DAILY MORNING NOTE | 7 June 2023

Trade of the Day

CapitaLand Investment Ltd (SGX: 9CI)

Analyst: Zane Aw

(Current Price: S$3.34) – TECHNICAL BUY
Buy price: S$3.34 Stop loss: S$3.22
Take profit 1: S$3.52 Take profit 2: S$3.70

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The Airport of Thailand is one of the largest airport operators in the Asia-Pacific region, with a proven reputation for delivering high-quality, reliable services to travellers. As the country’s premier airport operator, AOT can capitalize on this trend through investments in infrastructure, capacity expansion, and other growth initiatives. If you wish to invest in AOT, you can consider investing through the AOT Singapore Depository Receipts (stock code: TATD), listed on SGX. It offers investors an attractive combination of stability, liquidity, and convenience.

Singapore shares end flat as focus switch to Fed meeting next week. This came after all three key indices on Wall Street slid overnight as investors took profit after Congress agreed to suspend the United States debt default. Across the broader market, gainers trailed decliners 265 to 271, on a turnover of about 1.5 billion securities worth S$1.1 billion in transaction value.

Wall Street stocks were higher at the end of a choppy session on Tuesday as beaten-down regional banking shares advanced on a quiet day for markets. The Dow Jones Industrial Average edged up less than 0.1 per cent to 33,573.28. The broad-based S&P 500 gained 0.2 per cent to 4,283.85, while the tech-rich Nasdaq Composite Index climbed 0.4 per cent to 13,276.42.

SG

The manager of Keppel DC Reit said Tuesday (Jun 6) that the filing for Chapter 11 bankruptcy protection in the US by Nasdaq-listed data centre operator Cyxtera will have “no material impact” on its distribution per unit (DPU). The Singapore-listed real estate investment trust’s (S-Reit) GV7 Data Centre in the UK has an attributable lettable area of 24,972 square foot (sq ft). Cyxtera is the only tenant at the property, which had a weighted average lease expiry by area of 3.9 years as at Mar 31. The property was valued at 36 million pounds (S$59 million) as at Dec 31, 2022. As at end-March, Keppel DC Reit had S$3.7 billion in assets under management, spanning 23 data centres across nine countries in Asia-Pacific and Europe.

Mapletree Industrial Trust’s (MIT) third-largest tenant has initiated a pre-arranged court-supervised process under Chapter 11 of the United States Bankruptcy Code, the trust’s manager announced in a bourse filing on Tuesday (Jun 6). The tenant, a global co-location provider, said that it had received a commitment for US$200 million in debtor-in-possession financing and intended to pay vendors. The group occupies spaces in seven data centres held under the Mapletree Rosewood Data Centre Trust, a 50:50 joint venture between Mapletree Investments and MIT. As at Mar 31, 2023, it contributed about 3.2 per cent of MIT’s monthly gross rental income. MIT’s manager said that the tenant has met its rental obligations for April and partially fulfilled its rental obligations for May this year. The manager added that it would be pursuing the balance of the rental obligations for May.

Singtel and SPTel, a joint venture between ST Engineering and SP Group, have submitted proposals to the Infocomm Media Development Authority (IMDA) to build nationwide, interoperable quantum-safe networks for businesses. Quantum computing has the potential to solve problems that are too complex for classical computers, and may also be able to break existing encryption algorithms that are used to secure communications. Singtel Singapore managing director Lim Seng Kong said that industries such as finance, healthcare and other critical information infrastructure can benefit from the new network.

Luxury watch retailer Cortina Holdings was recently subjected to a cybersecurity incident which gave a hacker unauthorised access to one of the group’s servers and encrypt its data. In a bourse filing on Tuesday (Jun 6), the group said that investigations are currently ongoing. The group has also contacted its external information technology consultant to assist with its containment and remedial efforts and informed the authorities, including the police and the Personal Data Protection Commission. Although it did not specify what data was leaked, the group said that it will on Wednesday begin to notify all parties whose data was affected.

US

Microsoft-backed OpenAI, the company behind ChatGPT, has no plans to go public any time soon, chief executive Sam Altman said at a conference in Abu Dhabi. OpenAI has so far raised US$10 billion from Microsoft at a valuation of almost US$30 billion as it invests more on building computing capacity. OpenAI started off as a non-profit organisation but later created a hybrid “capped-profit” company, that allowed it to raise external funds with a promise that the original non-profit operation still benefits.

New trades in the enormous US dollar interest rate swap market have almost entirely stopped using the London Interbank Offered Rate (Libor) as the deadline for its demise approaches. A record 91 per cent of new dollar swaps executed in May used the Secured Overnight Financing Rate (SOFR), the newly accepted US benchmark, as their reference rate. Libor will cease to exist in the coming months, after a years-long push by regulators to move away from a rate that bank traders were caught manipulating. It was once used in pricing everything from derivatives to student loans. Dollar Libor quotes will end on June 30, although regulators have said a “synthetic” rate will continue for a period.

Ford Motor is recalling more than 125,000 sport utility vehicles and trucks in the United States due to the risk of an engine compartment fire, the National Highway Traffic Safety Administration (NHTSA) website showed on Tuesday (Jun 6). The recall, which expands on a similar recall from a year earlier, covers some Escape and Lincoln Corsair SUVs and its Maverick compact pickup trucks manufactured between 2020 and 2023 equipped with 2.5L Hybrid/Plug-In Hybrid motors. Additionally, the US automaker last week also said it was recalling 142,000 Lincoln MKC SUVs in the country while it investigates the cause of under-hood fires in the model.

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

RESEARCH REPORTS

TDCX Inc. – Laying the foundation

Recommendation : BUY (Upgraded); TP: US$12.10, Last Close: US$9.19

Analyst: Jonathan Woo

– 1Q23 results were in line with expectations. 1Q23 revenue/PATMI at 23%/25% of our FY23e forecasts. Adj. PATMI was at 19% of our FY23e forecasts, negatively impacted by S$5.1mn net reversal in SBC.

– Revenue mix continued to diversify; 76% revenue contribution from top 5 clients (1Q22: 83%). Revenue ex-top 5 clients grew 45% YoY.

– Travel & Hospitality vertical improved 34% YoY as cross-border travel continued to rebound. Increasing outbound China travel expected to be tailwind.

– Long-term tailwinds in the expanding BPO market should continue to benefit TDCX, with the company well-positioned to capture much of this due to its strong presence in Asia. Due to recent share price performance, we upgrade to BUY with an unchanged DCF (WACC 10.4%, g 3%) target price of US$12.10.

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