DAILY MORNING NOTE | 28 May 2024

Trades Initiated in the past week

Singapore shares finished 0.1 per cent higher on Monday (May 27). Seatrium was the most heavily traded stock by value. The provider of engineering solutions to the offshore, marine and energy industries gained 11.7 per cent or S$0.18 to end the day at S$1.72, following news of a contract win. The second-best performer was ground handler and cargo company Sats, which gained 3.9 per cent or S$0.10 to S$2.65. The company will release its financial results for FY2024 on Thursday, before market trading hours.

US markets were closed on Monday, May 27 in observance of Memorial Day.

Top gainers & losers

Events Of The Week

SG

Seatrium Limited today released its voluntary business update for the first quarter 2024 (1Q 2024). In 1Q 2024, Seatrium delivered Brassavola, Singapore’s first Membrane LNG Bunker Vessel and completed 67 Repairs & Upgrades projects. Year-to-date 2024, the Group achieved order wins of over S$11.4 billion, driven by the newbuild FPSO platforms P-84 and P-85 for Petrobras as well as other new orders which include the Sparta FPU newbuild for Shell Inc., topsides integration contract from MODEC for the Errea Wittu FPSO, and topsides fabrication and integration contract from SBM Offshore for the Jaguar FPSO. In addition, the Group was informed by TenneT TSO B.V. that it plans to commence work on the third 2-gigawatt High Voltage Direct Current (HVDC) electrical transmission system by June 2024. The current net order book stands at S$25.8 billion. For Repairs & Upgrades, Seatrium secured a series of major contracts with an aggregate value of S$350 million, reinforcing its reputation as a market leader in vessel repairs, upgrades, and conversions. The Group has also secured the world’s first full-scale, turnkey Carbon Capture and Storage (CCS) retrofit from a long-term Favoured Customer Contract (FCC) partner, Solvang ASA, a FCC with TMS Cardiff Gas for the repairs and upgrades of a fleet of 17 Liquefied Natural Gas (LNG) carriers, and a renewed five-year FCC with GasLog LNG Services and Shell International Trading and Shipping Company (STASCO) to provide ship repairs, refurbishment and upgrading for their combined fleet of 43 LNG carriers.

Maritime vessel maker Yangzijiang Shipbuilding’s order book now stands at a record value of US$16.1 billion as at May 24. The mainboard-listed shipbuilder said in a quarterly business update on Monday (May 27) that it now has 193 vessels in its backlog to be delivered by 2028, with a total compensated gross tonnage of 7.45 million. Container ships made up the largest number (66 vessels with a value of US$9.3 billion) followed by oil tankers (58 vessels, US$2.8 billion), then bulk carriers (47 vessels, US$1.9 billion) and finally gas and ethane carriers (22 vessels, US$2.1 billion). The total number of vessels is up from the previous record of US$14.5 billion for 182 vessels, at the end of 2023. The strong order book brings revenue visibility up to 2027, it said. The group added that it was on track to achieve delivery targets for its 2024 financial year, with 28 vessels delivered out of a target of 63. It also said that it has already hit 74 per cent of its order win target, year to date (May 24), with 38 vessels having a combined contractual value of US$3.3 billion. Around 54 per cent of the new order wins were greener vessels, using engines that can run on alternative fuels such as methanol or liquified natural gas, which it said aligns with the increasing green trend in the maritime industry.

Ley Choon Group has reported a net profit of S$10.9 million for the FY2024 ended March 31, 2024, a 18.1% y-o-y increase from the same period a year before. Following this, the group has announced a final dividend of 0.27 cents for FY2024. This is the group’s first dividend payout since 2014. The group’s revenue for the full year came in at S$129.1 million, 4.2% higher y-o-y due to higher construction activities in road works and cable laying projects. For the full year, Ley Choon’s gross profit increased 28.9% y-o-y and gross profit margin expanded by 3.1 percentage points. This was primarily attributed to the favourable project mix with more higher-value construction activities being carried out. As at March 31, the group has reported an unfulfilled order book of S$258.5 million, which is roughly two times the revenue reported for FY2024. The amount will be progressively recognised over the next 24 to 36 months, according to the group. Earlier in March, the group completed its debt restructuring agreement ahead of its March 31, 2024 deadline.

Boustead Singapore has reported a net profit of S$64.2 million for the FY2024 ended March 31, 2024, a 42% y-o-y increase from the same period a year before. The group says that after adjusting for other gains/losses and impairments, all net of non-controlling interests, net profit would have been 101% higher y-o-y. Boustead’s overall revenue for the full year came in at S$767.6 million, 37% higher y-o-y due to significantly better revenue contributions from the Geospatial Division, Real Estate Solutions Division and Energy Engineering Division. The board has proposed a final dividend of 4.0 cents per share with the option for it to be taken in cash and/or scrip, for shareholders’ approval. This takes the total dividend proposed and paid for FY2024 to 5.5 cents per share, higher than the total dividend paid for FY2023 of 4.0 cents per share.

