DAILY MORNING NOTE | 7 February 2024

Trade of the Day

Marco Polo Marine Ltd (SGX: 5LY)

Analyst: Zane Aw

(Current Price: S$0.055) – TECHNICAL BUY
Buy price: S$0.055 Stop loss: S$0.052 (-5.45%)
Take profit 1: S$0.060 (+9.09%) Take profit 2: S$0.063 (+14.55%)

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Trades Initiated in the past week

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DBS’ 4Q2023 results beat expectations with net profit of S$2.39bn vs our estimate of S$2.20bn. Bulk of the beat was from stronger than expected net interest income of S$3.43bn (+5% YoY) and net interest margin growth to 2.13% (+8bps YoY). Fee income surged by 31% YoY from growth in cards, wealth management and loan-related fees. Credit costs rose by 5bps YoY to 11bps as allowances were higher at S$142mn (4Q22: -S$42mn) mainly due to a rise in SPs to S$139mn (4Q22: S$74mn) and GP of S$3mn (4Q22: write-back of S$116mn). 4Q23 dividend up 29% to 54 cents, bringing full-year FY23 dividend to 192 cents, with an additional bonus issue of one bonus share for every existing 10 ordinary shares held. More details to follow after 11.30am analyst call.

Glenn Thum
Senior Research Analyst


Singapore shares were in the red on Tuesday (Feb 6), tracking losses in the United States. Advancers beat decliners 332 to 255, as 1.3 billion securities worth S$1.1 billion were traded. The top performer was electronics manufacturer Venture Corporation, which rose 1.8 per cent or S$0.24 to S$13.91. Meanwhile, the biggest loser was energy and urban development company Sembcorp Industries, which fell 1.9 per cent or S$0.11 to S$5.56. The three local banks retreated as well. DBS lost 0.6 per cent or S$0.20 to S$31.65, while UOB declined 0.8 per cent or S$0.22 to S$28.17. OCBC edged down 0.2 per cent or S$0.03 to S$12.78.

Stocks on Wall Street finished higher on Tuesday (Feb 6), propelled by strong quarterly earnings and reversing some of Monday’s declines. The Dow Jones Industrial Average closed up 0.4 per cent at 38,521.36, while the broad-based S&P 500 rose 0.2 per cent to 4,954.23. The tech-rich Nasdaq Composite Index also inched higher, rising by 0.1 per cent to 15,609.00.

Top gainers & losers

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Events Of The Week

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SG

Fibre network provider NetLink NBN Trust reported S$85.1 million in profit after taxes for the first nine months of its 2024 financial year ended Dec 31, 2023. This was a 4 per cent increase from the same period a year ago. The higher profit was a result of improved earnings, though it was partially offset by higher net finance cost, depreciation, and income tax expenses, said NetLink in a bourse filing on Tuesday (Feb 6). Earnings before interest, taxes, depreciation and amortisation came in at S$228.5 million over the nine-month period, a 3.9 per cent increase from the same period a year ago. NetLink said the improved earnings were mainly due to higher revenue and a one-off reversal of operating costs following a resolution of disputed power charges. Revenue rose 3.2 per cent to S$309.4 million over the same period a year ago, mainly due to higher connection revenue across all segments and higher installation-related revenue.

Beverage maker F&N reported a net profit of S$43.8 million for the first quarter ended on Dec 31, 2023, a 52.9 per cent jump from the same period the year before. However, its revenue took a dip of 0.2 per cent to S$531.6 million over the same time period, the company said in a business update filed with the bourse on Tuesday (Feb 6). Earnings per share came in at three Singapore cents, an increase from two Singapore cents a year ago. The company said that the first quarter’s revenue was impacted by unfavourable foreign exchange translation. Without the effects of forex, revenue would have gone up by 2 per cent, led by sales of its dairy and beer products. Revenue for the food and beverage segment – which includes soft drinks, beers and dairy products – grew 0.2 per cent to about S$457 million, due to increased sales of soft drinks and canned milk, as well as higher beer prices.

Entertainment company NoonTalk Media reduced its net loss for the first six months of its financial year (FY2024) by 40 per cent, to S$1.3 million from S$2.1 million in the previous corresponding period. That puts its loss per share at 0.64 Singapore cent from 1.26 cent previously. The Catalist-listed company, with Singaporean actor and television host Dasmond Koh as its chief executive, reported its latest financial statement on Tuesday (Feb 6). In the same fiscal period, revenue rose 16 per cent to S$2.3 million from S$2.0 million. Revenue from its production division increased 7.8 per cent to S$1.3 million from having more small-scale, physical live events, which made up for the fall in number of large-scale projects. An increase in the engagements of affiliated artistes and a concert bumped revenue from its management and events operations by 29.7 per cent to S$0.9 million.

