DAILY MORNING NOTE | 5 February 2024

ETF Monthly January 2024

Analyst: Zane Aw

– Review of asset classes performance in January – Slow start for most ETFs which were largely flat or down 1-2%. ETF tracking S&P 500 (VOO) was a standout and continued to post gains of 1.6%. On the other hand, ETF tracking the Hang Seng Index (2828) was the biggest loser and slumped over 10%

– For their current trends, most asset classes (US Treasury Bonds, Gold, Bitcoin and Singapore Equities) remain in a range consolidation. S&P 500 is in an uptrend while Oil and Hang Seng Index are in a downtrend

– As we head into February, price consolidation is likely for most assets less S&P 500 and Oil. For S&P 500, we are likely to see a pullback of the current strong bullish run while Oil is likely to extend its downtrend

Thai SDR Monthly January 2024

Analyst: Zane Aw

– Review of performance in January – Airports of Thailand Public Co. was unchanged and PTT Exploration & Production Public Co. Ltd had a slight gain of 0.3%. CP All Public Co. Ltd was down over 6%

– For their current trends, all 3 Thai SDRs are in a range consolidation phase

– As we enter February, we are likely to see Airports of Thailand Public Co. and CP All Public Co. Ltd trade higher with increasing momentum building up in these 2 counters. PTT Exploration & Production Public Co. Ltd’s price action is likely to remain flattish in February

Trades Initiated in the past week


Week 6 Equity Strategy: As anticipated, the Federal Reserve kept interest rates unchanged. It also ruled out a cut in March but did reiterate it was appropriate to reduce rates. This puts May as the earliest for a rate cut with three more core inflation data points. The impressive jobs data of 353k additions in January beat market estimates of 187k and is double the pre-pandemic average of 177k. Notably, nearly 2/3 of the job additions were from the government and healthcare sectors, underscoring that government spending remains the backbone of US growth. These jobs are growing at almost triple their pre-pandemic pace. With the delay in rate cuts and sluggish earnings, REITs will be under pressure. In the recent reporting season, around 80% of the REITs reported a decline in DPU averaging 10% YoY.

In a recent briefing by a Malaysian port operator, gateway volumes (i.e. container shipments sourced from local manufacturers) were at record levels. It was an indication that the re-shoring of manufacturing into SE Asia is gaining momentum. The Red Sea disturbance caused a major delay in shipments for the 1st half of January but recovered in the 2nd half. Shipments can normalise despite some vessels taking the longer route of around the Cape. This is because there are excess vessels available that can be deployed to normalise shipping times. Suez throughput is down 30% but the larger worry is the Panama Canal which is down 50% due to the ongoing drought. Container rates are unlikely to climb higher due to the excess supply of vessels, but the longer sailing times will cap any downside.

In Singapore, tourist arrivals grew 33% YoY in December with a large boost from China arrivals that spiked 5-fold. There is upside from China that is only 50% of pre-pandemic levels. With an impressive line-up of concerts and events plus visa-free travel, the Singapore Tourism Board projects arrivals of 15mn-16mn in 2024, representing an increase of 11-19%. Another promising sector is building materials. There is good visibility of demand. According to the Building and Construction Authority (BCA), construction demand in 2024 is expected to grow to S$32bn-38bn (-5 to +12%), following the 17% rise in 2023. Demand is expected to remain between S$31bn-38bn for the subsequent years until 2028. This represents a 25% jump in estimates from an average of S$28.5bn to S$34.5bn. However, such positive fundamentals may not find favour with investors as flows will remain attracted to US equities, especially after Big Tech (of FAANGM) blockbuster results in the December quarter. Net profit jumped 53% YoY to US$102mn. AI is becoming a major earnings contributor.

Paul Chew
Head Of Research

Singapore shares ended the week higher on Friday (Feb 2), tracking gains on Wall Street. The biggest gainer was UOL, which rose 3.2 per cent or S$0.19 to S$6.20. Meanwhile, Yangzijiang Shipbuilding was the biggest decliner, falling 1.8 per cent or S$0.03 to S$1.65. The trio of local banks all ended higher on Friday. DBS gained 1.2 per cent or S$0.39 to S$32.22, OCBC climbed 1.3 per cent or S$0.16 to S$13, while UOB advanced 1 per cent or S$0.28 to S$28.62

Wall Street advanced on Friday (Feb 2) as strong earnings outlooks and a blowout January employment report boosted confidence in the US economy, even though the Federal Reserve would be less likely to cut interest rates any time soon. Solid earnings from Meta Platforms and Amazon.com helped boost the S&P 500 index and the Nasdaq Composite Index, while the blue-chip Dow Jones Industrial Average’s gain was more muted. All three major US stock indexes were on track for their fourth consecutive weekly gains.

