DAILY MORNING NOTE | 29 January 2024

Trades Initiated in the past week


Week 5 Equity Strategy: The Federal Reserve meets this Wednesday. Expectations are interest rates will be left unchanged. We expect the Fed to remain dovish. Core PCE inflation for December was 2.9% YoY. It is above the market and even the Fed’s projection of 3.2%. Inflation was lowest in almost three years when the Fed funds rate was still at zero. The odds of rate hikes this year have increased. Beneficiaries include REITs and property sectors.

After attending multiple REIT results briefings last week, the conclusion is operationally rents are still rising but finance and foreign exchange remain headwinds. This will lead to mediocre DPU growth in 2024. Any rate cuts will not impact DPU as debt is largely hedged at a fixed rate. The most challenging segment is industrials in China. Logistics rents are declining as much as 20% in Tier 2 cities and data centre tenants are in arrears. A combination of weak economy, higher supply and regulations have impacted the industry. Conversely, Singapore’s retail looks the strongest for rental reversion. It benefits from a 3-year renewal cycle that is refreshed against pandemic rents. The rental index is still 22% below pre-pandemic levels. The office sector is expected to grow at a slower pace due to a decade-high in pipeline supply and cautious corporates. Industrial outlook ranges from undersupplied high-spec logistics to weak business parks. Business parks face huge supply from Punggol digital district and Singapore Science Park, an estimated 4mn sft supply. Industrial buildings face slow growth amid a soft export environment. Consequently, tenants are also not looking to relocate. Existing data centres are unlikely to benefit from the growth in AI due to the lack of available power. Pure AI or GPU cloud data centres such as CoreWeave are likely to thrive.

Marina Bay Sands’s record earnings in the December quarter point to strong mass market growth of 22% YoY whilst VIP volumes are flat. Genting Singapore should register robust earnings. Another positive will be for the construction industry. Marina Bay’s planned 4th tower and capex of S$4.5bn are still on track. Possible completion date is 2030. Beneficiaries include building material suppliers Pan United and BRC Asia.

Paul Chew
Head Of Research

Singapore stocks ended in the black on the last trading day of the week on Friday (Jan 26), amid a mixed showing by regional bourses. Singapore stocks climbed 0.4 per cent or 11.89 points to end at 3,159.53. Across the broader market, advancers outnumbered decliners 297 to 279, with 1.5 billion securities worth S$1.2 billion having changed hands. Elsewhere in the region, key indices in Shanghai, South Korea and Malaysia rose. However, the Nikkei 225 in Japan and the Hang Seng Index in Hong Kong closed lower, falling 1.3 per cent and 1.6 per cent respectively.

Wall Street stocks finished mixed on Friday (Jan 26), ending the S&P 500‘s streak of records following moderate inflation data and uneven corporate earnings. The personal consumption expenditures price index rose at an annual rate of 2.6 per cent last month, unchanged from November, data that is expected to keep Federal Reserve interest rates level. The Dow Jones Industrial Average climbed 0.2 per cent to 38,109.43, eking out a fresh record. But the S&P 500 slipped 0.1 per cent to 4,890.97, snapping a four-day streak of records. The tech-rich Nasdaq Composite Index dropped 0.4 per cent to 15,455.36.

Top gainers & losers


Events Of The Week



Boustead Singapore has failed to acquire 90 per cent of the non-controlled shares held by Wong Yu Wei, Patricia Huang, Chong Ngien Cheong and public minority shareholders at the final close on Friday (Jan 26). At the close of the offer, the offeror only received valid acceptances of about 89.36 per cent of the non-controlled shares. Without crossing the 90 per cent threshold, Boustead Singapore is unable exercise its right of compulsory acquisition. Boustead Singapore had garnered valid acceptances representing about 23.94 per cent of Boustead Projects’ shares at the final close of its exit offer on Friday.

Far East Orchard has announced in a profit guidance that it expects to report a higher profit after tax for its financial year ending Dec 31, 2023, compared with the audited profit after tax for FY2022, it said in a bourse filing on Friday (Jan 26). The expected higher profit after tax is mainly attributed to fair value gains on investment properties, it added. The company said that it is still in the process of finalising the valuations on its portfolio of properties and will announce its unaudited FY2023 results on or about Feb 28.

