DAILY MORNING NOTE | 6 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**
Trade of the Day
Analyst: Zane Aw
(Current Price: S$3.70) – TECHNICAL SELL
Sell stop: S$3.68 Stop loss: S$3.78 (-2.72%)
Take profit 1: S$3.46 (+5.98%) Take profit 2: S$3.33 (+9.51%)
Summary of Trades Initiated in Past Week
Singapore shares fell for the second consecutive day on Tuesday (Dec 5), losing 0.2 per cent after big tech and other equities in most major markets fell. The top loser on the Singapore bourse was DBS. The counter fell 0.8 per cent or S$0.26 to S$31.44. Jardine Matheson, on the other hand, bagged the biggest gains of the day, rising 1 per cent, or US$0.41 to close at US$39.81.
Wall Street stocks finished mixed on Tuesday after data suggesting a cooling of the US jobs market sent Treasury yields lower. Labor Department data showed a drop of more than 600,000 job openings at the end of October, offering further indication that the US economy is cooling. The Dow Jones Industrial Average finished 0.2 per cent lower at 36,124.56. The broad-based S&P 500 slipped 0.1 per cent to 4,567.18, while the tech-rich Nasdaq Composite Index added 0.3 per cent at 14,229.91.
VTAC special purpose acquisition company (Spac) will pay S$5.01 per share to shareholders who have exercised their redemption right. This translates to a total of about S$130.3 million to be drawn from the escrow account, based on the redemption of some 26 million shares. The payment will be made through Central Depository channels on Friday (Dec 8), said Singapore’s first Spac on Tuesday. The redemption price is derived from the aggregate amount on deposit in the escrow account as at Tuesday, including non-released interest earned, net of any taxes payable on the interest earned, divided by the number of outstanding shares. Oustanding shares include those held by Venezio and the sponsor Vertex Venture Holdings, but exclude the promote shares, the Spac noted.
Elite Commercial Reit’s portfolio valuation as at Dec 1, 2023, stood at £412.5 million (S$697.1 million) across 150 properties, based on the latest external valuation conducted by CBRE. While this is 11.2 per cent down from the real estate investment trust’s (Reit) £464.5 million reported portfolio value as at Dec 31, 2022, the manager said it represents a 9.5 per cent decline based on the carrying value of investment properties on a like-for-like comparison of the 150 properties. In a business update on Tuesday (Dec 5), the Reit manager reported an adjusted net asset value (NAV) per unit of £0.43, representing a 15.7 per cent drop from £0.51 as at end-September. The adjusted NAV accounts for divestments of assets in October and December 2023, the repayment of loans in October 2023, and the value of the 150 properties as at Dec 1 this year. Elite Commercial Reit’s gearing ratio rose 3.8 percentage points to 49.6 per cent as at Dec 1, from 45.8 per cent as at end-September.
Cordlife Group’s accreditation by the Foundation for the Accreditation of Cellular Therapy has been suspended indefinitely, at least until the foundation’s investigations are completed and issues are resolved. In a regulatory filing on Tuesday (Dec 5), Cordlife Group said that it has received a notice from Foundation for the Accreditation of Cellular Therapy which has initiated internal investigations into the circumstances raised in a notice from the Ministry of Health (MOH). Cordlife Group has received a request from the foundation to submit reports relating to the investigations conducted by the authorities, the results of a comprehensive root cause analysis of the issues and the company’s short- and long-term corrective plans. It will provide all necessary information to the foundation in order to restore its accreditation, said Cordlife Group in the filing. But it did not say what the impact of the suspension of accreditation would have on its business.
Singtel is developing a new generation of artificial intelligence (AI) data centres (DCs) with high power density and sustainable features. The DC at Tuas under construction will be the first of the fourth generation DCs tailored for intense compute environments. They can handle higher power density AI workloads with a concentration of graphic processor units (GPUs), said Singtel on Tuesday (Dec 5). The fourth generation of DCs will adopt more efficient cooling solutions to prevent overheating of the GPUs, Singtel said. Chang noted that the DC Tuas, offering 58 megawatts capacity, the largest among Singtel’s current data centres, will be one of the industry’s most efficient with a power usage effectiveness (PUE) ratio of around 1.23 at full load. A ratio of one indicates full power efficiency. Besides DC Tuas, Singtel is also developing two other projects of the fourth generation DCs in Thailand and Indonesia. These will increase Singtel’s total pipeline capacity beyond 200 megawatts, from its current operational capacity of 62 megawatts in Singapore.
In-flight caterer and ground handler Sats on Tuesday (Dec 5) said it remains on track to restore profitability, a week after it filed its notice of three consecutive years of losses. The group was responding to media articles detailing the notice, its US$3 billion multicurrency debt issuance programme and the uncommitted bilateral facilities it has obtained. In its clarification, the group cited factors including the global travel recovery, new contract wins, operational efficiencies and synergies achieved through the integration with Worldwide Flight Services. It reiterated that there is no risk of being placed on the watch list, as its six-month average daily market capitalisation stood at S$3.9 billion. As for its funding programmes, the group said its S$3 billion multicurrency debt issuance programme will provide flexibility for the group to access global debt markets to optimise its borrowing costs through appropriate maturity tenure. It noted that it continues to generate positive net operating cash flow on the back of global travel recovery and good progress on its integration with WFS. Its newly obtained uncommitted bilateral facilities were also the result of the group restructuring WFS’ existing revolving credit facilities, which had certain restrictive covenants in place. Sats had restructured these facilities with ING Bank, MUFG Bank, Bank of America and HSBC Bank to remove these restrictive covenants and provide the group with greater funding flexibility, the group said. It added that it will continue to maintain a prudent financial management strategy, as well as focus on delivering stable financial performance and increasing shareholder value.
