DAILY MORNING NOTE | 30 March 2023

Singapore shares gained 0.2 per cent on Wednesday (Mar 29). Jardine Cycle and Carriage advanced, rising 1.6 per cent or S$0.46 to S$29.99. Sats added 8.2 per cent or S$0.21 to close at S$2.76. On the other end of the spectrum, thinly traded UOI was the biggest loser, shedding 1.9 per cent or S$0.12 to S$6.29. Samudera Shipping was another one of the biggest losers on the local bourse, falling 4.6 per cent or S$0.06 to S$1.25.

Wall Street stocks powered higher on Wednesday (Mar 29) as markets cheered the apparent containment of a banking industry crisis that has rattled investors in recent weeks. The Dow Jones Industrial Average finished up 1.0 per cent. The broad-based S&P 500 advanced 1.4 per cent, while the tech-rich Nasdaq Composite Index climbed 1.8 per cent. Semiconductor firms were especially strong following a forecast from Micron that pointed to improving demand in the second half of the year. Micron jumped 7.2 per cent, while Intel surged 7.6 per cent and Nvidia advanced 2.2 per cent. Regional banks were another winner, with First Republic piling on 5.9 per cent and PacWest Bancorp winning 5.1 per cent.

SG

The latest Singapore Savings Bond (SSBs) allotted on Wednesday (Mar 29) experienced a rise in number of applications, exceeding the amount on offer, after months of falling demand due to declining yields. The April tranche of the Singapore government-backed bonds received a total of S$758.1 million in applications, compared with the total of S$261.1 million in applications for the March issuance. A maximum of S$700 million in SSBs were offered and allotted through the quantity ceiling format. Those successful in their applications will be issued the notes, which have a 10-year tenor, on Apr 3.

SIA Engineering Company (SIAEC) has signed a comprehensive services agreement with Singapore Airlines (SIA) on March 29. The agreement will commence on April 1 and will last for two years with an option to extend for a further period of one year. The agreement will see SIAEC supporting SIA’s fleet of aircraft through services such as maintenance, repair and overhaul (MRO) and fleet management support. The agreement is expected to yield a labour revenue of $1.14 billion, including the one-year extension.

Sembcorp Marine (SembMarine), on March 29, says the preliminary administrative proceedings against its Brazilian subsidiary Estaleiro Jurong Aracruz Ltda (EJA) is related to the “past conduct” investigated by the Brazilian authorities in connection with Operation Car Wash. The CGU has not brought any civil or administrative charges against SembMarine or its subsidiaries yet. SembMarine adds that it will continue to cooperate and work with the Brazilian authorities on its investigations.

Keppel Corp is aiming to raise its current S$50 billion in assets under management (AUM) to S$200 billion by 2030 under its drive to be a leading global asset manager. The company will be investing in solutions that help its customers in their digitalisation and net-zero journeys. Keppel’s new targets come as it has been fostering more collaboration among its various units under its Vision 2030 Plan. At present, most of the new projects approved by the company involve cross-business unit collaboration, compared to only a small proportion just a few years ago, said Loh.

Yangzijiang Shipbuilding on Wednesday (Mar 29) announced that its 81-per-cent owned subsidiary will acquire 39 Robinson Road, a 21-storey freehold commercial building in Singapore’s central business district, for S$399 million. The purchase is meant for the group to deepen its roots in Singapore, said executive chairman and chief executive officer Ren Letian. Ren noted that a professional real estate manager will be appointed to manage the marketing activities and operations of the building, with the idea of branding it a financial hub to attract tenant profiles like institutional investors and family offices.

Volare Group’s partial offer to acquire an additional 10 per cent of Sabana Industrial Real Estate Industrial Trust (Sabana Reit) at S$0.465 per unit closed on Mar 24, after receiving valid acceptances representing about 27.7 per cent of issued units in the Reit. Under the partial offer terms, the offeror is only permitted to acquire the offer units comprising 109,612,132 units in Sabana Reit. It was announced late on Tuesday (Mar 28) that some 51,424,456 units were tendered in respect of their relevant percentage offer units, which may be accepted in full by Volare.

