DAILY MORNING NOTE | 7 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

Factsheets


Singapore shares gained 0.3 per cent on Wednesday (Dec 6), reversing declines at the start of the week. Jardine Matheson remained at the top spot as the biggest winner for the day, after its shares rose 2.2 per cent or US$0.87 to US$40.68. It was all positive on the banking front too. DBS ended up 0.1 per cent at S$31.48, UOB rose 0.2 per cent to S$27.29, while OCBC gained 0.1 per cent to S$12.61.

The S&P 500 notched up its first three-day losing streak in almost six weeks, as declines for US stocks accelerated in late trading on Wednesday. The benchmark index closed 0.4 per cent lower to 4,549.34 for its first three-session losing streak since late October. The tech-heavy Nasdaq Composite declined 0.6 per cent to 14,146.71 while the Dow Jones Industrial Average lost 0.2% to close at 36,054.43.

Top gainers & losers

Factsheets


EVENTS OF THE WEEK

Factsheets


SG

ComfortDelGro is revising its taxi fare structure to help cabbies defray higher operating costs due to rising fuel prices, high inflation and the impending Goods & Service Tax (GST) hike. With effect from Dec 13, the flag down fare will be increased by 50 cents. Depending on the vehicle type, the new flag down fare will be between S$4.40 and S$4.80. The subsequent distance-based rate will go up to 26 cents from 24 cents. With this adjustment, the estimated fare for a 10km off-peak normal taxi trip will increase by 6.8% or 94 cents from S$13.80 to S$14.74. The definition of “evening peak hour”, where a surcharge is applicable, will be extended by an hour from 5:00pm to 11:59pm, effective Monday through Sunday, including public holidays. A new peak hour surcharge will also be implemented from 10:00am to 1:59pm on Saturdays, Sundays, and public holidays.

Keppel Corporation and GenZero have signed a memorandum of understanding (MOU) at the 2023 United Nations Climate Change Conference, otherwise known as COP28, to jointly pursue opportunities to accelerate the transition to clean energy and the development of sustainable fuel projects across the Asia-Pacific region. Under the MOU, Keppel, through its infrastructure division, and GenZero, a Temasek-owned investment platform company focused on accelerating decarbonisation globally, will carry out feasibility studies to co-develop projects that are aimed at facilitating the early retirement of coal-fired power plants (CFPP), as well as Southeast Asia’s pivot to cleaner energy alternatives, such as solar power or geothermal energy.

CapitaLand China Trust (CLCT) is divesting its entire equity interest in a special purpose vehicle that holds its mall in Beijing, CapitaMall Shuangjing, for 842 million yuan (S$157.8 million). Based on the asset’s net property income from Jan 1, 2023, to Sep 30, 2023, this price tag represents an exit yield of 2.8 per cent. The transaction is expected to crystallise higher cash value from the asset, reduce CLCT’s aggregate leverage and enhance returns to unitholders, said the manager on Wednesday (Dec 6). The sale of CapitaMall Shuangjing is slated to complete in Q1 2024 and is expected to generate net proceeds of about 690.7 million yuan. Net proceeds may be used to repay debt, undertake a unit buyback, and finance general corporate and working capital requirements. Located in Guangqu Road in Beijing’s Chaoyang District, CapitaMall Shuangjing was part of CLCT’s initial asset portfolio during the trust’s initial public offering in 2006. It is also the last remaining master-leased mall within CLCT’s retail portfolio.

Singapore Post (SingPost) has acquired the final 2% interest in Australian services provider Freight Management Holdings (FMH) for A$13.3 million (S$11.7 million). Following the acquisition from FMH management shareholders, SingPost, through its wholly-owned subsidiary SingPost Australia Investments (SPAI), holds 100% of the issued share capital of FMH. SingPost first acquired a 28% stake in FMH in December 2020 before upping its stake to 51% in November 2021. The company acquired an additional 37% stake in January and a further 10% interest on Nov 28, bringing its total stake in FMH to 98%.

The manager of Keppel Infrastructure Trust (KIT) has announced it has obtained a $50 million term loan facility on Dec 6. The agreement contains the caveat that all outstanding loans will have to be repaid immediately should the manager cease to be wholly-owned by Keppel Capital Holdings (KCH) or Keppel Corporation and should an entity that is not wholly-owned by KCH or Keppel be appointed as its replacement. The same condition applies should the manager of KIT cease to act as the trustee-manager of KIT.

Ever Glory United Holdings’ wholly-owned subsidiary Ever Capital has entered into a joint venture (JV) agreement with Primest Land and Sunlit Venture Capital to purchase a piece of District 14 land through Primest Land V1, the JV company. Primest Land V1, which is in the land purchase process for the development and construction of residential flats, will be engaged in the business of acquisition, development, marketing, holding, leasing, sale and disposal of the property. The estimated costs and expenses to be incurred by the JV company in completing the project to its full completion amounts is expected to amount to approximately S$30 million, of which 40% or S$12 million will be funded by the three parties proportionate to their respective shareholding interests in Primest Land V1. The remaining 60% or S$18 million will be funded by bank loans. As such, Ever Capital’s estimated aggregate consideration value will amount to some S$3 million, which Ever Glory United intends through internal resources. The company says the JV agreement is in line with its strategy to expand into the property investment business and represents an opportunity for an additional revenue stream.


