DAILY MORNING NOTE | 26 July 2023
SINGAPORE shares rose on Tuesday (Jul 25), in tandem with overnight Wall Street gains and the spirited trading seen in most key Asian indexes after China pledged more support for its tepid economy. Singapore shares gained 0.6 per cent or 21.02 points to 3,286.16 points.
WALL Street stocks advanced on Tuesday (Jul 25) as traders took in earnings reports and looked ahead to the US Federal Reserve’s interest rate decision.The Dow Jones Industrial Average ended 0.1 per cent higher at 35,437.93, extending its winning streak for a 12th straight session.The broad-based S&P 500 Index rose 0.3 per cent to 4,567.54, while the tech-heavy Nasdaq Composite Index gained 0.6 per cent to 14,144.56.
SIA Engineering: SIAEC posted its first quarterly operating profit in 1Q24 (S$0.4mn) since 4Q20. This is also the first quarter without government COVID support. It booked 1Q24 EPS of 2.41 cts/share. Revenue of S$262mn (+16% qoq) has returned to pre-pandemic level, though the number of flights handled was 84% of pre-COVID level (Mar 23: 79%). Net profit of S$27mn (+28% QoQ, +111% YoY) was led by share of profits at associates/JVs. Balance sheet is flushed with cash of S$634mn (S$0.57/share). SIA owns 77.7% of SIAEC and will report 1Q24 earnings on 27 July.
Peggy Mak Bang Mui
THE manager of Mapletree Logistics Trust (MLT) reported a distribution per unit of S$0.02271 for the first quarter of financial year 2023 and 2024, up just 0.1 per cent from a DPU of S$0.02268 for the same period a year ago. The amount distributable to unitholders rose 3.1 per cent year-on-year to S$112 million from S$108.6 million. The increase was due to a higher divestment gain and capital gain tax write-back, said the manager in a bourse filing on Tuesday (Jul 25).
FINTECH platform iFast has reversed into the black with a net profit of S$3.6 million for its second quarter ended Jun 30, as financial market conditions stabilised this year which benefited its core wealth management platform business. A year earlier, it made a net loss of S$2.7 million. Earnings per share stood at 1.22 Singapore cents for the second quarter. In the year before period, the company had a loss per share of 0.92 Singapore cent. Net revenue for Q2 rose 6.5 per cent to S$31.8 million from S$29 million previously.
KEPPEL Reit’s distribution per unit (DPU) fell by 2.4 per cent to S$0.029 for the first half of the 2023 financial year ended Jun 30, down from S$0.0297 the year before, its manager said on Tuesday (Jul 25). Distributable income from operations fell 10.5 per cent to S$99 million and was lower due mainly to higher property expenses and borrowing. Property income rose 4.7 per cent to S$114.9 million due to higher rentals and portfolio occupancy, the manager said.
THE voluntary unconditional cash offer for consumer electronics retailer Challenger Technologies closed on Tuesday (Jul 25), with the offeror DigiTech Holding receiving valid acceptances representing about 97.8 per cent of the total number of shares in the company.
THE general insurance arm of UOB, United Overseas Insurance (UOI), reported a net profit after tax of S$12.2 million for the first half of the 2023 financial year, up 70.2 per cent from a net profit after tax of S$7.1 million for the same period a year ago. Insurance revenue increased by 17.5 per cent to S$45.4 million for the first half of FY2023 ended Jun 30, as compared with S$38.7 million in the same period a year ago.
FRASERS Centrepoint Trust’s committed occupancy for its retail portfolio rose 1.6 percentage point to 98.7 per cent year on year in the third quarter ended Jun 30, on the back of firm leasing demand. Shopper traffic and tenants’ sales both increased within the same period, with tenants’ sales averaging 16 per cent above pre-Covid-19 levels, the trust’s manager said on Tuesday (Jul 25).