Top gainers & losers


Events Of The Week


*Due to its recent privatization offer, we have dropped coverage of TDCX Inc., and reallocated resources elsewhere*


Dasin Retail Trust has reported a decline in the fair value of its investment properties. After obtaining independent valuations as at June 30, 2023, the trust’s properties are now valued at RMB9.09 billion, 4.6% lower than the RMB9.53 billion as at Dec 31, 2022. In Singapore dollars (SGD), the trust’s portfolio fell by 8.27% h-o-h to $1.7 billion from $1.85 billion previously. The larger decline was attributable to the weaker RMB against the SGD. The main reason for the decline is due to general weaker economic and market environment, lower passing rent, negative reversion in rental rate and lower occupancy rate, says the trust.

Silchester has bought another 1.97 million shares in ComfortDelGro via the market on Jan 29. The fund manager, already a substantial shareholder in the transport operator, paid a total of $2.74 million or $1.389 per share. Following the purchase, Silchester’s stake in ComfortDelGro is now at 7.05% from 6.96% previously, according to a filing on Jan 30. Silchester has been steadily acquiring more shares in ComfortDelGro since November 2023. On Nov 7, 2023, the fund manager became a substantial investor in the transport operator after buying 1.52 million shares for $2.04 million or $1.337 per share, bringing its stake to 5.026% from 4.955% previously. On Dec 4, 2023, Silchester bought 4 million shares from the market for $5.16 million or $1.2898 per share, which brought its stake to 6.14%, from 5.96% previously.

Frasers Property (FPL) stressed that it will develop and operate its business where it has “local platform capabilities” in its business update for the 1QFY2024 ended Dec 31, 2023. During the 1QFY2024, the group saw “steady progress” for its residential development portfolio with pre-sold revenue of $2.4 billion across Singapore, Australia, Thailand and China as at Dec 31, 2023. FPL’s net gearing ratio increased by 2.2 percentage points q-o-q to 78.0% mainly due to capital expenditure (capex). This was partly offset by the divestment of its stake in Changi City Point. In Singapore, FPL reported $0.9 billion in unrecognised revenue with 640 contracts on hand. FPL’s average occupancy rate for its retail portfolio in Singapore inched up by 0.1 percentage points q-o-q to 98.7% as at Dec 31, 2023, while the average occupancy rate for its commercial portfolio dipped by 0.5 percentage points as at the same period. About 18.9% of leases are due to expire over the remainder of the financial year for FPL’s Singapore retail portfolio while 15.7% of the leases are due to expire for FPL’s commercial portfolio in Singapore.

Chuan Hup Holdings has reported earnings of US$380,000 ($507,500) for its 1HFY2024 ended Dec 31, 2023, down 73.8% compared to its earnings of US$1.45 million in the same period last year. Earnings per share (EPS) for the half-year period also shrunk to 0.04 US cents compared to 0.16 US cents in 1HFY2023. The decrease in net profit was mainly due to the absence of the US$1.6 million gain on the acquisition of Finbar Group’s shares in 1HFY2023 and higher depreciation and amortisation expenses recognised in relation to the student accommodation business of US$0.7 million in 1HFY2024. The company was, however, able to record a revenue of $3.7 million in 1HFY2024, up 46.0% y-o-y, from the additional rental income of US$0.9 million from its student accommodation business acquired in May 2023.


U.S. job growth posted a surprisingly strong increase in January, demonstrating again that the labor market is solid and poised to support broader economic growth. Nonfarm payrolls expanded by 353,000 for the month, much better than the Dow Jones estimate for 185,000, the Labor Department’s Bureau of Labor Statistics reported Friday. The unemployment rate held at 3.7%, against the estimate for 3.8%. Wage growth also showed strength, as average hourly earnings increased 0.6%, double the monthly estimate. On a year-over-year basis, wages jumped 4.5%, well above the 4.1% forecast. The wage gains came amid a decline in average hours worked, down to 34.1, or 0.2 hour lower for the month.

Apple faithful lined up at its US stores on Friday (Feb 2) to pick up the first Vision Pro headsets, ushering in what the company calls “the era of spatial computing”. The Vision Pro vaults Apple into its first major new product category since 2015: a US$3,499 headset that melds virtual and augmented reality. It’s been a relatively niche market until now, with Meta Platforms dominating the industry. But Apple hopes to use cutting-edge technology – and the company’s famous marketing muscle – to turn it into something bigger.

