DAILY MORNING NOTE | 28 February 2024

Trades Initiated in the past week


Singapore shares ended Tuesday (Feb 27) down 0.4 per cent. UOB was the top gainer, adding 0.1 per cent or S$0.02 to S$28.20 on a cum-dividend basis. DBS closed flat at S$33.50 on a cum-bonus and cum-dividend basis; while OCBC fell 0.2 per cent or S$0.02 to close at S$13.31. Jardine Matheson Holdings was the biggest loser, shedding 2.2 per cent or US$0.94 to US$41.01.

Wall Street stocks finished mixed on Tuesday, following downcast US consumer confidence and durable goods data. The Dow Jones Industrial Average slipped 0.3 per cent to 38,972.41. The broad-based S&P 500 rose 0.2 per cent to 5,078.18, while the tech-rich Nasdaq Composite Index gained 0.4 per cent to 16,035.30.

Top gainers & losers


Events Of The Week



OCBC’s 4Q2023 results met our expectations with net profit of S$1.62bn vs our estimate of S$1.63bn. It came from fee income growth of 16% YoY to S$460mn lifted by higher wealth, credit card and trade-related fees offset by stable net interest income of S$2.46bn (+3% YoY) as net interest margin fell 2bps YoY to 2.29%. Total non-interest income grew 25% YoY to S$811mn, mainly from higher fee income, higher trading income and improved investment performance, which offset lower insurance income. Furthermore, total allowances were lower at S$187mn (-41% YoY) as both GPs and SPs dipped. 4Q23 dividend is up to 42 cents (4Q22: 40 cents), total FY23 dividend at 82 cents (+21% YoY) representing a dividend payout ratio of 53% and a dividend yield of ~6.2%. More details to follow after 9.30am analyst briefing.

Glenn Thum
Senior Research Analyst

Semiconductor and machine manufacturer Frencken Group posted a 20.7 per cent decrease in its net profit for the half year ended Dec 31, 2023 to S$20.4 million from S$25.7 million in the corresponding period a year earlier. Revenue for the half year decreased 1.3 per cent to S$391.8 million from S$397.2 million in H2 2022. For the full financial year, revenue came in 5.5 per cent lower than FY2022, dropping to S$742.9 million from S$786.1 million, while net profit plummeted 37.4 per cent to S$32.5 million from S$51.9 million. The group anticipates more revenue to be generated from its semiconductor and medical segment in the coming year, while revenue from the industrial automation segment – which registered a 52.1 per cent year-on-year decrease from H2 2022 to H2 2023 – is expected to decline further. The board of directors has recommended a first and final dividend of 2.28 Singapore cents per share for FY2023, compared to the 3.64 cents per share for FY2022. The proposed dividend, if approved, will be paid on May 15.

Yangzijiang Shipbuilding has reported earnings of RMB4.1 billion for FY2023, up 57% over the preceding FY2022. Despite delivering fewer vessels, revenue in the same period was up 16.5% to RMB24.1 billion, as the company was contracted by customers to build larger and bigger ticket ships. In FY2023, the company delivered 56 vessels, versus 67 completed in the preceding year. For the year ended Dec 2023, the company achieved a higher net profit margin of 17%, up from 12.6% in FY2022. The company plans to pay a final dividend of 6.5 cents, up from 5 cents per share paid for FY2022. As of Dec 31, Yangzijiang has an order book of US$14.5 billion for 182 ships, which includes contracts for 97 vessels worth US$7.1 billion won in FY2023. Yangzijiang flags that a growing number of new orders are for so-called alternative-fuelled vessels, as the shipping industry gets on the sustainability trend in a bigger way.

CSE Global has reported earnings of S$22.5 million for FY2023, up 372%. Revenue in the same period was up 30% to S$725.1 million, with growth seen across its major business lines. The company plans to pay a final dividend of 1.5 cents per share, bringing full-year payout to 2.75 cents. The company generated strong cash inflow from operations and a return on equity of 10.4%. As at Dec 31 2023, the company had an orderbook of S$730.6 million. With continued growth in its electrification and communications businesses, the company says it is “well positioned” to achieve a stronger financial performance in the current FY2024.

