DAILY MORNING NOTE | 31 August 2023

Trade of the Day

Amazon.com, Inc. (NASDAQ: AMZN)

Analyst: Zane Aw

(Current Price: US$134.91) – TECHNICAL BUY
Buy price: US$134.91 Stop loss: US$130.00
Take profit 1: US$146.00 Take profit 2: US$158.00

Singapore shares took a breather from a six-day winning streak to finish lower on Wednesday (Aug 30), bucking regional gains and snubbing Wall Street’s upbeat overnight showing. 1.4 billion securities worth S$964.8 million changed hands on Wednesday. Gainers trounced losers, with 291 counters up and 254, down. Losses were led by the banking trio DBS, UOB and OCBC. Frasers Centrepoint Trust inched up S$0.02 or 0.9 per cent to S$2.23. The manager on Wednesday said the real estate investment trust will divest retail mall Changi City Point for S$338 million to an unrelated third party. The proceeds will be used to pare debts. Singtel closed unchanged at S$2.36. The counter was the day’s third most active with 26 million shares done.

THE S&P 500 and Nasdaq closed higher on Wednesday as fresh economic data signaled a cooling US economy, reinforcing expectations the Federal Reserve will pause rate hikes in September. The S&P 500 index reached its highest in nearly three weeks after an ADP National Employment report showed private payrolls increased by 177,000 jobs in August, compared with estimates of 195,000, suggesting a softening labour market. Fresh gross domestic product numbers showed the US economy expanded 2.1 per cent in the second quarter, slower than a preliminary estimate of a 2.4 per cent growth. The Nasdaq gained 0.54 per cent to 14,019.31 points, while Dow Jones Industrial Average rose 0.11 per cent to 34,890.77 points.

SG

The closing date for the offer to acquire and delist Penguin International has been extended for the sixth and final time to 5.30 pm on Sep 25. The offeror “does not intend to extend the offer beyond the final closing date”, the shipbuilder said in a bourse filing on Wednesday (Aug 30). Aleph Tav, a consortium comprising Penguin’s executive chairman Jeffrey Hing, managing director James Tham, and a special-purpose vehicle under private equity firm Dymon Asia, is the offeror.It is the consortium’s second attempt to take the shipbuilder private, following an unsuccessful bid in 2021. The offer, priced at S$0.83 per share, was set to close on Thursday. As at 6 pm on Wednesday, the consortium had a resultant shareholding of 88.83 per cent of Penguin – still below the 90 per cent shareholding threshold required for compulsory acquisition to kick in.

Hotel group Shangri-La Asia posted a net profit of US$131.4 million for its first half ended Jun 30, 2023, from a loss of US$158.2 million the same period last year. This was mainly due to the robust recovery of its hotel business, particularly in Hong Kong and mainland China, which experienced strong demand following the easing of cross-border restrictions earlier this year, the company said on Wednesday (Aug 30). Earnings per share stood at 3.688 US cents for the half-year period, reversing from a loss of 4.429 cents the previous year. Revenue for H1 rose 60.3 per cent to US$1 billion, from US$627.5 million a year earlier. The combined effects of rebounding travel activities, relaxed pandemic related restrictions, and pent-up consumer demand catalysed the revenue growth during the period, the company said. No dividend was declared for the half year, unchanged from the year before.

Frasers Centrepoint Trust (FCT) will divest retail mall Changi City Point for S$338 million to an unrelated third party. The capital gain on the property is estimated at S$20 million, after taking into account the property’s independent valuation of S$325 million as at Jul 31, its manager said on Wednesday (Aug 30). Changi City Point, which comprises three storeys and one basement, has a net lettable area spanning 208,453 square feet (sq ft) and gross floor area of 306,378 sq ft. It has a 60-year lease which started on Apr 30, 2009. The mall is located at 5 Changi Business Park Central 1 and is connected to Expo MRT station. This train stop also serves as an interchange station between the Downtown Line and the East-West Line, which goes to Changi Airport. The property has 128 tenants, including key tenants FairPrice Finest and Daiso. Total shopper traffic stood at about 7.5 million for the period between October 2021 and September 2022. The purchaser, which was not named, will pay a deposit of S$16.9 million for the property after signing the sales and purchase agreement on Aug 29. The remaining balance will be paid when the transaction is completed on Nov 15, 2023.

US

Jack Daniel’s maker Brown-Forman missed quarterly profit expectations on Wednesday (Aug 30), hurt by higher input costs and sluggish demand for its pricier whiskeys like Woodford Reserve and Gentleman Jack in the US. Shares of the company were down about 4 per cent in pre-market trade as its net sales in the first quarter also fell marginally short of analysts’ expectations. Higher input costs, including for agave, grains and wood, took a toll on the spirits maker, even as shipment volumes declined in the United States after wholesalers worked to trim inventories. Excluding items, Brown-Forman earned 48 US cents per share, compared with a profit estimate of 53 cents per share, as per Refinitiv data. Advertising expenses in the quarter rose 19 per cent, while overall expenses were up 14 per cent as it also battled a tough labour market. The company has increased the prices of its spirits between 2 per cent and 3 per cent year on year, in a bid to ease the damage to its margins as a fallout of supply-chain and input-cost issues that peaked in the last fiscal.

HP Inc fell the most in more than three years after cutting its profit outlook and acknowledging that a rebound in personal-computer demand isn’t coming as quickly as hoped. The Palo Alto, California-based computer supplier pared back its adjusted profit forecast to a range of US$3.23 to US$3.25 a share, down from US$3.30 to US$3.50. It also reduced its outlook for full-year cash flow. Shares plunged as much as 11 per cent as trading got underway in New York on Wednesday (Aug 30), the most since May 2020. PC makers have been struggling to stage a comeback since sales fell off a cliff in a post-pandemic bust. HP had been hoping for a more robust recovery in the second half of 2023 with back-to-school and holiday seasons bolstering sales. Tuesday’s outlook cuts have instead thrown the timing of any significant rebound into question.

US food and beverage maker PepsiCo began building a snack factory in Indonesia’s West Java on Wednesday (Aug 30), marking its return to South-east Asia’s largest economy after splitting with a local partner two years ago. The factory, part of PepsiCo’s US$200 million commitment to invest in Indonesia over a 10-year period, is expected to start producing snacks by 2025. PepsiCo’s affiliate Fritolay Netherlands Holding BV and Indofood CBP, a unit of Indonesia’s largest food company Indofood Group, ended a 30-year joint venture (JV) in 2021 without providing any reason, when Indofood bought PepsiCo’s minority stake. The JV at the time had manufactured a range of snacks under brands such as Lay’s, Cheetos and Doritos. Building the new factory without a local partner, PepsiCo pledged to source most raw materials for its snacks, including corn and palm oil, from sustainable sources and to use renewable power sources.

Apple has set Sep 12 as the date for its biggest product-upgrade event of the year, when it’s set to unveil the iPhone 15 line and next-generation smartwatches. The company announced the plans on its website and via e-mail under the tagline “Wonderlust”. The presentation will be streamed online at 10.00 am Pacific, with an accompanying event at Apple’s Steve Jobs Theater in Cupertino, California. Apple is under more pressure than usual with this iPhone launch. Its sales have slid for three straight quarters as the company contends with shaky demand for smartphones and other devices. The new products should help restore growth this holiday season – Apple’s biggest sales period of the year. Together, the iPhone and Apple Watch bring in the majority of the tech giant’s revenue.

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

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