DAILY MORNING NOTE | 3 April 2024

Trades Initiated in the past week

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Singapore shares closed 0.4 per cent higher on Tuesday (Apr 2), mirroring regional markets. The top gainer was agribusiness Wilmar International, which closed up 2.3 per cent or S$0.08 to S$3.51. Meanwhile, Seatrium partially reversed its Monday gains to fall 3.4 per cent or S$0.003 to S$0.084. The three local banks ended the day higher. DBS added 0.8 per cent or S$0.29 to S$36.20, and OCBC closed up 0.6 per cent or S$0.08 at S$13.64. UOB gained 0.7 per cent or S$0.22 to S$29.66.

US stocks finished lower in a volatile session on Tuesday, with the three benchmark indexes suffering their worst day since early March. The S&P 500 fell 37.96 points, or 0.7%, to end at 5,205.81. The Dow Jones Industrial Average was off 396.61 points, or 1%, to finish at 39,170.24. The Nasdaq Composite slumped 156.38 points, or nearly 1%, ending at 16,240.45. Long-dated Treasury yields finished at their highest levels in more than four months on Tuesday. The yield on the 10-year Treasury rose 3.4 basis points to 4.363%, the highest since Nov.

Top gainers & losers

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Events Of The Week

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SG

Mooreast Holdings has secured an order to supply its proprietary anchors for a 30MW pre-commercial floating offshore wind farm in Southern France. The pre-commercial floating offshore wind farm, Eolmed, is developed by independent European energy company, Qair, with TotalEnergies and floating technology supplier BW Ideol. The contract will see Mooreast partner with French installation contractor, Bourbon Offshore, to supply the former’s MA5S mooring drag anchors. Bourbon Offshore will provide transport and installation services to the offshore wind farm, which is the biggest of the first three floating wind energy projects to be developed in France. The anchors, which weigh up to 35 tonnes each, command a holding power of up to 1,210 metric tonnes. They will be used to moor three floating wind turbines. The anchors are expected to be delivered by October, and the order will contribute positively to Mooreast’s FY2024 performance. The anchors will be manufactured at Mooreast’s yard at 51 Shipyard Road.

Mehta Vimesh Piyush, a substantial shareholder of Huationg Global, has sold 12.5 million shares in the civil engineering services provider to the company’s CEO Patrick Ng for S$1,775,000 or 14.2 cents apiece. The off-market transaction took place on April 1 and was completed on the same day. After the sale, which was completed on the same day, Piyush ceased to become a substantial unitholder of Huationg, reducing his stake from 8.01% to 0.96%. Meanwhile, Ng’s direct stake in Huationg after the sale stands at 7.75%, up from 0.69% previously. The CEO has a deemed interest in another 121.76 million shares, giving him a total stake of 76.45%.

Willimbury, a substantial shareholder of Grand Banks Yachts, has purchased 1,709,500 units in Grand Bank Yachts for S$529,945 or 31 cents apiece. The off-market transaction took place on March 28. The sale was completed on April 2, after the Good Friday and Easter Monday public holidays in Australia. Willimbury now has a 15.79% stake, or 29.15 million units, in Grand Banks, up from 14.864% previously.


US

Tesla on Tuesday posted a decline in quarterly deliveries for the first time in nearly four years and missed Wall Street estimates, as price cuts failed to stir demand in a highly competitive market. The EV maker has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items and rivals in China, the world’s largest auto market, are rolling out cheaper models. Tesla’s deliveries declined by 8.5% in the first quarter to 386,810 vehicles from a year ago and the company produced 433,371 vehicles during the period. Wall Street had expected Tesla to deliver 454,200 vehicles. The last time the automaker posted a sales fall was in the second quarter of 2020 when the COVID-19 pandemic forced Tesla to shut down production. Tesla attributed the drop in volumes partly to efforts to prepare its Fremont, California, factory to handle increased production of the updated Model 3 and to shutdowns at its Berlin plant due to the impact of the Red Sea conflict and an arson attack. But Tesla produced 46,000 more vehicles than it sold in the first quarter, signaling softer demand.

Intel on Tuesday disclosed deepening operating losses for its foundry business, a blow to the chipmaker as it tries to regain a technology lead it lost in recent years to Taiwan Semiconductor Manufacturing. Intel said the manufacturing unit had US$7 billion in operating losses for 2023, a steeper loss than the US$5.2 billion in operating losses the year before. The unit had revenue of US$18.9 billion for 2023, down 31% from US$63.05 billion the year before. During a presentation for investors, Chief Executive Pat Gelsinger said that 2024 would be the year of worst operating losses for the company’s chipmaking business and that it expects to break even on an operating basis by about 2027. Gelsinger said the foundry business was weighed down by bad decisions, including one years ago against using extreme ultraviolet (EUV) machines from Dutch firm ASML. While those machines can cost more than US$150 million, they are more cost-effective than earlier chip making tools. Partially as a result of the missteps, Intel has outsourced about 30% of the total number of wafers to external contract manufacturers such as TSMC, Gelsinger said. It aims to bring that number down to roughly 20%. Intel has now switched over to using EUV tools, which will cover more and more production needs as older machines are phased out.

