DAILY MORNING NOTE | 27 February 2024

Trades Initiated in the past week

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Singapore stocks ended the first trading day of the week 0.4 per cent lower amid cautious investor sentiment. DBS was the biggest loser by value, shedding 1 per cent or S$0.33 to close at S$33.50. The other local lenders also ended the day in the red – UOB lost 0.2 per cent or S$0.07 to S$28.18, while OCBC fell 0.3 per cent or S$0.04 to S$13.33. Venture Corporation was the top gainer, rising 5 per cent or S$0.68 to S$14.40 on a cum-dividend basis.

Wall Street stocks dipped on Monday, retreating from records ahead of new inflation data expected to influence US monetary policy. The Dow Jones Industrial Average finished down 0.2 per cent at 39,069.23, pulling back from an all-time high. The broad-based S&P 500 dropped 0.4 per cent to 5,069.53, also declining from a record, while the tech-rich Nasdaq Composite Index slipped 0.1 per cent to 15,976.25.

Top gainers & losers

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Events Of The Week

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SG

Lendlease Global Commercial REIT’s (LREIT) manager announced on Feb 26 that Lendlease Italy SGR has extended the contract of the property manager, Prelios Intgegra, of its Milan properties, until June 2025. On Dec 18, 2023, Lendlease Italy SGR, on behalf of LREIT, entered into a new lease agreement with Sky Italia for Sky Complex (which comprises three buildings in Milan). The original property lease was due to expire in May 2032 with a break option in 2026. Two of the buildings will be leased to Sky Italia for an initial period of 9 years with an option to extend for an additional 6 years with no break option. The third building will be returned to LREIT in 1Q2024 upon the completion of reinstatement works and the tenant will provide two years of existing annual rent to LREIT.

Nanofilm Technologies has reported earnings of S$3.1 million for the FY2023 ended Dec 31, 2023, 92.8% lower than its earnings of S$43.8 million in the FY2022. Earnings for the 2HFY2023 fell by 56.9% y-o-y to S$10.8 million from S$25.0 million previously. Gross profit for the year fell by 41.1% y-o-y to S$65.6 million while gross profit margin (GPM) fell by 9.9 percentage points y-o-y to 37.0% mainly due to the higher cost of materials. A final dividend of 0.33 cents per share was declared for the period, bringing the company’s total dividend for the full year to 6.6 cents per share. The final dividend will be paid on May 20. Looking ahead, Nanofilm expects to see higher revenues and profits in the FY2024 should all things remain unchanged.

Haw Par Corporation has reported earnings of S$216.6 million for the FY2023 ended Dec 31, 2023, 46% higher y-o-y. The group, which is in healthcare, leisure, property and investments, reported earnings of S$112.4 million for the 2HFY2023, 58.1% higher y-o-y. Earnings per share (EPS) for the FY2023 and 2HFY2023 stood at 97.8 cents and 50.8 cents respectively. Group revenue for the FY2023 rose by 27.4% y-o-y to S$232.1 million mainly due to higher consumer spend on products in the group’s healthcare segment. Gross margin improved to 58.1% as production overheads were allocated to higher production volume. Group revenue for the 2HFY2023 increased by 39.7% y-o-y to S$120.9 million thanks to the recovery in the Asian markets for the healthcare segment. Other income also rose from higher dividend yield from the group’s “strategic and long-term” investments and higher interest income from the continued elevated interest rate environment. Gross profit for the FY2023 rose by 36.9% y-o-y to S$134.9 million while gross profit for the 2HFY2023 rose by 54.2% y-o-y to S$71.9 million. For the year-end, a second and final dividend of 20 cents per share was declared, bringing the full year’s dividend to 40 cents, up from the total of 30 cents per share in the FY2022. The second and final dividend will be paid on May 21.

