DAILY MORNING NOTE | 26 April 2023

Singapore shares fell 0.8 per cent, or 27.99 points, to 3,296.56 on Tuesday (Apr 25) amid weak market sentiment in the region. In the broader market, losers beat gainers 326 to 231 after 1.6 billion securities worth S$1.1 billion changed hands. Across the region, markets were mostly in the red. Japan’s Nikkei 225 index edged up 0.1 per cent, while Hong Kong’s Hang Seng Index declined 1.7 per cent and South Korea’s Kospi fell 1.4 per cent.

Wall Street stocks plummeted on Tuesday, as shares of First Republic Bank were battered after an earnings report that showed it lost a large amount of deposits – reviving worries over the financial sector. Investors have been eyeing the performance of regional lenders since the dramatic failures of Silicon Valley Bank and Signature Bank last month, which sparked fears of contagion. On Monday, First Republic said it lost more than 40 per cent of its deposits in the first quarter this year, and its shares sank nearly 50 per cent as of end-Tuesday. The Dow Jones Industrial Average slumped 1.0 per cent to 33,530.83, while the broad-based S&P 500 fell 1.6 per cent to 4,071.63. The tech-heavy Nasdaq Composite Index plunged 2.0 per cent to 11,799.16.

SG

The 17th, 18th and 20th floors of 20-storey freehold office project Solitaire on Cecil have been sold for S$162.8 million, translating to S$4,300 per square foot (psf) on a blended basis across the total strata area of 37,857 square feet (sq ft). The transaction marks a new record psf price for strata office space in the Central Business District (CBD). It surpasses the previous record of S$4,196 psf for the 12th floor of the same office project in March, which was sold for S$52.3 million. The sale is also one of the largest strata office transactions by quantum since January 2022.

Keppel Data Centres and Woodside Energy have signed a non-binding heads of agreement (HOA) to evaluate potential supply of liquid hydrogen to Singapore. This supply would also include Woodside’s proposed facility in Perth, Western Australia. This deal allows both companies to develop key hydrogen supply chain agreements. There is also a reference to potential purchase of 1,000 tonnes of liquid hydrogen per day by Keppel Data Centres as early as 2030. Both Woodside and Keppel Data Centres expect production and shipping technology to have reached maturity by then.

The voluntary unconditional cash offer for all the issued and paid-up shares in mainboard-listed investment company GK Goh closed on Tuesday (Apr 25), with the offeror and its concert parties holding 95.03 per cent of the total issued share capital. Trading of the company’s shares on the Singapore Exchange (SGX) will be suspended from Tuesday, GK Goh said in a bourse filing on the same day. A compulsory acquisition exercise to acquire the remaining shares will be held on or after May 22 this year, the company added. Following the compulsory acquisition, GK Goh will be delisted from SGX’s mainboard, with details to be announced on a later date.

Fintech platform iFast Corporation posted a 48.1 per cent fall in net profit to S$3 million for the three months ended Mar 31, 2023, down from S$5.7 million previously. This was due partly to startup losses in its UK-based subsidiary iFast Global Bank, iFast said in a bourse filing on Tuesday (Apr 25). Earnings per share for the period stood at 1.02 Singapore cents, compared with 1.97 cents in the year-ago period. Revenue for Q1 2023 was up 1.9 per cent to S$53.9 million, from S$52.9 million previously. The gain in revenue during the first quarter came from a S$4 million contribution from iFast’s banking operations; revenue from its non-banking operations fell 5.7 per cent to S$49.9 million, compared to Q1 2022. The board has proposed a final dividend of one Singapore cent per share, unchanged from the same period a year ago.

IReit Global on Tuesday (Apr 25) reported 87 per cent occupancy rates for Q1 2023, down slightly from 88.3 per cent in Q4 2022. This was mainly due to lower occupancy at Spanish properties Il-lumina and Sant Cugat Green. Rents were up 3.4 per cent in the quarter compared to the year prior, and was a result of step-up rents and indexing to the consumer price index. Weighted average lease expiry was 4.8 years in Q1 2023. The aggregate leverage for the quarter stood at 32.3 per cent compared to 32 per cent in Q1 2022. The real estate investment trust (Reit) said that weighted average interest rates are at 1.9 per cent per annum, with 96.6 per cent of bank borrowing hedged.

US

Gucci sales barely grew in the first quarter as Kering’s biggest luxury brand struggled to win over more shoppers to products such as Double G belts and furry Princetown slippers. Revenue at Gucci rose 1 per cent on a comparable basis, the company said on Tuesday (Apr 25). Analysts had expected a gain of about 2.7 per cent. Investors pay particular attention to Gucci, the luxury conglomerate’s Italian label, which generated about two-thirds of Kering’s operating profit last year.

First Republic Bank is exploring divesting US$50 billion to US$100 billion of assets as the beleaguered lender attempts to rescue itself from the turmoil that engulfed the industry last month. The sales, which include long-dated mortgages and securities, are aimed at reducing the mismatch between the bank’s assets and liabilities — one of the factors that has left First Republic teetering after a run on deposits in March, according to people familiar with the matter. Potential buyers, including large US banks, could receive warrants or preferred equity as an incentive to buy assets above their market value, one of the people said.

Google parent company Alphabet said on Tuesday that its board of directors authorized $70 billion in share repurchases. If Google ends up spending the entire amount on buybacks, it would represent a continuation of last year’s pace. Alphabet announced $70 billion in share repurchases in April 2022. Since then, Google has had to cut costs and lay off employees, citing “a different economic reality” and overhiring. Alphabet said it would take into account the stock price as well as the market conditions when deciding when to buy back its own shares of both Class A and Class C stock.

Google has been pouring money into its cloud-computing business to compete with Amazon and Microsoft. Those hefty investments are finally turning a profit. Alphabet said Tuesday that Google’s cloud business is profitable for the first time in the three years it’s been reporting operating metrics for the division. The segment generated $191 million in operating income on $7.45 billion in revenue in the first quarter, according to Alphabet’s earnings statement. In the year-ago quarter, the unit reported a $706 million loss on $5.82 billion in revenue.

Microsoft on Tuesday said that its cloud computing and artificial intelligence offerings lifted its revenue and profit in the first three months of this year. Microsoft, which has made a huge bet on embracing AI technology from the makers of ChatGPT, reported profit of US$18.3 billion on revenue of US$52.9 billion. “Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI,” said Microsoft chief executive Satya Nadella. Revenue in a productivity and business unit that includes Office 365 increased 11 per cent to US$17.5 billion when compared to the same quarter last year, Microsoft reported. Meanwhile, Microsoft’s “Intelligent Cloud” sophisticated software services, which are hosted online, climbed 16 per cent to US$22.1 billion, earnings figures showed. The increases more than offset drops in revenue from licensing Windows software to computer makers, as sales suffer in that market.

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

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