Food Empire Holdings has reported earnings of US$56.5 million (S$75.9 million) for the FY2023 ended Dec 31, 2023, 6.0% lower than the US$60.1 million reported in the FY2022. The lower earnings come despite the record full-year revenue due to the inclusion of the one-off US$15.0 million disposal gain recorded in the year before. Excluding the gain, the company’s normalised net profit after tax marked a 25.28% increase from FY2022’s earnings of US$45.1 million. FY2023 revenue stood at a record US$425.7 million, 6.9% higher y-o-y, mainly due to higher volumes and, or higher average selling prices (ASPs) and in spite of the depreciation of the Russian ruble and Ukrainian hryvnia against the US dollar (USD). Earnings for the 2HFY2023 fell by 9.6% y-o-y to US$29.8 million, although without the one-off disposal gain, 2HFY2023 earnings would’ve been up by 65.6% y-o-y. Revenue for the six-month period rose by 2.9% y-o-y to US$227.5 million. Gross profit was up by 7.6% y-o-y to US$71.9 million, while gross profit margin rose by 1.4 percentage points y-o-y to 31.6%. For the period, Food Empire proposed a record dividend of 10 cents per share, comprising a first and final dividend of five cents and a special dividend of five cents. The dividend, if approved, will be paid on May 17.

Chocolate confectionery company Delfi on Tuesday (Feb 27) posted a net profit of US$21.1 million for the six months ended Dec 31, 2023, marking a 14.1 per cent decrease from the US$24.5 million booked for the corresponding year-ago period. This came despite a 9 per cent increase in revenue, to US$255.2 million from US$234.0 million in H2 FY2022. Earnings per share stood at 3.44 US cents, a decrease from the 4.01 US cents recorded in the same period a year earlier. For the full financial year, revenue increased by 12.7 per cent, to US$538.2 million from US$477.5 million in FY2022, while net profit rose to US$46.3 million, up 5.4 percent from US$43.9 million the year before. The directors are proposing a final dividend of 1.74 US cents and a special dividend of 0.52 US cents per share. Subject to the approval of shareholders at the group’s annual general meeting on Apr 23, both dividends are expected to be payable on May 15.

EC World REIT is suspending its distribution for 2HFY2023 due to insufficient funds following overdue rent receivables under the relevant master leases. The REIT has previously deferred its distribution of 2.053 cents for 1HFY2023, which was supposed to have been made on Sept 28, 2023. During FY2023, more than 80% of the REIT’s revenue came from rental income pursuant to related party leases with its sponsor. As at Dec 31, 2023, the overdue rent receivables owing to the EC World Group by the sponsor group has exceeded RMB289.1 million (S$53.7 million). Notwithstanding the security deposit from the master lessees amounting to RMB345.1 million, the REIT manager continued to engage the sponsor group to demand for payment of outstanding rental receivables from the related party lessees although it has met with “little success” due to severe financial difficulties faced by the sponsor. In its outlook, the REIT manager says it will continue to face serious financial and cash flow stress in the short to medium term. The units trading will continue to be suspended until the financial situation has improved.

Local supermarket operator Sheng Siong announced that its earnings for FY2023 ended Dec 31, 2023 came in at S$133.7 million, 0.3% higher than S$133.3 million a year ago. Revenue for the period saw a slight growth of 2.1% y-o-y to S$1.37 billion from S$1.34 billion a year ago. The increase was primarily driven by the six new stores, which contributed a 2.5% y-o-y increase to total sales. This was partially offset by a lower revenue contribution from the Yishun store that was closed in FY2022 due to lease expiration. For the 2HFY2023 period, revenue was 2.2% higher y-o-y at S$677.2 million, while earnings gained 3.6% y-o-y to S$68.3 million. In line with the increase in revenue, gross profit increased by 4.3% to S$410.5 million in FY2023, compared to S$393.5 million in FY2022. The group also recorded relatively stable margins with a gross margin expansion of 0.6 percentage points (ppts) to 30.0% in FY2023 compared to FY2022 primarily due to constant refinement efforts to establish a more favourable sales mix and addressing the increased staff costs and utilities expenses. The board has proposed a final dividend of 3.2 cents per share. Together with the interim dividend of 3.05 cents already paid out, the total dividends for FY2023 is 6.25 cents, representing a payout ratio of about 70%. This is slightly higher than 6.22 cents paid out in the previous year.


JPMorgan Chase CFO Jeremy Barnum says he expects trading revenue to decline by 5 to 10 per cent in the first quarter compared with a strong quarter in the previous year. The largest lender in the US reported a total markets revenue of US$8.4 billion in the first quarter last year. “Both equities and macro were relatively strong last year and the slightly worse performance relative to prior years is not particularly differentiated across asset classes,” Barnum told investors at a conference in Miami. Barnum also expects the IPO market to be a bit weaker than expected. However, the investment banking fee is expected to rise in low-to-mid teens percentage in the first quarter. JPMorgan CEO Jamie Dimon on Monday (Feb 26) said market sentiment is improving for equities, mergers and acquisitions but maintained a cautious tone about the economic outlook.

Apple will wind down its team working on electric cars, called Special Projects Group. The news signals that Apple will cease its secretive effort to build a car to rival Tesla. The program employed thousands of employees but never fit with Apple’s core business of electronics and online services, and raised questions about what companies Apple would tap to manufacture a car. Some Apple employees in the company’s car division may move to a generative artificial intelligence team. The company has other automotive-related projects, including its infotainment-oriented CarPlay software.