OUE REIT made its first interest rate swap with a set of voluntary carbon credits with OCBC, sourced by the OCBC’s Emissions Trading Desk. The S$75 million structured derivative transaction enables OUE REIT to hedge against interest rate risks. As part of the transaction, OUE REIT received a fixed amount of high-integrity voluntary carbon credits (VCCs) that will contribute towards investing in a carbon reduction nature-based project in the Southeast Asia region. This project is certified by Verified Carbon Standard Programme, the world’s most widely-used greenhouse gas (GHG) crediting programme administered by Verra. OUE REIT says that the carbon credits received in this transaction will be used to offset OUE REIT’s residual emissions.

ARA Asset Management (ARA), which is owned by ESR Group, has entered into a shares purchase agreement with Acrophyte Asset Management, owned by Gordon and Celine Tang. Acrophyte will acquire the REIT manager and trustee-manager of ARA US Hospitality Trust, a stapled security which holds US hotels. In the same announcement, ARA Real Estate Investors 23, held by ESR, has also entered into a sale and purchase agreement with Acrophyte to divest 110.2 million stapled securities in ARA US Hospitality Trust representing 19% of the trust, to Acrophyte. No price was mentioned.

iWOW Technology has reported a lower net profit of S$2.8 million for the FY2024 ended March 31, 2024, a 22% y-o-y decrease from S$3.6 million for the FY2023. The group says that this is following a weaker 1H2024 performance from the completion of the trace token project and higher costs associated with increased hiring to bolster the group’s R&D and business development capabilities. The group’s revenue for the full year came in at S$46.4 million, a 81.5% y-o-y growth compared to the FY2023 revenue of S$25.6 million. This is due to the 12-month contribution from its Smart City Infrastructure segment in FY2024. The group’s 2H2024 revenue grew by 242.5% y-o-y to reach S$29.1 million as compared to S$8.5 million in 2H2023. This is due to full six-month contributions from both its Wireless Engineering Solutions (WES) and Datacomm & Enterprise Solutions (DES) segments (collectively Smart City Infrastructure), as compared to two months’ contribution in 2H2023, following the acquisition of Roots Communication Pte Ltd (Roots). As at April 2024, the group has an order book of S$93.5 million. The current order book is anticipated to generate revenues over the next five years.

US

Two key European Central Bank figures on Monday threw their weight behind the prospect of an interest rate cut next week, indicating that it is practically a done deal. In a speech on Monday, Olli Rehn, ECB governing council member and head of Finland’s central bank, stressed that inflation in the euro area was falling in a “sustained way.” Inflation in the euro area held steady at 2.4% in April, marking the seventh straight month it has been below 3%, despite a slight rebound in December. The figures for May are due on Friday. “Thanks to this disinflationary process, inflation is converging to our 2% target in a sustained way, and the time is thus ripe in June to ease the monetary policy stance and start cutting rates,” Rehn said in a speech published on the website of the Finnish central bank. Meanwhile, the ECB’s Chief Economist Philip Lane said in an interview with the Financial Times, “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.” The comments come ahead of the central bank’s next meeting on June 6.

Amazon’s computing unit AWS is in talks with Italy to invest billions of euros in the expansion of its data centre business in the country as part of the tech giant’s effort to boost its cloud offer in Europe, four people familiar with the matter said. Discussions between parties over the size and the location of the investment are ongoing, according to the sources, with one of them saying Amazon Web Service (AWS) is considering expanding its current site in Milan or building a new one. Both AWS and a spokesperson for the Cabinet’s office digital transition department declined to comment. A spokesperson for Italy’s industry ministry was not immediately available to comment.

Elon Musk’s xAI has announced that it has raised US$6 billion in series B funding, giving the artificial intelligence company widely viewed as a burgeoning rival to ChatGPT-maker OpenAI a post-money valuation of US$24 billion. xAI said in a statement that the funding round included participation from high-profile venture capital names like Andreessen Horowitz and Sequoia Capital. Musk said that xAI had a pre-money valuation of US$18 billion. xAI said that the funds will be used to help it bring its first products to market, build “advanced infrastructure,” and “accelerate the research and development of future technologies.”

Soccer star David Beckham will promote Alibaba’s international e-commerce platform, AliExpress, in its biggest global brand ambassador partnership to date, the business unit announced Monday. The deal comes against the backdrop of China-based rivals PDD Holdings ’ Temu and online fashion startup Shein’s rapid global expansion, with the former also advertising at the Super Bowl to gain traction with US customers. AliExpress, which did not disclose how much it was paying Beckham to be its global brand ambassador, has joined several Chinese companies in sponsoring the UEFA European soccer championship that kicks off in mid-June.

Indonesia’s anti-trust agency said on Monday it is investigating the local units of e-commerce platforms Shopee and Lazada for suspected violations of anti-competition rules. The companies are PT Shopee Internasional Indonesia, and PT Ecart Webportal Indonesia, which oversee the domestic operations of Shopee and Lazada respectively. The agency did not elaborate on what the alleged breaches of anti-competition rules were. Shopee, owned by Southeast Asian technology firm Sea Ltd, and Lazada, the Southeast Asian arm of Alibaba, did not immediately respond to requests for comment. The agency’s hearing into the conduct of Shopee would start on Tuesday, it said, without giving details of a potential punishment. The agency found early evidence of violations by Lazada, which it said is facing a maximum fine of 50% of its net profits or 10% of its sales earned during the time of the alleged breaches.

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

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