DAILY MORNING NOTE | 5 December 2023

**Do note that the last day of Morning Note Issuance will be on 14 December 2023. Morning Note will resume in January 2024**

Summary of Trades Initiated in Past Week

Singapore shares fell 0.2 per cent on Monday (Dec 4), closing the first trading day of the week in the red. The top loser was Sembcorp Industries, which fell 6.2 per cent to S$4.88, while the top gainer was Yangzijiang Shipbuilding, which rose 2.8 per cent to S$1.49. The three local banks all closed lower on Monday. OCBC slipped 0.2 per cent to S$12.62, UOB shed 0.2 per cent to S$27.25, while DBS lost 0.6 per cent to S$31.70.

Wall Street stocks sagged on Monday (Dec 4), pausing after a buoyant November ahead of key US employment data later in the week. The Dow Jones Industrial Average slipped 0.1 per cent to 36,204.44. The broad-based S&P 500 dropped 0.5 per cent to 4,569.78, while the tech-rich Nasdaq Composite Index fell 0.8 per cent to 14,185.49.

Top gainers & losers

EVENTS OF THE WEEK

SG

Centurion is selling two of its assets in Malaysia to the country’s largest public sector pension fund, Kumpulan Wang Persaraan (KWAP), for a total consideration of RM227 million (S$65.2 million). This is above the properties’ collective net tangible asset value of RM224.3 million as at Jun 30, 2023, noted the group on Monday (Dec 4). The company has also agreed to lease back the properties from KWAP for a period of 15 years from completion of the sale. One of the two PBWAs, Westlite Bukit Minyak, is located in Penang and has a total capacity of 3,321 beds. It comprises three eleven-storey accommodation blocks across 16,398 square metres (sq m). The other asset in Johor, Westlite Tampoi, is made up of six accommodation blocks with a total capacity of 5,790 beds. The property spans some 28,328 sq m.

BRC Asia has announced that its replacement of a steel-supply contract with a cheaper deal amid sliding steel prices has enabled it to save at least S$25 per tonne – even after taking into account the S$2.1 million it had to pay to compensate the first supplier. In its regulatory filing in response to queries from the Singapore Exchange (SGX) on Monday (Dec 4), the mainboard-listed steel reinforcement solutions provider described the settlement sum to Shanghai Emetal Hong Energy as “commercially justifiable”. BRC also stated that the move did not prejudice the interests of the company and its minority shareholders. Shanghai Emetal Hong Energy is an associate of BRC’s controlling shareholder. The price per tonne for the steel deformed bars in the purchase contract with Shanghai Emetal Hong Energy was based on the prevailing market price, but the price of steel bars fell substantially in the six months before the scheduled delivery by October. BRC said: “Such market conditions presented the company with an opportunity to negotiate more advantageous terms with another supplier.”

Yanlord Land Group has reported total contracted pre-sales of RMB1.09 billion (S$205.5 million) for the month of November. The amount, which came from the group’s residential and commercial units as well as car parks, was 71.5% lower than November 2022’s RMB3.82 billion. This month’s total contracted pre-sales stood over a gross floor area (GFA) of 38,398 sqm, which was a 66.0% decrease from November 2022’s GFA. For the eleven months ended Nov 30, the group’s total contracted pre-sales was approximately RMB29.23 billion on a total contracted GFA of 1,143,086 sqm, a decrease of 52.8% and 8.0%, respectively, compared to the corresponding period of 2022. For the same period, contracted pre-sales of other property development projects under the group’s project management business stood at RMB1.359 billion on a total contracted GFA of 64,349 sqm. The key contributors to the group’s total contracted pre-sales were the Chinese cities of Suzhou, Jinan, Shenzhen, Nanjing and Tianjin, in that order. As at Nov 30, Yanlord’s subscription sales stood at RMB3.11 billion.

Singtel’s data centre subsidiaries have secured a S$535 million five-year green loan from DBS, OCBC, UOB and Standard Chartered. The banks have also been appointed as green loan coordinators. This marks the first green loan obtained by Singtel, said the telecommunications provider on Monday (Dec 4). Proceeds will go into refinancing borrowings and supporting the operations of two of Singtel’s data centres, DC West and DC Kim Chuan. These two facilities offer a combined 62 MW of capacity. As part of the green loan criteria, both data centres must obtain at least a Green Mark GoldPlus certification from Singapore’s Building and Construction Authority (BCA). Both have already attained Green Mark Platinum, which is the highest green building certification awarded by the BCA.

Mermaid Maritime has announced that its wholly-owned subsidiary Mermaid Subsea Services (Thailand) has entered into a loan facility agreement of up to US$5.95 million (S$7.95 million) with the Export-Import Bank of Thailand on Dec 4. The proceeds from the loan facility will be towards the reimbursement of the company’s equity used for the acquisition of one of its vessels. The agreement contains a condition in which a mandatory default prepayment shall occur if Thoresen Thai Agencies holds less than 52% of the total issued share capital of Mermaid Maritime. In such an event, the aggregate level of facilities that may be affected is approximately US$30.8 million, of which US$21.9 million has been drawn and remains outstanding as at Dec 4. Thoresen has been a strategic shareholder of Mermaid Maritime since 1995 and became the company’s majority shareholder in 2005.

Koh Brothers Eco Engineering was the target of a recent cyberattack in which the servers in certain subsidiaries of the company were subjected to unauthorised access and encryption. While the ongoing investigation indicates that the incident has been controlled, the sustainable engineering solutions provider said on Monday (Dec 4) that it is unable to assess the extent of the impact of the cyberattack on the group and its operations. The Catalist-listed group noted that it took prompt steps to contain the incident, including disconnecting the affected servers from the network and preventing further unauthorised access to its IT network.

