DAILY MORNING NOTE | 6 March 2024

Trade of the Day

The Walt Disney Company (NYSE: DIS)

Analyst: Zane Aw

(Current Price: US$113.69) – TECHNICAL BUY
Buy price: US$113.69 Stop loss: US$110.00 (-3.25%)
Take profit: US$126.00 (+10.83%)

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Trades Initiated in the past week

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Singapore shares ended lower on Tuesday (Mar 5), tracking losses on Wall Street. Singapore stocks fell 0.5 per cent or 15.11 points to 3,107.1. Across the broader market, losers outnumbered gainers 356 to 194, after 1.4 billion securities worth S$959.6 million were transacted. The Nikkei 225 lost 0.03 per cent, the Hang Seng Index fell 2.6 per cent, the Kospi Composite Index was down 0.9 per cent, and the FTSE Bursa Malaysia KLCI declined 0.2 per cent.

Major US indices ended on Tuesday (Mar 5) in a slump, as key tech names lost ground and traders looked ahead to remarks by the central bank chair later in the week. The tech-heavy Nasdaq Composite Index lost 1.7 per cent to 15,939.59, with Apple, Microsoft and Tesla all retreating. The Dow Jones Industrial Average slipped 1.0 per cent to 38,585.19, and the broad-based S&P 500 stumbled 1.0 per cent as well, to 5,078.65.

Top gainers & losers

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Events Of The Week

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SG

17Live Group and mm2 Asia will be exploring joint entertainment offerings across South-east Asia, the former announced in a press statement on Tuesday (Mar 5). A memorandum of understanding has been signed by livestreaming platform 17Live and media and entertainment company mm2 Asia to collaborate on entertainment marketing and production-related activities. Such activities would include marketing of movies, collaboration between live streamers and mm2 movie projects, as well as the production of long-form animation content. The agreement will see parties possibly forming a joint venture of a business unit focused on delivering livestream content via a platform co-owned by both companies. 17Live shares closed 2.4 per cent lower at S$1.20 while mm2 shares ended unchanged at S$0.02 on Tuesday, before the announcement.

Singapore’s Temasek Holdings is holding talks about investing in OpenAI, a deal that would mark the first time a state-backed group has funded the ChatGPT maker. Senior executives at Temasek, one of the world’s biggest and most active investors, have met OpenAI’s chief executive Sam Altman multiple times over recent months, according to two people with knowledge of the talks. Another person familiar with the discussions said that the Singaporean group had initially been interested in investing in Altman’s venture capital fund Hydrazine Capital, but more recent talks had included OpenAI itself. This person added that the talks were preliminary but ongoing, with no agreement on the size of any investment. OpenAI and Temasek declined to comment on the discussions.

AcroMeta Group has announced the proposed disposal of its wholly-owned subsidiary Acromec Engineers for an aggregate consideration of $3.3 million. On March 5, the company announced that it had entered into a sale and purchase agreement (SPA) with AESM Holdings for 100% of the issued and paid-up share capital of Acromec. The subsidiary provides specialist engineering services in the field of controlled environments, and has an issued and paid-up share capital of $8 million comprising 8 million ordinary shares. Acromec recorded an FY2023 revenue of $66 million. Meanwhile, AESM is 80% owned by Ingenieur Holdings shareholder Chew Chee Keong, with Lim Chee Leong and Anton Setiawan each holding 10% of the share capital.


US

Oil prices fell nearly 1 per cent on Tuesday (Mar 5) as scepticism around China achieving its economic growth target and investors’ declining risk appetite countered a weaker US dollar. Brent crude futures settled 76 US cents, or 0.9 per cent, lower at US$82.04 a barrel, while US West Texas Intermediate crude futures fell 59 US cents, or 0.8 per cent, to US$78.15 a barrel. Both benchmarks had dropped by more than a US dollar during the session. Weighing on prices, China, the world’s biggest oil importer, set an economic growth target for 2024 of around 5 per cent. While the target is similar to last year’s goal and in line with analysts’ expectations, the lack of big-ticket stimulus plans to prop up the country’s struggling economy disappointed investors.

Amazon’s cloud services division is halting fees it has long charged customers that switch to a rival provider – following in the steps of Google, which recently announced it was ending the practice. Amazon Web Services (AWS) will no longer charge customers who want to extract all of their data from the company’s servers and move them to another service, AWS vice-president Robert Kennedy said on Tuesday (Mar 5). The move follows intensifying scrutiny of cloud services by regulators and lawmakers. UK antitrust authorities launched a probe into such penalties, and the fees emerged as a key issue when the US Federal Trade Commission asked for public comments on a variety of cloud concerns. Amazon has said the fees help cover the costs of networking and other infrastructure.

CrowdStrike shares surged as much as 21% in after-hours trading Tuesday after the cybersecurity company reported a beat on the top and bottom lines, plus issued stronger-than-expected guidance for the upcoming quarter and full year. For the period that ended Jan. 31, CrowdStrike saw net income of $54 million, or 22 cents per share, from a $48 million loss, or a 20 cent loss per share, in the year-ago period. CrowdStrike’s revenue for the fourth quarter ended Jan. 31 rose 32.6% to $845.3 million, beating Street expectations of $839.1 million. The company also guided to fiscal first-quarter revenue between $902 million and $906 million, better than a consensus estimate of $899 million. CrowdStrike also expects earnings per share for the period between 89 cents and 90 cents, better than the consensus estimate of 82 cents.

Nio Inc’s annual loss widened last year as the Chinese electric-vehicle maker faced fierce competition in the world’s biggest EV market. The Shanghai-based company’s net loss of 5.4 billion yuan in the fourth quarter brought its annual deficit to 20.7 billion yuan (US$2.9 billion), according to a statement Tuesday. Nio posted better-than-expected sales for the final three months of 2023. Gross margins for the fourth quarter came in at 7.5% compared to the 10.2% the market was looking for. Nio now sees revenue of as much as 11.1 billion yuan for the current quarter, significantly below analyst expectations. Nio now expects to ship as many as 33,000 cars in the first quarter, down from 50,045 vehicles in the previous three-month period.

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


RESEARCH REPORTS

City Developments Limited – Record revenue driven by property development

Recommendation: BUY (Maintained); TP: S$6.87

Last Done: S$5.62; Analyst: Darren Chan

– FY23 PATMI of S$317.3mn (-75.3% YoY) missed our estimate by 15% due to higher-than-expected finance costs (+73% YoY). The YoY decline in PATMI was largely attributable to the absence of outsized divestment gains from the divestment of Millennium Hilton Seoul (S$926mn) in FY22.

– Excluding divestment gains and impairment losses, FY23 PATMI quadrupled YoY to S$188.6mn (FY22: S$47mn); PBT grew 90% YoY to S$352.7mn (FY22: S$186mn). This was mainly due to the contribution of Piermont Grand EC in its entirety in Jan-23 and the sale of land at Shirokane in Jul-23 under the property development segment.

Maintain BUY with a lower TP of S$6.87 from S$8.22, a 45% discount to RNAV of S$12.50. We raise our FY24e PATMI estimate by 15%, factoring in higher contributions from hotel operations. We view CDL as a proxy for the Singapore residential market and hospitality recovery. Asset monetisation, unlocking value through AEIs and redevelopments, establishing a fund management franchise, and the continuous recovery in the hospitality portfolio are potential catalysts for CDL, which could help narrow the discount between CDL’s share price and RNAV.

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