Cordlife’s substantial shareholder, Robust Plan, has ceased to become a substantial shareholder in the company after it sold 4.6 million shares in an off-market transaction. According to a filing on Jan 25, Robust Plan, which is wholly-owned by Shanghai Dunheng Capital Management, sold its shares for a total consideration of $1.49 million or 32.4 cents per share. The sale took place via an off-market transaction. Following the sale, Robust Plan, which formerly held a 5.47% stake in Cordlife, now owns a 3.67% stake in the latter.


Airbnb is planning to increase the guest service fee for cross-currency bookings as the vacation-rental company pushes into more international markets to boost growth. Starting Apr 1, an additional fee of as much as 2 per cent will be charged to guests if they pay in a different currency from the listing, Airbnb said on its website. That would bring the guest service fee to as much as 16.5 per cent of the subtotal, which excludes taxes. Hosts can also choose to tack on a cleaning fee, which has prompted complaints from some guests as being excessive.

An important inflation gauge released Friday showed that the rate of price increases cooled as 2023 came to a close. The Commerce Department’s personal consumption expenditures price index for December, an important gauge for the Federal Reserve, increased 0.2% on the month and was up 2.9% on a yearly basis, excluding food and energy. Economists surveyed by Dow Jones had been looking for respective increases of 0.2% and 3%. On a monthly basis, core inflation increased from 0.1% in November. However, the annual rate declined from 3.2%. The 12-month rate is the lowest since March 2021.

Oil prices rose for a second week in a row and settled at their highest in nearly two months on Friday (Jan 26) as positive US economic growth and signs of Chinese stimulus boosted demand expectations, while Middle East supply concerns added support. Brent crude futures rose US$1.12, or 1.4 per cent, to settle at US$83.55 a barrel, their highest close since Nov 30. US West Texas Intermediate crude (WTI) climbed 65 US cents or 0.8 per cent to US$78.01, also the highest close since November. Both benchmarks made weekly gains of more than 6 per cent, marking their biggest weekly increase since the week ending Oct 13 after the start of the Israel-Hamas conflict in Gaza.

Intel slumped more than 12 per cent on Friday (Jan 26) following a bleak first-quarter revenue outlook, as the chipmaker plays catch-up in the AI race while also dealing with a weak PC market. For the first quarter of fiscal 2024, Intel expects adjusted earnings per share of 13 cents on between $12.2 billion and $13.2 billion in sales, versus LSEG expectations of 33 cents per share on $14.15 billion of revenue. The company projects a fiscal first-quarter net loss of 25 cents per share on a GAAP basis. Intel posted net income of $2.7 billion, or 63 cents per share, compared with a net loss of $700 million, or 16 cents per share, last year.

American Express forecast a better-than-expected profit for 2024 on hopes that its affluent customers will be resilient with their spending amid elevated interest rates, sending the company’s shares up nearly 3 per cent before the bell on Friday (Jan 26). AmEx posted a profit of US$2.62 per share for the three months ended Dec 31, up from US$2.07 per share a year earlier. The company’s total revenue for the fourth quarter rose 11 per cent to US$15.80 billion. For 2023, its revenue rose 15 per cent to US$60.52 billion. It forecast 2024 earnings per share between US$12.65 and US$13.15, higher than analysts’ estimates of US$12.41, according to LSEG data.

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


Tesla Inc – Intensifying competition to weigh further on margins

Recommendation : NEUTRAL (Downgraded); TP: US$175.00, Last Close: US$183.25

Analyst: Jonathan Woo

– 4Q23 revenue was in line with our estimates, while Adj. PATMI was above on higher interest income. FY23 revenue/Adj. PATMI was at 97%/108% of our FY23e forecasts. TSLA met its 1.8mn (+38% YoY) vehicle delivery target for FY23.

– Expected volume growth slowdown due to a shift in focus to developing new products like its next-generation low-cost EV, while margin pressures remain due to intensifying competition from BYD and other Chinese EVs. We expect flat YoY gross margins for FY24e

– We cut our FY24e revenue/EBITDA estimates by 7%/27%, respectively, to reflect a slowdown in unit growth and further margin headwinds. Our DCF target price is cut to US$175 (prev. US$240). We downgrade to NEUTRAL from ACCUMULATE. We believe that competition will only intensify further from aggressive Chinese EV makers, putting further pressure on pricing and margins. Our WACC assumption of 9% remains unchanged, while we reduce the growth rate to 4% (prev. 5%).

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