DAILY MORNING NOTE | 29 August 2023
Singapore shares rallied on Monday (Aug 28), extending last Friday’s gains as investors cheered China’s latest measures to boost investor confidence in its ailing stock and property markets. OCBC advanced 0.8 per cent or S$0.10 to close at S$12.46, notwithstanding a disruption to its banking services earlier in the day. The bank said these were restored from a little past noon. ISOTeam retreated 4.4 per cent or S$0.002 to S$0.043. The counter was the day’s eighth-most actively traded, with 26 million shares done. Yangzijiang Shipbuilding inched up nearly 3 per cent or S$0.05 to S$1.77, and was the third-most traded stock on Monday, with a volume of 47 million shares.
Wall Street ended higher on Monday, with gains in 3M and Goldman Sachs ahead of key inflation and jobs data this week that will offer more clues on the Federal Reserve’s interest rate path. All three major stock indexes rose as investors digested last Friday’s comments from Fed Chair Jerome Powell that the US central bank may need to raise interest rates further to ensure inflation is contained. Focus now shifts to a report on the personal consumption expenditures price index, the Fed’s preferred inflation gauge, to be released on Thursday, and non-farm payrolls data due on Friday. The S&P 500 climbed 0.63 per cent to end the session at 4,433.31 points. The Nasdaq gained 0.84 per cent to 13,705.13 points, while Dow Jones Industrial Average rose 0.62 per cent to 34,559.98 points.
Construction and engineering services provider Civmec reported on Monday (Aug 28) a 4.4 per cent rise in net profit to A$29.4 million (S$25.6 million) for the half-year ended Jun 30, 2023, up from the A$28.2 million it posted for the corresponding period the year before. This was despite a 1.9 per cent fall in revenue to A$412 million for the period, from A$419.9 million in the year-ago period. The group attributed the rise in net profit to increased gross margins in the period, which rose to 13.9 per cent year on year, from 11.6 per cent for the half-year before. The group also recognised a 12.5 per cent year-on-year increase in other income to A$2.1 million, due to interest income, fuel tax credits, gain on disposal of plant and equipment, as well as gain on disposal of the group’s interest in Civtec Africa. Civtec Africa operates in Uganda, and is also a construction and engineering services provider.
Sembcorp Industries has received a letter of intent from the Energy Market Authority (EMA) to explore the development of offshore wind farms in Vietnam to export electricity to Singapore. The project will span approximately 200,000 hectares of sea area across two sites off the shores of South Vietnam. In a bourse filing on Monday (Aug 28), the company said that its wholly-owned subsidiary, Sembcorp Utilities, will work with Vietnam Oil and Gas Group member Petrovietnam Technical Services Corporation (PTSC) to explore the development of such wind farms. It also noted that PTSC is the first and only company to obtain a permit from Vietnam’s Ministry of Natural Resources and Environment to conduct wind, marine and geological surveys.
Nordic Group has secured S$40.8 million worth of new contracts with repeat customers. The systems integration solutions provider announced on Sunday (Aug 27) that these clients include multinational companies, and those in the marine, offshore oil and gas sectors. The group also highlighted that the new contracts are not expected to have a material impact on the consolidated net tangible assets per share and earnings per share (EPS) for the current financial year. The contracts were secured through several divisions, with the cleanroom, air and water engineering solutions section contributing the most value at about S$9.7 million for ad-hoc and maintenance work. These projects will mainly be completed in the first quarter of 2025.
Healthcare provider Thomson Medical Group (TMG) reported a 66.7 per cent drop in net profit to S$13.8 million for its second half ended Jun 30, 2023, from S$41.3 million in the same period a year ago. Revenue for the half-year fell 8.8 per cent to S$171.8 million, from S$188.3 million. This was mainly due to lower income received from project-related services as a result of the closure of vaccination centres, the group said in a filing on Monday (Aug 28). But the decrease was partially offset by the higher average bill sizes in Singapore, it noted. It added that in Malaysia, revenue has continued to improve due to higher patient loads attributed to the increased operating capacity at Thomson Hospital Kota Damansara, as well as higher case intensity being handled.