Lowe’s on Tuesday beat Wall Street’s quarterly earnings and revenue estimates, even as the company continued to see customers tackle fewer home projects. The home improvement chain was going up against lower expectations for its fourth quarter. It had cut its full-year forecast in November, after CEO Marvin Ellison said the company had felt a “greater-than-expected pullback” on pricier items and discretionary home projects. Lowe’s said it factored economic uncertainty into its forecast for the current fiscal year, too. It said it expects total sales of between US$84 billion and US$85 billion, which would be a drop from US$86.38 billion in fiscal 2023. It anticipates comparable sales will decline between 2% and 3% compared with the prior year, and expects earnings per share of approximately US$12 to US$12.30. For the fourth quarter, the company reported earnings per share of US$1.77 vs. US$1.68 expected and revenue of US$18.60 billion vs. US$18.45 billion expected.

Macy’s on Tuesday said sales fell nearly 2% in the holiday quarter, as the 166-year-old department store operator unveiled its strategy to get back to growth. For the fourth quarter, the company reported earnings per share of US$2.45 adjusted vs. US$1.96 expected and revenue of US$8.12 billion vs. US$8.15 billion expected. The retailer said it expects sales to remain stagnant. It projected net sales of between US$22.2 billion to US$22.9 billion for this fiscal year, down from US$23.09 billion in 2023. It anticipates comparable sales, which take out the impact of store openings and closures, will range from a decline of about 1.5% to a gain of 1.5% compared with the year-ago period on an owned-plus-licensed basis and including third-party marketplace sales.

Norwegian Cruise Line Holdings forecast a first-quarter profit on Tuesday betting on higher ticket prices and steady demand in the US for cruises to the Caribbean and Europe. The company’s advance ticket sales ended 2023 at a year-end record of US$3.2 billion, about 56% higher when compared with the end of 2019. Norwegian Cruise forecast an adjusted profit of 12 cents per share for the first quarter, compared with analysts’ estimates of a loss of 20 cents per share. The company’s fourth-quarter revenue rose to US$1.99 billion from US$1.52 billion a year earlier. Analysts had expected US$1.97 billion. Norwegian, which owns the Oceania Cruises and Regent Seven Seas Cruises brands, said it returned to full-year profitability for the first time since 2019.

Starbucks workers at unionized cafes will receive the pay hikes that their nonunion coworkers first collected in May 2022, a key step as the coffee giant and the union representing some baristas signaled Tuesday that they are working toward breaking a standoff over bargaining. The wage increases are a sign of good faith from Starbucks toward Workers United, an affiliate of the Service Employees International Union that has organized more than 300 company-owned Starbucks locations. If Starbucks follows through on its pledge to hike wages for union cafes, employees who have been with the company between two years and five years will receive either a 5% increase or get paid 5% above the market’s start rate, earning whichever is higher. Workers with more than five years of tenure will get a 7% increase or earn 10% more than the market’s start rate, whichever is higher. Starbucks also said Tuesday that it would provide unionized cafes with credit card tipping, a benefit that has been available in nonunion stores for more than a year.

Alibaba Group Holdings led the largest single financing round for a Chinese artificial intelligence (AI) startup, the latest in a string of sizeable investments that suggest the e-commerce firm is again deploying capital in the hunt for growth. Alibaba joins Tencent Holdings and Silicon Valley peers such as Microsoft in placing big bets on generative AI, the technology that powers ChatGPT. It led a US$1 billion funding round in Moonshot AI with existing backer Monolith Management, boosting the year-old firm’s valuation eight-fold to some US$2.5 billion, people familiar with the deal said. They joined previous backers including the investment arm of food delivery giant Meituan and Hongshan, formerly Sequoia China, the sources said, asking not to be identified as discussing a private transaction. Founded in March 2023, Moonshot AI is among the better-known startups developing generative AI in China, hoping to eventually match the likes of OpenAI and Google. It rolled out its Kimi chatbot to the public last November and has since launched a platform for developers to build AI applications atop its model. Its valuation stood at just US$300 million when it secured initial funding.

United States regulators issued a scathing assessment of Boeing’s safety culture, putting further pressure on the company as it contends with the fallout from a near-catastrophic accident at the start of the year. The planemaker was faulted for ineffective procedures and a breakdown in communications between senior management and other members of staff, a panel of experts convened by the Federal Aviation Administration (FAA) said in a report released on Monday (Feb 26). Constant changes to complex procedures and trainings led to confusion, while other shortcomings hindered the average employee’s understanding of their role in how Boeing manages safety, according to the report, which was mandated by US lawmakers.

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


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