ExxonMobil and Chevron reported lower but still strong profits on Friday (Feb 2), as they push ahead with hefty shareholder payouts and major acquisitions. The two biggest US oil companies, which have similar profiles and strategies, both saw fourth-quarter profits dip amid lower commodity prices, especially for natural gas. But both companies still scored mammoth full-year earnings: US$36 billion at ExxonMobil and US$21.4 billion at Chevron. Those are below the record profits of 2022, which benefited from a spike in crude prices following Russia’s invasion of Ukraine, but robust enough to enable significant increases in dividends and share buybacks. ExxonMobil, which has added some low-carbon ventures to its oil and natural gas-dominated profile, reported fourth-quarter profits of US$7.6 billion, down 40 per cent from the year-ago period. Revenues declined 11.6 per cent to US$84.3 billion. Chevron, which is smaller than ExxonMobil, fourth-quarter profits of US$2.3 billion were down 65 per cent from the year-ago period, while revenues fell 16 per cent to US$47.2 billion.

Meta Platforms issued its first dividend days ahead of flagship social network Facebook’s 20th anniversary, while reporting revenue and profit that beat expectations on robust ad sales in the holiday shopping period. Shares soared more than 14 per cent after the bell, extending a long recovery that saw Meta hit record highs in recent weeks for the first time in over two years. The company’s stock market valuation surged by more than US$140 billion. The increase alone was more than quintuple the entire value of smaller social media rival Snap. Meta, one of the tech sector’s original unicorns, said the dividend would be 50 US cents per share. It also announced it had authorised an additional US$50 billion in share repurchases.

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


Frasers Centrepoint Trust – Increasing stake in NEX

Recommendation: Accumulate (Maintained), Last Done: S$2.33

Target price: S$2.38, Analyst: Darren Chan

– No financials were provided in the 1Q24 business update. Retail portfolio occupancy increased 1.5ppts YoY and 0.2ppts QoQ to 99.9%, with rental reversions exceeding FY23’s +4.7%.

– DPU-accretive acquisition of an additional 24.5% stake in NEX, with further upside potential if tax transparency is achieved.

– Maintain ACCUMULATE; DDM TP raised from S$2.29 to S$2.38. We increase our FY24e-26e DPU estimates by 0.4-1% after accounting for the acquisition. We expect c.5% positive rental reversion for FY24e, supported by the low occupancy cost of 15.5% post-acquisition. Catalysts include more accretive acquisitions and tax transparency treatment for FCT’s stake in NEX. The current share price implies a FY24e DPU yield of 5.2%.

Keppel – Energy buttressed bottom line

Recommendation: ACCUMULATE (Downgrade) Last Done: S$7.29

Target Price: S$7.98; Analyst: Peggy Mak

– FY23 core net profit grew 5.6% YoY, in line with our expectations. Recurring income grew 54% to S$773mn, or 88% of net profit. Infrastructure made up 90% of this.

– Growth was underpinned by a higher margin from energy sales, offset by the doubling of interest expense to S$328mn, and S$111mn loss on distribution of K Reit units to Keppel shareholders.

– Energy earnings are sustainable, with 60% of capacity locked in on long-term contracts for more than 3 years. A lower interest rate environment could rejuvenate M&A and fundraising, lifting funds under management. The sale of the rigs in AssetCo could return S$3.1bn to the group, we estimate.

– Downgrade to ACCUMULATE from BUY on recent share price gains. We raised FY24e net profit projections by 0.4%. Our SOTP-derived TP is revised higher to S$7.98 (prev S$7.52), as recurring income takes a bigger share of net profit.

Lendlease Global Commercial REIT – High rental reversion and rental upside from Sky Complex

Recommendation: BUY (Maintained), Last Done: S$0.62

Target price: TP: S$ 0.83, Analyst: Liu Miaomiao

– Gross revenue increased by 17.9% to S$119.9mn with the 2-year supplementary rental from Building 3 of Sky Complex and form 55% of our FY24e forecast.

– NPI increased 22.2% YoY while DPU slid 14.5% YoY to 2.1 cents, and were 54%/52% of our FY24e estimates. High rental reversion was sustained with 313@somerset at c.20%, and Jem provided a stable contribution at c.10%.

– We reiterate our BUY recommendation with lower DDM-TP of S$0.83 and FY24e-25e DPU forecast of 4.16-4.59 Singapore cents. Erosion of DPU brought by higher-for-longer interest rates will still be apparent. We expect FY24e earnings will be supported by strong rental reversion.