Shares of Spotify closed down 14% Tuesday after the company released second-quarter results that missed analysts’ estimates for revenue and offered weaker-than-expected guidance. 2Q23 revenue grew 11% YoY to EUR3.2bn, in line with analyst estimates. Loss per share widened to -EUR1.55, well below analyst estimates, dragged by EUR135mn in restructuring-related costs. On the flip side, the company saw an outperformance in user metrics, reporting 551mn MAUs and 220mn premium subscribers respectively.
Senior Research Analyst
Alphabet shares rose about 7% in extended trading on Tuesday after the company reported better-than-expected revenue and profit, driven by growth in its cloud-computing unit. 2Q23 revenue US$74.6bn (7% YoY) vs estimates of US$72.8bn, while earnings came in at US$1.44 vs estimates of US$1.34. Google Ads remained resilient through macro headwinds with a 3% YoY growth, while Google Cloud saw another quarter of strong 25+% YoY growth, with profitability continuing for a 2nd straight quarter.
Senior Research Analyst
Microsoft shares slipped as much as 4% in extended trading on Tuesday after the software maker issued quarterly revenue guidance that fell short of analysts’ expectations. 2Q23 revenue US$56.2bn vs estimated US$55.5bn, earnings of US$2.69 vs estimates of US$2.55. Microsoft’s Intelligent Cloud segment contributed US$24.0bn in revenue, up 15% and above the US$23.8bn consensus estimates by analysts. Revenue growth has come in under 10% for three consecutive quarters for the first time since 2017. 1Q24e Mid-range revenue guidance of US$54.3bn fell short of estimates at US$54.9bn.
UNILEVER said on Tuesday (Jul 25) that China’s declining property market and exports have sent its consumer sentiment to a historic low.This came after the British consumer goods giant forecast a Chinese “consumption boom” earlier this year. The maker of Dove soap and Ben & Jerry’s ice cream in February flagged between US$1.5 trillion and US$2 trillion of “excess household savings” in China, which it believed could boost its sales in the country and in South-east Asia.
TIKTOK is planning to launch in early August an e-commerce platform to sell China-made goods in the United States, The Wall Street Journal reported on Tuesday (Jul 25), citing people familiar with the plan.The short-video app is seeking to replicate the American success of Chinese shopping platforms Shein and Temu and will be responsible for the storage and shipping of items on behalf of manufacturers and merchants in China, the report said.
BIOTECHNOLOGY company Biogen said on Tuesday (Jul 25) it expects to slash about 1,000 jobs, or 11 per cent of its workforce, in a fresh round of cost-cutting as it looks to the launch of a new Alzheimer’s drug to help it return to growth. The company said its costs are elevated compared to rivals and that it would focus on higher-growth products such as the recently approved Alzheimer’s drug Leqembi, which it sells with partner Eisai.
SALES at the world’s top luxury group LVMH rose by 17 per cent in the second quarter, with a sharp rebound in China helping to offset a decline in the US, where inflation and economic turbulence have dented demand for high-end goods. The French company, which owns 75 brands including fashion labels Louis Vuitton and Dior as well as Hennessy cognac and US jeweller Tiffany, said on Tuesday that sales came to 21.2 billion euros (S$31.1 billion) for the three months to the end of June.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: Neutral (Downgraded), Last Done: S$2.26
Target price: S$2.26, Analyst: Darren Chan
– 1H23 DPU of 5.051 Singapore cents (unchanged YoY) was in line and formed 51% of our FY23e forecast.
– Contributions from the acquisitions of Guangdong Data Centre 2 and 3, along with renewals, income escalations, and tax savings resulting from the approval of the NetCo Bonds as Qualifying Project Debt Securities, or QPDS, were offset by higher facilities expenses including increased electricity costs at some of its Singapore co-location assets, and higher finance costs due to refinanced loans, as well as floating interest rate loans.
– Downgrade from ACCUMULATE to NEUTRAL due to the recent share price performance. DDM derived target price remains unchanged at S$2.26. Catalysts include more accretive acquisitions and lower-than-expected interest costs. The current share price implies FY23e/24e DPU yields of 4.4%/4.5%.
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