Mainboard-listed BRC Asia reported a 46.5 per cent increase in net profit to S$17.1 million for its first quarter ended Dec 31, 2023, from S$11.7 million in the same period a year before. The steel manufacturing and solutions provider announced the results in a business update on Tuesday (Feb 6). Revenue for Q1 increased 17 per cent to S$399.2 million, from S$341.3 million in the previous year. As at Dec 31, 2023, the company’s order book stood at around S$1.3 billion. Projects in that book have a duration of up to five years, although that may be subject to change, it added.

Property and retail company Wing Tai recorded a net profit of S$20.5 million for the first half of its financial year ended Dec 31, 2023. This was a 68 per cent drop compared to the same period a year ago. The decline was partly because the S$63.3 million net profit recorded in the first half of its previous financial year included a one-off writeback of S$21.8 million, which was for a deferred tax provision that was no longer required. Nonetheless, revenue for the group fell 63 per cent to S$97.7 million in the first half of its current financial year, mainly due to lower contributions from its development properties, said Wing Tai in a bourse filing on Tuesday (Feb 6). Revenue for the current period was largely attributable to the progressive sales recognised from The M at Middle Road in Singapore and the sale of residential units in Jesselton Hills in Malaysia.


US

Spotify on Tuesday (Feb 6) reported fourth-quarter monthly active users and subscribers ahead of expectations as it grew in all regions, and said revenue and profitability trends looked favourable this year. The music streaming company has ventured into podcasts and audiobooks as it seeks to grow its user base to one billion by 2030. It has also raised prices for its subscribers and laid off thousands of employees to boost profits and increase efficiency. The company posted a fourth-quarter operating loss of 75 million euros, compared with a loss of 231 million euros in the year-earlier quarter. Revenue rose 16 per cent to 3.67 billion euros, but missed estimates of 3.72 billion as it took a hit from foreign exchange losses.

Boeing applied for a licence to establish its Middle Eastern headquarters in Riyadh as the Saudi government increasingly pressures businesses to boost their local presence. The US commercial aircraft manufacturer lodged its formal application “a few days ago” and is working with the Ministry of Investment for approval, Asaad Aljomoai, president of Boeing Saudi Arabia, said at the World Defence Show in Riyadh. Global firms had until Jan 1 to shift regional headquarters to Saudi Arabia from other parts of the Middle East, or risk being cut off from contracts with the government and missing out on lucrative deals with the kingdom.

Brent and United States crude futures initially climbed over US$1 a barrel on Tuesday (Feb 6) after the US Energy Department said crude oil production would grow less than forecast but then gave up some of the gains on talk of a possible lengthy cease-fire in the Gaza War. Brent crude futures settled at US$78.59 a barrel, up 60 US cents, or 0.77 per cent, while US West Texas Intermediate crude futures rose 53 US cents, or 0.73 per cent, to settle at US$73.51.

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


RESEARCH REPORTS

Meta Platforms Inc. – Beats all around

Recommendation : ACCUMULATE (Downgraded); TP: US$520.00, Last Close: US$459.41

Analyst: Jonathan Woo

– 4Q23 revenue was a slight beat on better-than-expected ad revenue. PATMI was a huge beat on higher operating leverage and stronger topline growth. FY23 revenue/PATMI were at 102%/109% of our FY23e forecasts. PATMI grew 3x YoY as expenses declined 8% YoY despite the revenue jump. Its 35% net margin was close to pandemic highs of ~40%.

– Reels finally contributing net revenue to META, driving >25% YoY growth in daily watch time across all video platforms, and were re-shared 3.5bn times daily.

– META is intensifying its capital investments, with plans on having compute worth about ~600K H100 GPUs by end-FY24e to support long-term AI development.

– We raise our FY24e revenue/PATMI by 3%/9% on stronger ad revenue and a leaner cost structure. We expect META to benefit from the recovery in digital advertising, and also to lean on AI for product improvement and efficiencies which we expect will turn into greater value for advertisers. Due to recent price movements, we downgrade to an ACCUMULATE rating from BUY, with a raised DCF target price of US$520 (prev. US$375) as we roll over an additional year of valuations. Our WACC/g assumptions remain unchanged at 7.1%/4.5%, respectively.

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