Grand Venture Technology has reported earnings of S$1.55 million for the FY2023 ended Dec 31, 2023, 81.4% lower y-o-y. Earnings for the 2HFY2023 fell by 46.9% y-o-y to S$1.54 million. The earnings drop was attributable to the softer demand for semiconductor and electronics services during the year, compared to that of the year before. FY2023 revenue fell by 15.1% y-o-y to S$111.3 million as revenue from the semiconductor segment fell due to lowered demand for the company’s back-end semicon services. At the same time, contribution from its life sciences segment as well as the electronics, aerospace, medical and others segments stood relatively stable y-o-y. Gross profit fell by 22.3% y-o-y to S$27.8 million; gross profit margin fell by 2.3 percentage points y-o-y to 25.0%. Profit before tax fell by 56.2% y-o-y to S$6.1 million. A final dividend of 0.1 cents per share has been declared for the year, down from the dividend of 0.3 cents per share declared in the year before. The company has guided for its revenue to come between S$58 million and S$64 million for the 1HFY2024 ending June 30.

Real estate developer Ho Bee Land reported a net loss of S$102.7 million for the six months ended Dec 31, 2023, reversing a net profit of S$16.4 million in the second half of 2022. Loss per share for the period came in at 15.68 Singapore cents, down from earnings of 2.41 cents per share for the same period in 2022, said the group in a bourse filing on Monday (Feb 26). Net loss for the whole financial year stood at S$259 million, compared with a net profit of S$167.1 million in FY2022. The loss follows the continuous decline in the group’s net profit from H2 2022 due to the fair-value loss based on indicative valuations of its portfolio of investment properties in London. The group noted in the accompanying press release that an unrealised fair-value loss of S$472.2 million was recorded on the London portfolio due to sharp expansion of capitalisation rates, although this was partially mitigated by a fair-value gain of S$108.3 million on the Singapore portfolio. The board of directors has recommended a first and final dividend of 3 cents per ordinary share, down from the 8 cents per share proposed for FY2022. Subject to shareholders’ approval, the dividend will be paid out on May 24.

China-based SIIC Environment announced that its revenue and net profit attributable to shareholders in FY2023 for the 12 months to Dec 31, 2023 fell by 8.8% and 22.6% y-o-y, respectively, to RMB7.573 billion and RMB604 million, respectively. The higher margins and revenue from waste water treatment were offset by the lower construction revenue. The net profit decline was caused by higher financing costs, the company said. As at the end-FY2022, overseas borrowings were mainly denominated in Hong Kong dollars and Singapore dollars with floating interest rates. Due to the changes in the international financial market environment caused by the rise in the US dollar interest rate, SIIC’s financing costs of overseas borrowings increased sharply. In response to the changes in the international financial market in 2023, the company is “optimising” its financing structure by replacing high-interest borrowings with low-interest borrowings and working with banks to obtain lower RMB fixed-rate borrowings. As at the end-FY2023, overseas RMB fixed-rate loans increased by RMB610 million, and the share of such loans has increased by 10.9%, from 3.7% at the end-FY2022, to 14.6% at the end of 2023.


US

Zoom Video Communications on Monday posted better-than-expected results for the fourth quarter, helped by strong demand for its expanding product portfolio as more employers embrace hybrid work models. Zoom also authorized a stock buyback of up to US$1.5 billion of its outstanding Class A common stock. The results indicate Zoom’s attempts to integrate artificial intelligence (AI) into its products and diversify its portfolio have paid off, as the video-conferencing provider takes advantage of a surge in hybrid working. It reported adjusted profit of US$1.42 per share for the quarter ended Jan. 31, above analysts’ estimates of US$1.15 per share. Revenue stood at US$1.15 billion, beating an estimate of US$1.13 billion. Zoom introduced its AI companion during its third quarter, allowing paid users to access features including meeting summaries and catch-ups, as well as email and chat composing prompts. The company also reported operating cash flow margin of 30.6% for the reported quarter. Zoom forecast fiscal-year 2025 revenue of about US$4.60 billion, which is below analysts’ estimate of US$4.66 billion.

Electric vehicle (EV) maker Li Auto reported better-than-expected earnings, revenue, and vehicle deliveries for the fiscal Q4 2023. Earnings per share (EPS) were reported at RMB4.23, topping the consensus estimates of 93 cents. The company’s quarterly revenue reached RMB41.73 billion, also above the estimated RMB39.8 billion. The automaker saw a significant year-over-year increase in vehicle deliveries, reporting 131,805 units compared to last year’s 46,319, and exceeding the anticipated 127,821 units. Li Auto also reported an improvement in gross margin to 23.5% from 20.2% year-over-year, topping the 21.6% expected by analysts. Looking ahead, Li Auto forecasts revenue for the first quarter of 2024 to be between RMB31.25 billion and RMB32.2 billion, which is below the consensus projection of RMB36.37 billion. The company expects vehicle deliveries to range from 100,000 to 103,000 units, short of the estimated 116,604 units.

