DAILY MORNING NOTE | 5 January 2024

Trade of the Day

Medtecs International Corporation Ltd (SGX: 546)

(Current Price: S$0.188) – TECHNICAL SELL

Sell stop: S$0.186 Stop loss: S$0.192 (-3.23%)
Take profit 1: S$0.165 (+11.29%) Take profit 2: S$0.156 (+16.13%)


Alphabet Inc. (NASDAQ: GOOGL)

Analyst: Zane Aw

(Current Price: US$138.92) – TECHNICAL BUY

Buy price: US$138.92 Stop loss: US$136.40 (-1.81%)
Take profit 1: US$143.70 (+3.44%) Take profit 2: US$150.60 (+8.41%)


Singapore shares fell for the third consecutive day on Thursday (Jan 4), tracking a broader decline across the region. The stocks fell 0.8 per cent or 25.43 points to close at 3,174.01. CapitaLand Investment was the top STI decliner, slipping 2.3 per cent to S$3.00. The local banks also closed in the red, with UOB, DBS and OCBC falling between 0.5 and 0.6 per cent.

US stocks ended the day mixed on Thursday, as better-than-expected private sector jobs data fueled concerns that the financial markets may have been too enthusiastic about interest rate cuts. The US Federal Reserve recently signaled it expects as many as three rate cuts this year, as inflation continues to decline towards policymakers’ long-run two per cent target. But markets indicated that traders expected as many as six reductions over the same period, something that seems increasingly unlikely in the face of continued strong economic data.

Top gainers & losers

Factsheets


Events Of The Week

Factsheets


SG

Seatrium’s S$250 million wind farm contract cancelled. A wind farm contract awarded to was cancelled by Empire Offshore Wind, a joint venture between Norwegian state-owned energy company Equinor and oil giant BP. The offshore and marine engineering group was informed that the cancellation was a result of “significant macroeconomic conditions” impacting the Empire Wind 2 project, Seatrium said on Thursday (Jan 4). Seatrium will avail construction capacity set aside for this project to other projects in the pipeline

Electric cars from Smart – a tie-up between Mercedes-Benz and China auto giant Geely – will be available in Singapore from the first half of 2024, with Cycle & Carriage (C&C) Singapore appointed as the authorised distributor. C&C said on Thursday (Jan 4) that a new showroom for the brand is expected to open in the third quarter of 2024, on the third level of the Mercedes-Benz Center at 301 Alexandra Road. The company is planning road shows where consumers can view and test drive the cars before the completion of the showroom.

Nera Telecommunications (NeraTel) has entered into a strategic partnership with Taiwan-based cybersecurity leader uniXecure Corporation Ltd to provide cybersecurity solutions to small- and medium-sized enterprises (SMEs) in Southeast Asia (SEA). Under the two-year partnership, NeraTel will be uniXecure’s preferred partner in SEA offering solutions dedicated to SMEs, which have become prime targets of cyber crimes in recent years. According to NeraTel, SMEs were targeted due to cost limitations and the lack of in-depth cybersecurity expertise.


US

Xerox said on Wednesday (Jan 3) that it was cutting 15 per cent of its workforce as part of a restructuring, the company’s latest effort to shift focus to its business-services offerings and away from its iconic photocopiers. In a news release, the company said it would reduce its global staff, which included roughly 23,000 employees in 2022, and name a new leadership team. The layoffs are expected to take place in the first quarter of 2024. The company’s shares fell more than 12 per cent after the layoff news was announced. Its share price had been steadily rising over the past year, in part because Xerox had saved billions of US dollars after starting a cost-cutting programme in 2018. In recent years, Xerox has struggled to adjust to the digital age as demand for ink and print documents crumbled.

Mark Zuckerberg sold nearly half a billion US dollars of Meta Platforms shares in the final two months of 2023 after a two-year hiatus in which the company’s stock price hit its lowest in seven years.The Meta chief executive sold shares on every trading day between Nov 1 and the end of the year, unloading nearly 1.3 million shares for about US$428 million, according to a Tuesday (Jan 2) regulatory filing. On average, each sale took in US$10.4 million, with the largest on Dec 28 at US$17.1 million.

Amazon.com’s push into video advertising will boost annual revenue by as much as US$5 billion, mostly generated by new television-style commercials on Prime Video. Ads on Amazon’s streaming service will start appearing in North America on Jan 29 and internationally on Feb 5. To receive ad-free content, North American subscribers will have to pay an additional US$3 per month. Amazon’s advertising business – mostly search and display ads on its web store – generated US$12.1 billion in the quarter ended Sep 30, about 8.5 per cent of total revenue. The Seattle-based company sees Prime Video as an ideal spot to boost ad sales and profit from the billions it has spent on content, including movies and National Football League games. Advertising is Amazon’s smallest but fastest-growing revenue source.

BYTEDANCE’S TikTok aims to grow the size of its United States e-commerce business tenfold to as much as US$17.5 billion this year, posing a bigger threat to Amazon.com. TikTok’s ambitious target sets up a clash not just with Amazon but also fellow Chinese-owned outfits Temu and Shein, who have been making big strides among younger American shoppers. Unlike its two rival discounters, TikTok is counting on its social media reach and the appeal of viral videos to hook buyers.

Microsoft is adding a button to the Windows keyboard to activate its AI Copilot service, with the first devices to sport the new key available this month. The Copilot key, which will sit to the right of the space bar, is the first change to the Windows keyboard layout since Microsoft added the Windows/Start key in 1994, underscoring the company’s commitment to artificial intelligence. Microsoft’s hardware partners will show off Windows 11 computers with the Copilot button over the coming days at the CES technology conference and, over time, it will become a required feature. The shortcut will help users create images, write emails and summarise text with the help of AI.

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


RESEARCH REPORTS

Yoma Strategic Holdings Ltd – Adapting well to the new environment

Recommendation: Not rated; Last close: S$0.072; Analyst Paul Chew

– Following the pandemic and coup in 2021, Yoma has undergone a major de-leveraging and rightsizing exercise. Net debt has shrunk from US$326mn in September 2021 to US$134mn in September 2023. The company disposed of investment properties, restructured Yoma Central debt, resized F & B operations, lowered manpower costs and generated operating cash flow.

– Real estate development has been the key performer for Yoma. Revenue has more than tripled in 1H24 to US$48mn. As of September 2023, there is a further US$65mn of unrecognized revenue. Buyers are seeking hard assets in an environment of rising inflation, negative real interest rates and a depreciating kyat currency.

– The macro environment in Myanmar has been extremely challenging. Myanmar’s GDP (in USD nominal terms) contracted 17.5% YoY in 2021 and 8.9% in 2022. Inflation is running at 20% p.a. and the kyat currency is officially down 60% since 2021. Yoma is responding to these challenges by de-gearing its balance sheet, disposing of non-core assets, localising costs and rebalancing its headcount. The share price is currently trading at a 71% discount to its book value of US$0.189.

Nikko SPDR ETF Quarterly: Jan 03 – Majority of stakes in banks

Analysts: Phillip Research Team

· Half of the holdings in banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs

· Implied value for Nikko AM STI ETF and SPDR Straits Times Index ETF at $3.69 and $3.73 respectively
· A chance to diversify holdings across Singapore’s leading companies and engage Singapore’s long-term growth potential through a single, cost-effective transaction.

PSR Stocks Coverage

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