US

GitLab stock jumped as much as 18% in extended trading on Monday after the developer-tools software maker announced fiscal third-quarter results and quarterly guidance that impressed Wall Street. The company reported earnings of 9 cents per share, adjusted, vs. loss of 1 cent per share expected while revenue came in at US$149.7 million, vs. US$141.5 million expected. This marks the first time GitLab has posted an adjusted operating profit. “We continue to grow responsibly and delivered over 2,200 basis points of non-GAAP operating margin expansion,” the company’s finance chief, Brian Robins, was quoted as saying in a statement. GitLab’s revenue grew 32% year over year in the quarter, which ended on Oct. 31, according to the statement. Net loss attributed to the company came to US$285.2 million, or US$1.84 per share, compared with a net loss of US$48.5 million, or 33 cents per share, in the year-ago quarter. GitLab made a one-time income tax adjustment during the quarter that skewed results. For the fourth quarter of its 2024 fiscal year, GitLab called for adjusted earnings of 8 to 9 cents per share on US$157.0 million to US$158.0 million in revenue.

Sales of US carmaker Tesla’s China-made electric vehicles (EVs) skidded 17.8 per cent in November from the same month a year earlier, to 82,432 cars, China Passenger Car Association data showed on Monday (Dec 4). Deliveries of China-made Model 3 and Model Y cars rose 14.3 per cent from October. Chinese rival BYD, with its Dynasty and Ocean series of EVs and petrol-electric hybrid models, saw passenger vehicle deliveries set another record at 301,378 vehicles, up 0.09 per cent from October and up 31 per cent from a year earlier.

NVIDIA CEO Jensen Huang said on Monday (Dec 4) his company would do its best to supply its artificial intelligence processors to Japan amid extremely high market demand. Japan is rushing to rebuild its once world-leading semiconductor infrastructure and catch up on the development of AI technology. “Demand is very high, but I promised the prime minister we will do our very, very best to prioritise Japan’s requirements for GPUs,” Huang told reporters at Prime Minister Fumio Kishida’s official residence in Tokyo. Huang’s visit came less than two weeks after Japan passed an extra budget that included about 2 trillion yen (S$18.2 billion) earmarked for chip investment. Some of the funds are expected to be used to support Taiwanese chipmaker TSMC and chip foundry venture Rapidus, which aims to manufacture cutting-edge chips in Japan’s northern island of Hokkaido.

A US appeals court on Monday (Dec 4) threw out a US$2.18 billion patent-infringement award won by patent owner VLSI Technology against Intel, overturning one of the largest verdicts in the history of US patent law. The US Court of Appeals for the Federal Circuit reversed the jury’s 2021 verdict that Intel infringed one VLSI patent, and sent the case back to Texas for a new trial to determine how much Intel owes for infringing a second VLSI patent. Patent holding company VLSI is owned by investment funds managed by Fortress Investment Group. VLSI has sued Intel in multiple US courts, accusing it of infringing several patents covering semiconductor technology. A Waco, Texas jury awarded VLSI US$2.18 billion in the first trial from the dispute. The jury found that technology in Intel microprocessors infringed patents that VLSI had acquired from Dutch chipmaker NXP Semiconductors. Intel defeated VLSI’s bid for more than US$3 billion in damages in another Waco jury trial later in 2021. A separate jury in Austin, Texas said that VLSI was entitled to nearly US$949 million from Intel in a third patent case last year. The companies later agreed to dismiss another potential multi-billion-US dollar case in Delaware. Another trial in Northern California is set to begin in 2024.

China Evergrande Group won breathing room to strike a restructuring agreement with creditors after a Hong Kong court again pushed back a decision on whether the world’s most-indebted property developer should be wound up. The proceedings have been adjourned to Jan 29, 2024, Judge Linda Chan said in the city’s High Court. The unexpected delay came as the original petitioner did not push for an immediate liquidation on Monday (Dec 4), the latest twist in a lawsuit that has dragged on for more than a year. The homebuilder now has eight weeks to agree a deal with offshore bondholders for what would be one of the nation’s biggest restructurings. Evergrande’s lawyer said Monday that a new proposal was sent on Nov 26, and the company is applying for another adjournment as it hopes to seek further support and more feedback from creditors.

Japanese electronic parts maker TDK will manufacture lithium ion (li-ion) battery cells for Apple iPhones in India, a minister said on Monday (Dec 4). Apple has been touting India as its next big growth driver as it looks to move some production away from China. It began assembling iPhones in the country in 2017 through Wistron and later Foxconn, and has a total of 14 suppliers in India. TDK will set up a manufacturing facility in the northern state of Haryana, creating around 1,000 new jobs, Deputy Minister for Information Technology Rajeev Chandrasekhar said on social media platform X, formerly known as Twitter. Cells manufactured at the facility will be supplied to Apple’s li-ion battery assembler Sunwoda Electronics, the report added.

Spotify will reduce its total headcount by around 17% across the company, it said in an email on Monday, after laying of 6% of this staff in January citing higher costs. CEO Daniel Ek told Reuters the company was still focusing on efficiencies to get more out of each dollar. On Monday, he said a reduction of this size will feel surprisingly large given the recent positive earnings report and its performance. “We debated making smaller reductions throughout 2024 and 2025,” CEO Daniel Ek said in a mail to employees. “Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”

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

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