DAILY MORNING NOTE | 29 February 2024

Trade of the Day

Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6)

Analyst: Zane Aw

(Current Price: S$1.74) – TECHNICAL BUY
Buy price: S$1.74 Stop loss: S$1.68 (-3.45%) Take profit: S$1.85 (+6.32%)


Trades Initiated in the past week


Local shares ended Wednesday (Feb 28) 0.6 per cent lower, as investors opted for more caution ahead of a slew of critical macroeconomic data, including the Federal Reserve’s preferred inflation gauge – the latest personal consumption expenditures. The trio of lenders ended the day in the red. OCBC lost 2.3 per cent or S$0.30 to S$13.01; UOB shed 0.3 per cent or S$0.07 to S$28.13; and DBS fell 0.2 per cent or S$0.05 to S$33.45.

Wall street stocks slipped on Wednesday ahead of inflation data expected to influence the Federal Reserve’s upcoming policy decisions. The Dow Jones Industrial Average slipped 0.1 per cent to 38,949.02. The broad-based S&P 500 dropped 0.2 per cent to 5,069.76, while the tech-rich Nasdaq Composite Index declined 0.6 per cent to 15,947.74.

Top gainers & losers


Events Of The Week



Singapore Technologies Engineering (ST Engineering) has posted earnings of S$305.9 million for its 2HFY2023 ended December, up 19.9% y-o-y on strong business growth, higher productivity and cost savings. Revenue was up 10% y-o-y to S$5.2 billion, largely due to the growth of its commercial aerospace segment. Cost of sales in 2HFY2023 widened by 8.4% to S$4.25 billion, while gross profit grew 16.8% y-o-y to S$992.34 million. EBIT increased 34% to S$470 million. For the full year, the company recorded earnings of S$586.5 million, a 9.6% increase y-o-y. Revenue for FY2023 was up 12% y-o-y to S$10.1 billion. Cost of sales for FY2023 grew 10.8% to S$8.13 billion, while gross profit grew 16.1% to S$1.97 billion. EBIT improved 24% y-o-y to S$915 million. In 4QFY2023, ST Engineering secured new contracts of about S$3.1 billion. This brings the total new contract value for 2023 to S$14.8 billion compared to S$13.1 billion in 2022. With these new contract wins and after adjustments of revenue delivery, ST Engineering ended 2023 with an order book of S$27.4 billion. The company expects to deliver about S$7.9 billion from the order book in 2024. The board has proposed a final dividend of 4 cents per ordinary share. Together with the three quarterly interim dividends of 4 cents per ordinary share, the total dividend for FY2023 will be 16 cents per ordinary share.

Semiconductor equipment maker AEM Holdings on Wednesday (Feb 28) reported a net loss of S$20.9 million for the six months ended Dec 31, 2023, reversing a net profit of S$44 million in the corresponding period a year earlier. The results translate into a loss per share of S$0.0676, as compared to an earnings per share of S$0.1423 for H2 2022. Revenue for H2 2023 dropped 38 per cent to S$206.1 million from S$330 million. The group attributed the continual profit decline to the slowing down of the semiconductor industry, which started in H2 2022, lasted throughout 2023, and “will continue through at least 1H 2024”. For the financial year, revenue was down 45 per cent to S$481.3 million from S$870.5 million in FY 2022. Net loss stood at S$1.2 million, a significant decrease from the net profit of S$126.8 million a year earlier. The group said that it has decided to not pay dividend in order to continue to invest in new customer programs. Instead, it will undertake a bonus issue of shares of one share for every 100 shares pursuant to a general share issue mandate, subject to approval of the shareholders.

Semiconductor manufacturer UMS Holdings on Wednesday (Feb 28) recorded a net profit of S$15.7 million for the fourth quarter ended Dec 31, 2023, dipping 3 per cent from the earnings of S$16.1 million in the corresponding year-ago period. This translated to earnings per share (EPS) of S$0.0234, down from S$0.0241 in Q4 FY2022. Revenue for the period slid 27 per cent year on year to S$73.5 million, from S$101 million. This was attributed to lower revenue in the semiconductor and others segments in Q4 FY2023. The group declared a final dividend of S$0.022 per share for FY2023, higher than S$0.02 per share declared for FY2022. For the full year ended Dec 31, 2023, net profit fell 39 per cent to S$60 million, from S$98.2 million a year earlier. Revenue for the 12 months slid 19 per cent to S$300 million, from S$372.4 million.