Singapore Exchange Limited – FICC revenue support growth

Recommendation: Accumulate (Downgraded), Last done: S$9.58, TP: S$10.53, Analyst: Glenn Thum

– 1HFY24 revenue of S$592mn was slightly below our estimates, at 45% of FY24e, while adjusted PATMI of S$251mn was below our estimates, at 42% of FY24e. The variance came from higher-than-expected FICC revenue offset by lower Equities – Cash and Equities – Derivatives revenue. 1HFY24 DPS increased by 6% to 17 cents (1HFY23: 16 cents).

– Treasury income surged 47% YoY to S$67mn for 1H24, mainly due to higher average yields on margin deposits, partially offset by a decrease in margin balances.

– FICC grew 28% YoY, led by continued growth in commodity and currency derivatives volumes, higher OTC FX revenue, and higher treasury income. Equities revenue fell due to a decline in trading and clearing, and listing revenue, offset slightly by higher treasury income.

We downgrade to ACCUMULATE with a lower target price of S$10.53 (prev. S$11.71). We lower FY24e earnings by 3% as we lower Equities – Cash and Derivatives revenue estimates and lower total OPEX estimates for FY24e. Our target price is pegged to -1SD of its 5-year mean or 19.4x P/E (Figure 1). Catalysts include continued growth from OTC FX business pillars, and continued high treasury income due to the higher-for-longer interest rates.

Advanced Micro Devices Inc. – AI demand still hot

Recommendation : ACCUMULATE (Upgraded); TP: US$195.00, Last Close: US$177.66

Analyst: Jonathan Woo

– 4Q23 revenue was within expectations. PATMI was above expectations due to higher tax benefits and interest income. FY23 revenue was at 99% of our FY23e forecasts, while PATMI was ~US$1bn above.

– Data Centre (DC) and Client (PC) segments continue to drive revenue growth, with YoY expansion of 38%/62%, respectively. FY24e revenue from MI300X DC GPUs was revised up from US$2bn to US$3.5bn on stronger customer demand and order book.

– We double our FY24e PATMI estimates to US$3.4bn due to expanding margins from higher contribution of DC products, while also rolling over an additional year of valuations. We expect overall revenue growth in the near term to be driven by robust AI-related demand, offset slightly by weak Gaming and Embedded segments. We upgrade to ACCUMULATE from NEUTRAL with a raised target price of US$195.00 (prev. US$110.00). Our WACC assumption of 7.4% remain unchanged, but we increase our terminal growth rate to 5% (prev. 4%) on higher AI demand.

Phillip Singapore Monthly – Jan24: Disappointing start

Analyst: Paul Chew

– A tough start for the Singapore market, down 2.7% in January. The weakest sectors were electronics and commodities. Outperformers were transportation and shipping.

– Headline economic news was favourable with Singapore’s GDP expanding at a faster pace of 2.8% YoY in 4Q23 (3Q23: +1%). But most indicators remain sluggish. December manufacturing and export indicators were down 3.1% and 1.5% YoY respectively. REITs results were operationally healthy, but interest expense and currency dragged down dividends. Around two-thirds of REITs reported a contraction in their DPU. China was the weak spot, with either negative rental reversions or arrears creeping up.

– Our key sector Overweights are conglomerates, REITs and telecommunications. Another sector we favour is building materials. The construction sector is gaining momentum with 2023 awards reaching S$33.8bn, exceeding the BCA forecast of S$27bn-32bn. There is visibility of a strong 2024 with forecasted construction awards ranging between S$32bn and S$38bn.

Microsoft Corp – AI demand boost cloud revenue

Recommendation: ACCUMULATE (Maintained); TP: US$450.00

Analyst: Ambrish Shah

– 2Q24 revenue was in line with our expectation, while earnings exceeded. 1H24 revenue/PATMI was at 49%/53% of our FY24e forecasts. 2Q24 revenue grew 18% YoY driven by a robust 28% YoY growth in Azure cloud revenue. PATMI rose by 33% YoY to US$21.9bn due to higher operating leverage.

– For 3Q24e, Microsoft expects total revenue to grow by 15% YoY to US$60.5bn fueled by Azure revenue growth of 28% YoY and Office 365 Commercial revenue growth of 15% YoY. Microsoft’s implied operating margin for 3Q24e is ~43%.

– We maintain our ACCUMULATE recommendation with an increased DCF target price of US$450.00 (prev. US$375.00), with an unchanged WACC of 7.2%, and an increased terminal growth rate of 4.5% (prev. 4%). We believe that the growing demand for large AI models could help attract customers to Microsoft’s Azure platform for storage and computing solutions. Also, strong adoption of Office 365 AI tools could provide incremental revenue growth opportunities. Our FY24e revenue/PATMI has been increased by 1%/3% to account for the continuation of AI tailwinds and lower OPEX.

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