while net property income (NPI) gained 1.2 per cent to S$162 million. The growth was “partly offset by weaker performance in China and revenue loss due to properties that were divested or undergoing redevelopment”, MLT’s manager said in a bourse filing on Tuesday (Oct 24). For the six months ended Sep 30, 2023, the amount distributable to unitholders gained 3.6 per cent to S$224.5 million, with DPU up 0.5 per cent to S$0.04539 when compared to the same period a year ago. Gross revenue for H1 FY23/24 fell 0.7 per cent to S$368.9 million, while NPI declined 1 per cent to S$320.1 million. MLT’s portfolio occupancy stood at 96.9 per cent as at end-September, from 97.1 per cent as at end-June. As at end-September, MLT’s aggregate leverage ratio stood at 38.9 per cent, from 39.5 per cent as at end-June. Total debt outstanding fell by S$173 million quarter-on-quarter to S$5.4 billion, due mainly to the “repayment of loans using net proceeds from the divestment of properties in Japan, Malaysia and Singapore”, the manager said. The distribution for Q2 will be paid on Dec 19, after the record date on Nov 1.

Far East Hospitality Trust reported gross revenue for 3Q 2023 increased 42.5% year-on year to S$30.2 million led by a strong contribution from the Hotel segment which recorded a 56.3% increase in revenue from S$14.9 million to S$23.3million. As a result, Net Property Income grew 42.4% year-on-year to S$28.1 million and Income Available for Distribution grew 51.0% year-on-year to S$22.9 million respectively. Gross Revenue for YTD Sep 2023 increased 32.2% year-on-year to S$82.2 million, led by the steady recovery in the Hotel segment which registered a 42.6% increase in revenue from S$43.4 million to S$61.9 million. Excluding Central Square (which was divested on 24 March 2022), the revenues of the Serviced Residences and Commercial Premises segments would have increased 18.9% and 15.5% year-on-year respectively. YTD Net Property Income grew 34.8% year-on-year to S$77.1 million and Income Available for Distribution grew 36.7% year-on-year to S$60.3 million respectively.

Sembcorp Industries’ wholly-owned subsidiary, Sembcorp Utilities, has signed a joint development study with Indonesian-state-owned utility company PT PLN (Persero) at the Singapore International Energy Week 2023. The agreement will explore the feasibility of green hydrogen production in Indonesia for export to Singapore. According to the joint release, the facility could potentially produce up to 100,000 tonnes of green hydrogen per year in Indonesia using locally sourced renewable energy. The final product will be exported via subsea pipeline to Singapore. The project is expected to be Indonesia’s first green hydrogen export to Singapore. Sembcorp Utilities has also been granted conditional approval from the Energy Market Authority (EMA) to import 1.2GW of renewable electricity from Vietnam to Singapore. The conditional approval also follows the Letter of Intent (LOI) issued by EMA with regard to Sembcorp Utilities’ joint exploration of the development of offshore wind farms in southern Vietnam. The development will be done jointly with Petrovietnam Technical Services Corporation (PTSC) for the export of electricity to Singapore. The offshore wind farms could commence operations as soon as 2033, subject to the receipt of relevant approvals and barring unforeseen circumstances. Sembcorp Utilities and PTSC will be embarking on the project proposal development and working towards obtaining the conditional licence and import permit from EMA, and export permit from the Government of Vietnam.

United Overseas Insurance (UOI) reported a 123.2 per cent rise in net profit after tax to S$18.3 million for the nine months ended Sep 30, up from S$8.2 million in the same period a year prior. This was due primarily to S$9.5 million in non-underwriting income for the period, compared to S$0.1 million previously. UOI is the general insurance arm of UOB. Insurance revenue for the nine months ended Sep 30 grew 7.9 per cent to S$68.4 million, from S$63.4 million in the corresponding period a year ago. This was “mainly due to higher contractual service margin and recovery of insurance acquisition cash flows”, UOI said in a bourse filing on Tuesday (Oct 24). However, higher losses on “onerous contracts and higher software and manpower costs” sent insurance service expenses up by 14.5 per cent to S$45.9 million, from S$40.1 million previously. This was partially offset by an 18.8 per cent decrease in net expenses from reinsurance contracts to S$10.4 million for the period, from S$12.8 million a year prior. Total comprehensive income for 9M 2023 came in at S$17.3 million, reversing a S$24.4 million loss in the corresponding period a year ago.