Centurion Corporation has reported a 114% y-o-y increase in its earnings for the FY2023 ended Dec 31, 2023, of S$153.1 million, boosted by net fair value gains. For the full year, the group’s revenue grew 15% y-o-y to S$207.3 million on the back of revenue contributions from its purpose-built workers accommodation (PBWA) and purpose-built student accommodation (PBSA) across all markets which it operates in. The group’s board has recommended a final dividend of 1.5 cents per ordinary share for the FY2023. Revenue from the group’s Westlite accommodation PBWA segment increased 16% from S$134.7 million in FY2022 to S$156.7 million in FY2023 due mainly to strong revenue contributions in Singapore, as demand and supply dynamics for PBWAs continue to be positive. Revenue from the group’s dwell student living PBSA segment rose 13% y-o-y from S$44.2 million to S$49.9 million as bookings and financial occupancies across its PBSA assets in the UK and Australia were boosted by strong student demand underscored by shortage in PBSA bed supply. The group’s net fair value gain on investment properties came in at S$84.8million for FY2023, compared to a net fair value gain of S$19.0 million for FY2022.

Real estate group Far East Orchard posted on Wednesday (Feb 28) a net profit of S$57.7 million for the six months ended Dec 31, 2023, more than four times the S$13.9 million reported in the corresponding year-ago period. Revenue for the half year improved 20 per cent to S$92.8 million from S$77.3 million in H2 2022. The group attributed the jump in net profit to a fair-value gain on investment properties of S$58.3 million over the financial year, up from the S$2.6 million in FY2022. Earnings per share stood at 11.84 Singapore cents for H2 2023, up from the 2.92 Singapore cents in H2 2022. For the financial year, revenue rose 30.3 per cent year on year to S$183.6 million from S$141 million, boosted by the strong performance from the group’s hospitality segment. The board of directors will recommend a first and final dividend of S$0.04 per share at the group’s upcoming annual general meeting. Subject to shareholders’ approval, the payout date will be announced later.

Hong Leong Asia, the trade and industry arm of the Hong Leong Group, on Wednesday (Feb 28) posted a net profit of S$34.1 million for the second half of the year, up 185 per cent from earnings of S$12 million in the year-ago period. Earnings per share stood at 4.56 Singapore cents for the half year, up from 1.6 cents in the previous year. The mainboard-listed company’s H2 growth came as its powertrain solutions unit, Yuchai, and its building materials unit recorded an increase in gross profits. Revenue for the period jumped 12.4 per cent to S$2 billion, as Yuchai’s revenue surged 12.5 per cent or by S$182.7 million. Also contributing to the income growth was its building materials unit, which saw revenue grow 13.5 per cent, or by S$40.9 million in the half year, on the recovery of sales volumes and improved average selling prices in Malaysia. For the full year, the group’s net profit rose 19 per cent to S$64.9 million, from S$54.5 million in FY22, while revenue grew 5.2 per cent or S$200.4 million, to S$4.1 billion. The board has proposed a first and final cash dividend of two cents per ordinary share, to be paid on May 15 after attaining shareholders’ approval.

Yangzijiang Financial Holdings has reported earnings of S$201.8 million for the FY2023 ended Dec 31, 2023, 25% higher y-o-y. The group’s earnings for the 2HFY2023 surged by 53% y-o-y to S$39.3 million. Earnings per share (EPS) for the FY2023 and 2HFY2023 stood at 5.53 cents and 1.08 cents respectively. FY2023 total income rose by 16% y-o-y to S$348.4 million with strong investment income from its maritime fund assets and offset by a drop in interest income from its debt investments business. As at Dec 31, 2023, the group has S$4.0 billion of assets under management (AUM). Looking ahead, the group says it is still focused on its efforts to diversify its business. It has also set up a new long-term target to further reduce its China debt/credit exposure to less than 30% of its total AUM. The ratio currently stands at 40% as at the end of 2023. On its debt investments in China, the group adds that it is “pro-actively taking measures to mitigate the impact of exposures to the Chinese real estate market”. “The group has minimised the granting of new loans that are exposed to the real estate sector, and diligently managing its non-performing loans through various avenues such as loan restructuring and legal mechanisms,” says Yangzijiang Financial in its Feb 28 statement. For the period, the group has proposed a dividend of 2.2 cents per share, up from the 1.8 cents a share in the FY2022. This year’s dividend amounts to a payout ratio of 40%.