The Adijanto family of Indonesia is offering 25 cents a share for palm oil company Global Palm Resources Holdings, valuing the company at around $62.4 million. The family, via another vehicle, already controls 82.98% of the company. At 25 cents, the offer is a premium of 93.8% over the last transacted price of 12.9 cents on March 28, just before the offer announcement was made. The offeror believes that the delisting and privatising of the company will give them greater control and management flexibility to manage the business.

Second Chance Properties has reported net profit of $9.21 million for 1HFY2023 ended Feb 28, double that of the $4.60 million reported this time last year. This is mainly due to gain of $4.33 million on disposal of seven investment properties, says the company on March 29. Less the gain on disposal of investment properties and the unrealised foreign exchange gain of $2.60 million, adjusted ebitda for 1HFY2023 would have been $4.04 million, down from $5.27 million this time last year. Revenue, meanwhile, fell 7.96% y-o-y to $14.83 million for the period. The rental income of the group has been reducing, notes the company, and will decrease further because of the disposal of seven investment properties since last year.

US

An Indian appeals tribunal on Wednesday (Mar 29) said the Competition Commission of India (CCI)’s findings of Alphabet’s Google’s anti-competitive conduct to abuse its dominant position in Android were correct and the company was also liable to pay a US$161 million fine. However, it quashed four of the 10 antitrust remedies that had been imposed on Google to change its business model. Among the reliefs, Google will now not need to allow hosting of third-party app stores inside Play Store, as had been previously ordered by the CCI.

Electronic Arts is cutting 6% of its workforce, equal to about 800 jobs, and reducing office space, the video game company said Wednesday. The company expects to take impairment charges ranging from $170 to $200 million. EA expects the actions associated with the restructuring plan will be “substantially complete” by the end of September.

Apple announced on Wednesday that its annual developer’s conference, WWDC, will begin on June 5 and run through June 9. Apple holds a launch event led by CEO Tim Cook on the first day of the conference and typically unveils new iPhone, iPad, Apple Watch, Apple TV, and Mac software. Most years, Apple doesn’t announce new hardware at WWDC. However, this year, Apple could reveal its long-awaited virtual and augmented reality headset at the conference.

AMC Entertainment Holdings rose 13 per cent after the Intersect website reported that Amazon.com is weighing a possible acquisition of the struggling movie-theatre chain. Amazon has investment advisers looking at a possible takeover of the chain, which has a market value of about US$4 billion, the site reported.

BYD reported an 11-fold increase in fourth-quarter profit as it extended its lead in the domestic market with a wide range of products. Net profit for October-December came in at 7.3 billion yuan (S$1.4 billion) versus 602 million yuan a year earlier. For the whole of 2022, net profit increased 446 per cent to 16.6 billion yuan. Despite challenges of shrinking demand in 2023, BYD said that it expects new energy vehicle sales to continue strong growth momentum and its penetration rate to largely increase.

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

RESEARCH REPORTS

Uni-Asia Group Ltd – Shorter term leases in the downturn

Recommendation: BUY (Maintained); TP S$1.19, Last close: S$1.00; Analyst Paul Chew

– FY22 revenue and PATMI beat expectations at 118%/116% respectively of our forecast. Charter rates locked in during 1H22 offset the current sluggish environment. Dividends more than doubled to 14.5 cents.

– 2H22 PATMI rose 3% YoY to S$11.4mn, bolstered by average charter rate per day in 2H22, rising by 11% YoY to US$18.2k. A decline in property sales in Japan and a weaker currency was a major drag in revenue.

– We lower our FY23e earnings by 9% to US$17.4mn. Charter rates for bulk ships remain sluggish. The Baltic Exchange handysize index has declined by around 60% YoY in 1Q23. The company is coping with the softer environment by fixing more charters on a shorter-term basis. Our BUY recommendation is maintained with a lower target price of S$1.19 (prev. S$1.26). The target price is pegged to 4x P/E FY23e, a 40% discount to the much larger industry peers. Supply of handysize dry bulk vessels is expected to decline over the next two years due to uncertainty on future fuel type for vessels and a tighter financing environment.

Phillip Securities Research has received monetary compensation for the production of the report from the entity mentioned in the report.

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