Grand Banks Yachts has reported a net profit after tax (NPAT) of $2.8 million for the 1QFY2024 ended Sept 30, 158% higher than its NPAT of $1.1 million in the corresponding period the year before. The Mainboard-listed boat builder’s profit before tax (PBT) also surged by 330.9% y-o-y to $4.7 million during the 1QFY2024. The higher bottom line was attributable to the higher revenue for the three-month period as the group ramped up boat-building activities at its manufacturing yard in Pasir Gudang, Malaysia. 1QFY2024 revenue rose by 38.5% y-o-y to $31.0 million. Gross profit for the period rose by 68.9% y-o-y to $10.1 million as the group improved its operational efficiency and switched up its workflow and scheduling. The changes led to higher man-hours to meet higher orders. Accordingly, the company’s gross profit margin (GPM) grew by 5.9 percentage points y-o-y to 32.6%. In the 1QFY2024, Grand Banks saw five new built-to-order boat sales. Its net order book as at Sept 30 stood at $148.8 million, 6.6% lower than $159.4 million as at June 30. In its business update dated Oct 24, the group says it maintains a “cautiously optimistic” outlook due to the rising global uncertainty and softer short-term demand, although it notes that it has seen strong attendance at recent boat shows. That said, the group adds that it “will strive to maintain a healthy sales volume and expedite its manufacturing activities to shorten delivery times”.

Tuan Sing has priced S$150 million of notes at 7.5 per cent under its S$900 million multi-currency medium-term note programme. The new notes are expected to be issued on Nov 2 in denominations of S$250,000 each, with interest to be paid semi-annually in arrear. They are expected to mature on Nov 2, 2027. Tuan Sing may redeem all – but not some – of the notes after Nov 2, 2026, at 102 per cent of the principal amount, together with interest accrued to the date fixed for redemption. Controlling shareholders, directors and related entities or parties of Tuan Sing will be subscribing to less than 10 per cent of the new notes. On Tuesday (Oct 24), Tuan Sing said net proceeds from the issuance will be used to finance the aggregate purchase price for the group’s outstanding 6.9 per cent notes due 2024, for which the property developer launched a tender offer to redeem at 102 per cent of the principal amount in cash.


Alphabet reported 11% revenue growth in the third quarter, as a rebound in advertising pushed expansion into double digits for the first time in over a year. Earnings per share was US$1.55 per share vs. US$1.45 per share expected while revenue came in at US$76.69B vs. US$75.97B expected. The company also reported the following numbers: YouTube advertising revenue was US$7.95B vs. US$7.81B expected, Google Cloud revenue was US$8.41B vs. US$8.64B expected and Traffic acquisition costs was US$12.64B vs. US$12.63B. Even though cloud revenue disappointed, it still grew 22% from a year earlier, double the rate of expansion for the company as a whole. The business also swung to an operating profit of US$266 million after losing US$440 million in the same period a year earlier. Finance chief Ruth Porat said on the investor call that while cloud growth “remained strong across geographies, industries and products,” the expansion rate “reflects the impact of customer optimization efforts,” a phrase that generally refers to clients reeling in their spending. Other bets, which includes the Waymo self-driving car business and the Verily life sciences unit, reported revenue of US$297 million, up from US$208 million the year prior. However, it reported a loss of US$1.19B, narrowing slightly from US$1.23B the prior year.

Microsoft reported Tuesday fiscal first-quarter results that beat Wall Street estimates, as the tech giant’s investment in artificial intelligence bolstered growth in its cloud business Azure. The company announced earnings per share of US$2.99 on revenue of US$56.52B. Analysts anticipated EPS of US$2.65 on revenue of US$54.53B. With respect to guidance, Amy Hood, Microsoft’s finance chief, called for fiscal second-quarter revenue in the range of US$60.4B to US$61.4B on a conference call with analysts that implies 15% growth. Analysts had expected US$60.9B in revenue. Revenue grew almost 13% year over year in the quarter from US$50.12B in the year-ago quarter, according to a statement. Net income, at US$22.29B, increased 27% from US$17.56B, or US$2.35 per share in the same quarter a year ago. Microsoft’s Intelligent Cloud segment produced US$24.26B in revenue, up 19% and above the US$23.49B consensus. Revenue just from Azure jumped 29% during the quarter, faster than the 26% consensus. Microsoft doesn’t disclose Azure revenue in dollars. At constant currency, Azure revenue rose 28%, accelerating from 27% in the fiscal fourth quarter. For the second half of the 2024 fiscal year, Hood said to expect Azure growth in constant currency to remain stable compared with the fiscal second quarter, which should come in at 26% to 27%. The Productivity and Business Processes unit posted US$18.59B in revenue, which was up 13% and more than consensus of US$18.19B.