Weighed by the semiconductor down cycle, ISDN Holdings has reported lower earnings of S$4.95 million for FY2023, down 66.1% over the preceding 12 months ended Dec 2022. Revenue in the same period was down 7.8% y-o-y to S$341.8 million. For FY2023, the company’s gross margin dropped by 1.9 points, but ISDN expects to recover sequentially along with the industry upcycle. Besides its industrial automation businesses, ISDN runs hydropower plants in Indonesia, which have reached commercialisation after years. In FY2023, this business segment generated 2% of the company’s revenue and contributed tariff income of some S$8.8 million. Meanwhile, ISDN’s industrial automation business remains its core. Its China industrial automation business, which generated 73% of revenue, grew 6.6% y-o-y on a constant-currency basis, but given the weaker RMB versus Singdollar, the reporting currency, was up just 2.4%. According to ISDN, it gained market share as the overall market in China dipped by 2% in FY2023. As for its Southeast Asia industrial automation business, which contributed 21% of revenue, it suffered a drop of 28.3%, as the bulk of the demand was concentrated within the semiconductor industry which suffered from widespread cyclical decline in this region.


Tesla will aim to ship its Roadster electric sports car next year, the electric vehicle maker’s CEO Elon Musk said on Wednesday. “Tonight, we radically increased the design goals for the new Tesla Roadster,” Musk said in a post on X, adding that Roadster’s production design will be completed and unveiled by the end of this year. Tesla had announced the Roadster, a battery-powered four-seater, at the end of 2017, which was originally set to be launched in 2020. Musk in 2021 had pushed the launch of the Roadster to 2023, citing global supply chain bottlenecks.

ASML has reached “first light” on its massive new High NA EUV lithography system, the Dutch semiconductor equipment maker confirmed on Wednesday (Feb 28), a milestone that means the tool is functioning though not at full performance. The head of technology development at Intel, Ann Kelleher, first mentioned the progress during a talk at the SPIE lithography conference on Tuesday in San Jose. ASML confirmed Kelleher’s remarks were accurate. Lithography systems use focused light beams to help create the tiny circuitry of computer chips. ASML’s High NA EUV tools, which are the size of a double decker bus and cost more than US$350 million each, are expected to help enable new generations of smaller, faster chips. The first High NA tool in existence is at ASML’s laboratory in Veldhoven, Netherlands and the second is under assembly at an Intel plant near Hillsboro, Oregon. Advanced chipmakers including TSMC and Samsung are expected to adopt the tool in the coming five years, with Intel saying at an event last week it intends to use the tool in production for its 14A generation of chips.

Salesforce on Wednesday delivered upbeat guidance and posted better-than-expected fourth-quarter earnings as a step up in enterprise spending bolstered performance, paving the way for the cloud software maker to roll out its first quarterly dividend and upgrade its stock buyback plan. For the three months ended Jan. 31, Salesforce reported adjusted earnings of US$2.29 per diluted share, up from US$1.68 a year earlier, on revenue of US$9.29 billion, up from US$8.38 billion a year earlier. That topped Wall Street estimates of US$2.27 on revenue of US$9.22 billion. Current remaining performance obligation, or cPRO, a bookings metric, jumped 12% to US$27.6 billion at the end of Q4 year-on-year. Looking ahead, the company guided Q1 adjusted EPS of US$2.37 to US$2.39 on revenue of US$9.12 billion to US$9.17 billion, topping estimates of US$2.20 on revenue of US$9.14 billion. For the full-year the company sees adjusted EPS of US$9.68 to US$9.76 on revenue of US$37.7 billion to US$38.0 billion. The company initiated its first ever quarterly dividend of US$0.40 a share, and increased its share buyback plan by US$10 billion.

Snowflake forecast first-quarter product revenue below Wall Street estimates on Wednesday on expectations that customers would cut back on spending in an uncertain economy. The cloud data analytics company also appointed Sridhar Ramaswamy as its chief executive, succeeding Frank Slootman who retired on Feb 27. Snowflake forecast current-quarter product revenue between US$745 million and US$750 million, below analysts’ average estimates of US$765 million. The company’s product revenue accounts for 95% of its total revenue. Its adjusted profit per share for the fourth quarter came in at 35 cents, beating estimate of 18 cents.