US

Oil prices fell nearly 4% on Wednesday to their lowest settlements since June, as worries about global fuel demand mounted after US data showed a larger-than-expected rise in petrol inventories. Brent crude futures settled down US$2.90, or 3.8 per cent, at US$74.30 a barrel. US WTI crude futures fell by US$2.94, or 4.1 per cent, to US$69.38 a barrel. Concerns over China’s economic health and future fuel demand also weighed on prices, a day after rating agency Moody’s lowered the outlook on China’s A1 rating to negative from stable. US petrol stocks rose by 5.4 million barrels last week, the Energy Information Administration said, more than quintuple the 1 million barrel rise that analysts had expected. US petrol futures plummeted to their lowest in two years.

Meta , OpenAI, and Microsoft said at an AMD investor event Wednesday they will use AMD’s newest AI chip, the Instinct MI300X. It’s the biggest sign so far that technology companies are searching for alternatives to the expensive Nvidia graphics processors that have been essential for creating and deploying artificial intelligence programs such as OpenAI’s ChatGPT. If AMD’s latest high-end chip is good enough for the technology companies and cloud service providers building and serving AI models when it starts shipping early next year, it could lower costs for developing AI models and put competitive pressure on Nvidia’s surging AI chip sales growth. AMD says the MI300X is based on a new architecture, which often leads to significant performance gains. Its most distinctive feature is that it has 192GB of a cutting-edge, high-performance type of memory known as HBM3, which transfers data faster and can fit larger AI models. Su directly compared the MI300X and the systems built with it to Nvidia’s main AI GPU, the H100.

C3.ai reported mixed fiscal second-quarter results as revenue fell short of estimates, but the the AI software maker talked up the return of faster growth amid a transition to consumption-based pricing model. The AI software maker reported an adjusted loss of US$0.13 per diluted share on revenue of US$73.2 million, compared with estimates for an adjusted loss of US$0.18 on revenue of US$73.2 million. Looking ahead, the company forecast a Q3 adjusted loss from operations of US$40 million to US$46 million on revenue of US$74 million to US$78 million. That compared to Wall Street estimates for revenue of US$77.69 million. For the full-year, the company now expects revenue of between US$295 million to US$320 million and an adjusted operating loss of US$115 million to US$135 million, with the latter up from a prior forecast for a loss of US$70 million to US$100 million. “We are seeing a return to accelerating revenue growth as we continue our transition to a consumption-based pricing model,” the company said.

Amazon is sharply cutting fees for merchants selling clothing priced below US$20, a sign it’s hunkering down for a price war with Chinese fast-fashion upstart Shein. On Tuesday (Dec 5), Amazon announced it would reduce seller fees on clothing products priced below US$15 to 5 per cent beginning in January. The rates on clothing priced from US$15 to US$20 will drop to 10 per cent. The commissions on both categories had previously been 17 per cent. It’s rare for Amazon to reduce the so-called referral fees it charges merchants on its online store, and no other changes of that nature were announced. That signals Amazon is specifically looking to entice merchants offering low-cost clothes – an area where Shein has excelled with its US$9 hoodies and other bargain-basement apparel.

Members of the SAG-AFTRA actors union approved a three-year contract with major studios on Tuesday, formally ending six months of Hollywood labor disputes that halted film and television production. SAG-AFTRA said 78% of those who voted supported the deal with Netflix Inc, Walt Disney Co and other members of the Alliance of Motion Picture and Television Producers (AMPTP). Just 38% of eligible SAG-AFTRA members cast a ballot, the union said in a statement on X, formerly known as Twitter. SAG-AFTRA represents roughly 160,000 actors and other media professionals. The new contract provides for pay raises and streaming bonuses that union leaders said amounted to more than US$1 billion over three years. It also includes guardrails around the use of artificial intelligence (AI) in filmmaking, though some actors complained that the AI protections were not sufficient. The deal requires studios to obtain permission from celebrities to use their digital likenesses and to pay them for the use. Critics argued that the language allows creation of “synthetic performers” that could eliminate the need for many human actors.

Chinese electric vehicle maker Nio plans to spin off its battery manufacturing unit, according to two people with knowledge of the matter, as part of the efforts by the company to turn profitable, reduce costs and improve efficiency. The nascent battery unit, led by senior manufacturing engineers whose previous employers include Apple and Panasonic, will seek external investors after the spin-off that could happen as early as the end of this year, with a valuation to be decided later, the people said. They spoke on condition of anonymity because the information is confidential. Nio declined to comment beyond founder and CEO William Li’s comments on an earnings call on Tuesday (Dec 5) that the automaker would continue to do in-house research and development on batteries, but now planned to outsource all the manufacturing. The company, which has a market value of US$12.4 billion, currently buys all of its batteries from CATL and CALB Group.

Disney is beginning to roll out a Hulu integration on its Disney+ streaming platform in a bid to bundle subscribers. The full launch is expected March 2024, Disney said Wednesday. The company offers a bundle of Disney+ and Hulu, but Wednesday’s release is part of a push to integrate the two platforms. Disney last month agreed to buy the remaining one-third stake in Hulu that was owned by Comcast’s NBCUniversal. The Hulu integration is available to people who subscribe to the bundle, albeit in a limited form for now, according to a post on Disney’s website.

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


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