A committee formed by activist investor Quarz and other unitholders of Sabana Industrial Real Estate Investment Trust (Sabana Reit) has sent an open letter to the regulatory authorities to seek guidance on the internalisation of the Reit’s manager. The Sabana Growth Internalisation Committee (SGIC) on Tuesday (Dec 5) said it “urgently seeks guidance” from the Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGXRegCo) on two legal questions. The first is whether the Sabana Trustee is “wrong in its interpretation of the trust deed, and its position on how to proceed with internalisation”. The second question is whether the sponsor and its concert parties should be barred from voting on a resolution to amend the trust deed to effect the internalisation, because they are interested parties in the matter, given that the move would “directly affect their own fee income”. The trustee had said on Nov 7 that certain amendments to Sabana Reit’s trust deed are necessary to effect the internalisation, and that such amendments are subject to an extraordinary resolution of unitholders. But SGIC said on Tuesday that unitholders “totally disagree and are highly concerned” with the position.
NIO reported a quarterly loss of 4.6 billion yuan (S$864.5 million) and gave an outlook on revenue and electric-vehicle deliveries that missed estimates. The Chinese EV maker expects revenue of up to 16.7 billion yuan in the three months through December, short of the 21.4 billion yuan average estimate from analysts. Nio expects to sell 47,000 to 49,000 vehicles in the quarter, it said in a statement on Tuesday (Dec 5). Analysts had forecast 59,426 sales. Once considered one of the brightest rising stars in China’s EV market, Nio is yet to post a profit and is falling behind sales targets. It had a goal of shipping 250,000 EVs this year, but reached only 142,026 by the end of November.
Ratings agency Moody’s on Tuesday cut its outlook on China’s government credit ratings to negative from stable, citing lower medium-term economic growth and risks from a major correction in the country’s vast property sector. The downgrade reflects growing evidence that authorities will have to provide financial support for debt-laden local governments and state firms, posing broad risks to China’s fiscal, economic and institutional strength, Moody’s said in a statement. “The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said. The move by Moody’s was its first change on its China view since it cut its rating by one notch to A1 in 2017, also citing expectations of slowing growth and rising debt. While Moody’s affirmed China’s A1 long-term local and foreign-currency issuer ratings on Tuesday, it said it expects the country’s annual GDP growth to slow to 4.0% in 2024 and 2025, and to average 3.8% from 2026 to 2030.
Tesla’s labour dispute is expanding to Denmark, where the country’s largest union said it will halt shipments of the cars to Sweden in support of striking workers in the biggest Nordic country. Harbor workers and drivers at the Danish 3F union will in about two weeks stop offloading Sweden-bound cars in Danish harbors and driving them to Sweden, preventing Tesla from circumventing a weeks-long blockade there. The Danish union filed a strike warning notice for to the Danish Employers’ Association on Dec 4, it said in a statement on Tuesday (Dec 5). The protest won’t affect Tesla’s operations in Denmark, a spokesperson for the union said by phone.
CVS Health on Tuesday forecast 2024 revenue above Wall Street estimates and an in-line profit as the company expects to benefit from its expansion into health services and strength in its health insurance business. The healthcare conglomerate also said it was bringing its portfolio of health services such as doctors clinics and pharmacies under an umbrella brand called CVS Healthspire. CVS forecast revenue of at least US$366 billion, ahead of analysts’ average estimate of US$345.81 billion. The company’s 2024 adjusted profit forecast of at least US$8.51 per share was largely in line with Wall Street estimates.
Taiwan’s Foxconn, the world’s largest contract electronics maker and a major Apple supplier, on Tuesday (Dec 5) raised its outlook for the fourth quarter on strong year-end sales for the holiday peak season. Foxconn said in a statement that with the second half of the year being the traditional peak season for the tech industry, revenue performance in the first two months of the fourth quarter had been slightly higher than expected. “Therefore, the outlook for the fourth quarter should be better than the original guidance for ‘significant growth’”, the company added, without elaborating. Foxconn does not provide exact numerical guidance. The company, formally called Hon Hai Precision Industry, said revenue last month reached NT$650 billion (S$27.6 billion), the second highest on record for the month and up 18 per cent year-on-year, though down 12.3 per cent from October.
Procter & Gamble said on Tuesday (Dec 5) it would record up to US$2.5 billion in charges over two fiscal years as it writes down the value of its Gillette business and restructures certain markets. The consumer goods giant said it would take a US$1.3 billion non-cash impairment charge before tax in the current quarter ending Dec 31 on its Gillette business. P&G, which bought Gillette for US$57 billion in 2005, gets about 8 per cent of its total sales from the grooming business. The company expected its Gillette business to grow in the range of 5 per cent, chief financial officer Andre Schulten said on Tuesday, in line with growth over the last three years. In 2019, P&G took an US$8 billion charge on the unit due to currency fluctuations. The company said it expects charges of between US$1 billion and US$1.5 billion after tax related to the restructuring of its Argentina and Nigeria operations as it deals with difficult macroeconomic conditions. P&G also blamed a stronger US dollar for the twin charges. P&G said it was looking to divest its fabric and home care business in Argentina and turn Nigeria into an import-only market. Total charges will be between US$2 billion and US$2.5 billion after tax and will be recognized in fiscal years 2024 and 2025.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
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