Baidu’s revenue rose 6 per cent after its ChatGPT-style service began to augment advertising sales, helping the Chinese AI leader weather a severe economic downturn. The company reported sales of nearly 35 billion yuan (S$6.5 billion) for the three months ended December, broadly in line with analysts’ projections. Net income slid 48 per cent to 2.6 billion yuan. To rekindle growth, Baidu has joined Silicon Valley peers from Microsoft to Google in seeking ways to monetise generative AI. The Chinese company has attracted more than 100 million users to its ChatGPT-style service – now including a premium tier that charges a monthly subscription – giving it a headstart against peers like Tencent Holdings and ByteDance. But revenue generated by the AI model, known as Ernie, is a drop in the bucket for Baidu, which still relies mainly on search ads.

TJX Companies has reported higher-than-anticipated sales growth in the fourth quarter. The TJ Maxx and HomeGoods-owner was boosted by a jump in customer transactions, in a sign that shoppers are potentially seeking out cheaper options during a time of high inflation and elevated interest rates. Consolidated comparable store sales rose by 5% in the 14 weeks ended on Feb. 3, topping consensus estimates of 4.09%. Net sales expanded by 13% versus the year-ago period to US$16.41 billion, also above expectations, while earnings per share increased to US$1.22 thanks in part to lower freight costs and markdowns. In a statement, Chief Executive Ernie Herrman said the company is beginning 2024 “in a position of strength,” adding that the first quarter is already “off to a good start.”

Theater chain AMC Entertainment on Wednesday posted a bigger-than-expected quarterly loss on higher distribution costs for Taylor Swift and Beyonce concert movies and lack of big releases from Hollywood studios after twin strikes. Several big titles including the second part of sci-fi epic “Dune” were delayed by strikes that halted much of US film production until November, leaving little in the fourth quarter to follow the success of “Barbie” and “Oppenheimer”. That forced AMC to focus on alternative content such as the “Taylor Swift: The Eras Tour” and “Renaissance: A Film by Beyonce” concert films to attract people to its theaters. Total operating costs and expenses increased more than 3% to US$1.25 billion in the fourth quarter. AMC reported a loss of 83 cents per share for the quarter, bigger than the average analyst estimate of 70 cents. It posted revenue of US$1.10 billion for the quarter, compared with analysts’ estimates of US$1.05 billion.

Software firm C3.ai on Wednesday posted better-than-expected quarterly results and narrowed its full-year revenue forecast range which was still ahead of Wall Street estimates. The company now sees 2024 revenue between US$306 million and US$310 million, above analysts’ estimates of US$306.1 million. C3.ai had previously forecast US$295 million to US$320 million. For the fourth quarter, it expects revenue between US$82 million and US$86 million, compared to analysts’ estimates of US$84.45 million. Total revenue for the third quarter came in at US$78.4 million above estimates of US$76.14 million. Subscription revenue for the quarter was US$70.4 million, above estimates of US$66.77 million. On an adjusted basis, the company posted a smaller net loss of 13 cents per share, for the quarter ended Jan. 31, compared to estimates of a loss of 28 cents per share.

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


Raffles Medical Group Ltd. – Lacklustre near-term

Recommendation: NEUTRAL (Maintained); TP: S$0.96

Last Done: S$1.03; Analyst: Paul Chew

– 2023 earnings were below expectations at 89% of our estimates. 2H23 adjusted PATMI dropped 77% YoY, excluding fair value gains of S$7.4mn.

– The absence of high-margin pandemic-related services such as vaccination and testing was the major drag on earnings. Other activities pulling down margins were lower revenue per bed from transitional care facilities (TCF) and high loss ratios in their insurance business as patient claims normalised.

– We cut our FY24e PATMI by 30% to S$59.2mn. Our NEUTRAL recommendation is maintained, and the DCF target price is lowered to S$0.96 (prev. S$1.02). We do not expect any recovery in margins in the near term. Price pressure from TCF will linger due to aggressive competition. Weakness in foreign patient volume due to the strong Singapore currency, cheaper alternatives, and improved healthcare services in the region. Containing the decline in earnings will be progressive price increases in Singapore hospitals and narrowing losses in China.

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