Micron Technology has started mass production of its high-bandwidth memory semiconductors for use in Nvidia’s latest chip for artificial intelligence. The HBM3E (High Bandwidth Memory 3E) will consume 30% less power than rival offerings, Micron said, and could help tap into soaring demand for chips that power generative AI applications. Nvidia will use the chip in its next-generation H200 graphic processing units, expected to start shipping in the second quarter and overtake the current H100 chip that has powered a massive surge in revenue at the chip designer. Demand for high-bandwidth memory (HBM) chips, a market led by Nvidia supplier SK Hynix, for use in AI has also raised investor hopes that Micron would be able to weather a slow recovery in its other markets. HBM is one of Micron’s most profitable products, in part because of the technical complexity involved in its construction. The company had previously said it expects “several hundred million” dollars of HBM revenue in fiscal 2024 and continued growth in 2025.

Domino’s Pizza beat Wall Street targets for quarterly results as a relaunch of its loyalty program and promotional offers prompted more Americans to order its pizzas and chicken wings. The company also plans to raise prices in the low-single-digits percentage range in the US this year, CFO Sandeep Reddy said, in a bid to shield margins from the impact of the wage raises set to take effect in California in April. After struggling with a sales slowdown in early 2023, Domino’s rolled out multiple initiatives in recent months to help turn the ride. Its delivery partnership with Uber Eats helped attract new customers as well and is expected to boost sales throughout 2024, ramping up after the first quarter. US same-store sales at Domino’s rose 2.8% in the fourth quarter, beating analysts’ estimates for a 2.2% increase. Domino’s, which lifted its quarterly dividend by 25% and announced an additional US$1 billion share buyback plan, posted a quarterly per-share profit of US$4.48, above estimates of US$4.38.

Taiwan Semiconductor Manufacturing Company (TSMC) opened its first chip plant in Japan on Saturday as it diversifies supply chains away from Taiwan amid intensifying US-China trade tensions. TSMC, which is the world’s largest contract chip manufacturer with clients such as Nvidia and Apple, has been courted by Europe, the US and other countries to set up local operations. Located in Kumamoto, the chip fabrication plant in Japan will be equipped with a cleanroom — a controlled and sterile environment critical for chip making — with about 45,000 square meters of area, with production expected to start by the end of 2024, TSMC said. TSMC’s two factories in Japan will focus on producing semiconductors for automotive, industrial, consumer uses and to meet high-performance computing-related needs. The company is also building one of its largest overseas projects with a US$40 billion investment in Arizona for two chip manufacturing plants aimed at meeting the US annual demand.

Ryanair Holdings warned that it could be forced to pare back its schedule in the peak summer travel season amid fresh delivery delays of new jets from Boeing. The Irish discount carrier may receive fewer than 40 737 Max jets before the end of June, chief executive officer Michael O’Leary said. As recently as last month, Ryanair remained “reasonably confident” Boeing would deliver 50 new jets by summer, after a near-disaster in early January forced the United States planemaker to slow output. The airline originally was due to take 57 Max jets between summer 2023 and 2024. Ryanair makes most of its money in the summer season and cuts to its schedule mean lower revenue. O’Leary said the carrier had based its planning on the expectation it would receive 50 planes, and it will have to make some minor schedule cuts if it does not receive at least 40 planes by the end of March.

Amazon Web Services Mexico (AWS), a unit of Amazon.com Inc announced on Monday it will invest over US$5 billion to open a cluster of data centers in Mexico, amid growing demand for cloud services as more firms adopt new technologies. The cluster will be built in the Mexican state of Queretaro, Ruben Mugartegui, head of Amazon Web Services Mexico unit, told Reuters in an interview, adding the investment will be spread through the next 15 years. The company has been working on this project for more than five years, Mugartegui said. Companies can cut technology costs by around 20% when they use AWS, Mugartegui said, citing a study. Amazon has invested over 52 billion pesos (US$3.04 billion) in Mexico since its arrival to the country in 2015.

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


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