Capitaland Ascott Trust (Clas) has received valid acceptances of 36.6 per cent for the 100.5 million new stapled securities to be issued under the preferential offering announced on Aug 3. In a bourse filing on Monday (Aug 28), the manager of the stapled group said that a further 28.1 per cent of the new stapled securities were subscribed for under the preferential offering. The manager also noted that the stapled group’s sponsor, The Ascott, together with itself, Somerset Capital, Carmel Plus, CapitaLand Ascott Business Trust Management have accepted their respective provisional allotments of 29,622,829 in new stapled securities. In total, 65.1 million new stapled securities, or 64.7 per cent of the total number of new stapled securities offered under the preferential offering, were subscribed for. The manager said that the joint lead managers, bookrunners and underwriters have agreed to subscribe for portions of the remaining securities that were not subscribed for. The new stapled securities were sold at an issue price of S$1.025 apiece to raise gross proceeds of about S$103.1 million.
Mainboard – listed property developer Oxley Holdings sank further into the red in the second half of the financial year ended Jun 30, 2023, with losses deepening 311 per cent to S$83.4 million from S$20.3 million in the same period the year before. Revenue for the half-year fell by 52 per cent to S$202 million, from S$419.5 million a year ago. This was mainly due to lower revenue being recognised for development projects in Singapore, the group said in a bourse filing on Monday (Aug 28). This came as “substantial revenue was recognised prior to FY2023, partially offset by higher revenue recognition from Oxley Towers KLCC in Malaysia and hotel operations”, it added.
American Airlines Group was ordered to pay a US$4.1 million fine, the largest such penalty to date, for allowing aircraft to sit on the ground for three hours or more without giving passengers a chance to exit. The US Transportation Department on Monday (Aug 28) said the action was part of an increase in enforcement starting last year after Secretary Pete Buttigieg began denouncing carriers for causing lengthy delays and cancelling flights. US law prohibits domestic flights from sitting on airport tarmacs for more than three hours without pulling planes back to gates to allow people to leave.
The US dollar slid from a 12-week peak on Monday (Aug 28), as traders weighed US and European central bankers’ monetary options after last week’s Jackson Hole meeting, while Beijing’s decision to halve stamp duty on stock trading helped to lift the euro. The US dollar index, which measures the greenback against six peers, edged 0.08 lower to 104.08 after hitting its highest since early June on Friday. The index is up more than 2 per cent in August and set to snap a two-month losing streak. US Federal Reserve chair Jerome Powell told the annual Jackson Hole Economic Policy Symposium that the central bank may need to lift interest rates further, to finish the job of lowering inflation on a sustained basis.
Oil prices held steady on Monday, pressured by worries further US interest rate hikes could dent demand but supported by the potential of a supply disruption from a tropical storm off the US Gulf Coast. Brent crude settled 6 cents lower at US$84.42 a barrel, after touching a session high of over US$85 earlier in the day. US West Texas Intermediate crude was 27 cents, or 0.3 per cent, higher at US$80.10. On Friday, crude posted a second week of losses after Federal Reserve Chair Jerome Powell said the US central bank may need to raise rates further to cool stubborn inflation.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: Buy (Maintained), Last done: S$0.27, TP: S$0.38, Analyst: Glenn Thum
– 4Q23 earnings of RM36.4mn were below our estimates. FY23 earnings were at 87% of our FY23e. The 24% YoY dip in earnings came from lower-than-expected project-related revenue and higher-than-expected tax expense. FY23 DPS was 14% lower YoY at 0.60 cents.
– 4Q23e recurring revenue comprising maintenance and enhancement services, insurance ecosystem transactions and services, and retail transactions processing revenue grew 7% YoY, while project-related revenue comprising software licensing and software project services fell 4% YoY. Orderbook is RM665mn.
– We maintain a BUY rating on Silverlake Axis Ltd with a lower target price of S$0.38. We lower FY24e earnings by 20% as we lower revenue estimates and increase tax estimates for FY24e. Our target price is pegged to 20x P/E FY23e. We expect MOBIUS and the recovery in bank IT spending after two cautious pandemic years to be the key growth drivers for the company.
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