Spotify on Tuesday (Oct 24) swung to a quarterly profit in Q3, aided by price hikes in its streaming services and growth in subscribers in all regions. It forecast that its number of monthly listeners would reach 601 million in this quarter. The company posted a third-quarter operating income of 32 million euros (S$46.6 million) – its first quarterly profit since 2021, helped by a higher gross margin, and lower marketing and personnel costs. It forecast operating income of 37 million euros in the current quarter. After spending more than a billion euros in building up its podcast business, Spotify has been keeping a tight lid on costs, laying off 6 per cent of its employees earlier this year, and in July raising prices for its premium plans. Spotify’s gross margin rose to 26.4 per cent in the July to September period, up 166 basis points from a year earlier. “We do expect to continue to see margin expansion into next year” CFO Vogel said. The company’s number of monthly active users rose 26 per cent to 574 million in the third quarter, beating its own guidance and analysts’ forecast of 565.7 million. Premium subscribers, who account for most of the company’s revenue, rose 16 per cent to 226 million, topping estimates of 223.7 million. Revenue rose 11 per cent to 3.36 billion euros, beating estimates of 3.33 billion. Spotify’s monthly user forecast for the fourth quarter sets the company firmly on target to reach one billion users and US$100 billion in revenue annually by 2030. It also expects premium subscribers to reach 235 million in the last three months of the year, and revenue to reach 3.7 billion euros.

Card giant Visa sailed past estimates for fourth-quarter profit on Tuesday as consumers on a post-pandemic travel rebound shrugged off worries of a looming economic slowdown and cost-of-living crisis. Visa’s CFO Chris Suh said US inbound travel recovery accelerated in the quarter, while travel into Asia also continued to improve. Visa’s payment volumes rose 9 per cent in the quarter, while cross-border volumes excluding transactions within Europe, a gauge of travel demand, surged 18 per cent. Visa posted adjusted profit of US$2.33 per share in the three months ended Sept 30, topping expectations of US$2.24 per share. It increased its quarterly dividend by 16 per cent to US$0.52 per share and authorised a new US$25 billion multi-year share repurchase programme.

Coca-Cola on Tuesday raised its annual sales and profit forecasts for a second time this year, riding on resilient demand from consumers for its sodas, juices and energy drinks as well as higher prices. Coca-Cola’s average selling prices rose 9% in the third quarter, the company said, while overall unit case volumes increased 2%. The beverage giant now sees full-year organic revenue growth of 10% to 11%, compared with its prior forecast of an increase of 8% to 9%. Annual core earnings per share is forecasted to rise between 7% and 8%, compared to previous expectations of a 5% to 6% rise. Third-quarter net revenue rose nearly 8% to US$11.91 billion, topping estimates of US$11.44 billion. Adjusted earnings of 74 cents per share also beat expectations of 69 cents.

Verizon reported better than expected earnings for its third quarter and raised its free cash flow guidance. Adjusted EPS of US$1.22 topped estimates of US$1.18. Operating revenue reached US$33.3 billion, in line with consensus of US$33.29 billion. Consumer revenue amounted to US$25.3 billion, surpassing the estimated US$25.02 billion, while business revenue was US$7.5 billion, slightly lower than the estimated US$7.63 billion. Wireless Service revenue reached US$19.3 billion, just below the estimated US$19.35 billion. The company added 100,000 postpaid phone net customers, while analysts were looking for a number just exceeding 68,000. The company expects wireless service revenue growth to be in the range of 2.5-4.5%. Moreover, Verizon anticipates that its 2023 free cash flow will exceed US$18 billion, representing a US$1 billion increase from its previously issued guidance.

General Electric on Tuesday (Oct 24) raised its full-year profit forecast on robust demand for jet engine spare parts and services and improved performance in its renewable business. Boston, Massachusetts-based GE now expects 2023 adjusted profit per share of US$2.55 to US$2.65, compared with its earlier forecast of US$2.10 to US$2.30. Free cash flow for the year is estimated to be in a range of US$4.7 billion to US$5.1 billion, up from US$4.1 billion to US$4.6 billion expected in July. GE’s aviation business, its cash cow, has been lifted by a surge in demand for aftermarket services as a strong rebound in air travel prompted airlines to use jets for longer against the backdrop of a shortage of commercial planes. GE’s aerospace unit, which makes engines for jets made by Boeing and Airbus, posted double-digit growth in orders, revenue and profit from a year earlier. The unit’s margin expanded by 130 basis points in the quarter from a year ago. Meanwhile, profits at its grid and onshore wind businesses in the quarter helped narrow losses at its renewable unit. CEO Larry Culp expressed confidence that the businesses would continue to improve. The renewable business has struggled due to a combination of weak demand, higher raw material and labor costs. GE, which has completed the separation of its healthcare unit, said it would spin off its energy businesses, including renewables, and aerospace businesses into independent companies in the beginning of the second quarter. GE said adjusted profit for the quarter through September was US$1.62 billion, compared with a profit of US$359 million a year earlier. On a per-share basis, adjusted profit was 82 US cents, while adjusted revenue rose 18 per cent to US$16.31 billion.

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


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