Shares of US health insurers fell on Tuesday after the Biden administration didn’t boost payments for private Medicare plans as much as the insurance industry and investors had hoped. The announcement puts more pressure on insurers already grappling with high medical costs and uncertainty around claims processing after the cyberattack on UnitedHealth Group’s tech unit. It also deals a blow to Medicare Advantage businesses, which have long driven growth and profits for the insurance industry. The Centers for Medicare and Medicaid Services said late Monday that government payments to Medicare Advantage plans are expected to rise 3.7% year over year. That is effectively a 0.16% decline after stripping out certain assumptions baked into that rate. That final rate is unchanged from an earlier proposal in January. Typically, the federal agency raises that rate from its initial proposal. The closely watched rate determines how much insurers can charge for monthly premiums and plan benefits they offer, and ultimately, their profits. Medicare Advantage is a privately run health insurance plan contracted by Medicare. More than half of Medicare beneficiaries are enrolled in such plans, enticed by lower monthly premiums and extra benefits not covered by traditional Medicare.

Blackstone is exploring raising US$300 million via an India IPO of the International Gemological Institute (IGI), less than a year after it acquired the company, amid booming stock markets in the region, three people familiar with the matter said. Blackstone acquired IGI for US$570 million in May 2023 from Chinese conglomerate Fosun and the business’s founding Lorie family. IGI has most of its business in India and describes itself as the world’s largest independent lab for testing and grading diamonds and other gemstones and jewelry. Blackstone has appointed investment banks Morgan Stanley and India’s Kotak to lead the IPO deal, two sources added. Blackstone had initially been seeking a valuation of about US$1.5 billion in the IPO, although in new talks it is looking for as much as US$3.5 billion, two sources said. However, the price will be decided in coming months and will depend on investor demand.

UBS Group AG said it would buy back up to US$2 billion of its shares over the next two years, giving shareholders greater visibility on returns as the lender targets completion of its takeover of Credit Suisse. The new program will begin Wednesday and end at the latest on April 2, 2026. “Our ambition is for share repurchases to exceed our pre-acquisition level by 2026,” the Zurich-based bank said in a statement Tuesday. The bank confirmed previously announced plans to repurchase US$1 billion of shares this year as part of the new program.

Top oilfield services company SLB said on Tuesday it will buy smaller rival ChampionX in an all-stock deal valued at US$7.75 billion, amid growing consolidation in the North American energy sector. ChampionX shareholders will receive 0.735 shares of SLB common stock, or US$40.59 per share, representing a premium of 14.6% to ChampionX’s last closing price. The deal is expected to close before the end of 2024. SLB said it expects an annual pre-tax savings of about US$400 million in the first three years after the closure. SLB said it would return US$7 billion to shareholders over the next two years and increase its 2024 shareholder returns to a target of US$3 billion.

Microsoft is reportedly in the process of developing an AI-powered chatbot for Xbox, seeking to enhance customer support within its gaming division. The tech giant is experimenting with an “embodied AI character” designed to offer real-time responses to Xbox support inquiries. This effort is part of Microsoft’s broader strategy to integrate AI technology across its Xbox services and platform. The chatbot, which has access to Microsoft’s support documents for the Xbox network and ecosystem, is capable of addressing user queries and managing game refunds via Microsoft’s support website. Microsoft recently expanded the testing phase for the AI bot, hinting at the potential for this “Xbox Support Virtual Agent” to eventually cater to all Xbox user support needs.

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


RESEARCH REPORTS

Singapore Air Transport Mar 24 – Trickling into a seasonally lulled quarter

Analyst – Peggy Mak

– Another weak month for the Singapore air transport sector, as the valuation disparity has drawn investors to HK/China-listed peers. China was the last country to lift border restrictions, and HK/Chinese carriers, such as Cathay Pacific, are catching up on volume and profitability.

– SIA passenger load factor fell again in Feb 24. Cargo volume also declined after the short spike in Jan from CNY and the Red Sea conflict. It was a similar trend for passenger and airfreight volume at the Changi Airport.

– We are UNDERWEIGHT on air transportation.


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