DAILY MORNING NOTE | 8 February 2024

Trade of the Day

Micron Technology, Inc. (NASDAQ: MU)

Analyst: Zane Aw

(Current Price: US$84.60) – TECHNICAL SELL
Sell price: US$84.60 Stop loss: US$89.00 (-5.20%)
Take profit 1: US$78.80 (+6.86%) Take profit 2: US$73.50 (+13.12%)

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Trades Initiated in the past week

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Singapore stocks gained ground on Wednesday (Feb 7), with DBS leading the pack after it announced record full-year earnings for FY2023. Across the broader market, gainers outnumbered losers 293 to 258, as close to 1.4 billion shares worth S$1.2 billion were traded. DBS was the most traded stock by value, with 10.7 million shares worth nearly S$346.8 million changing hands. The counter rose 2.5 per cent or S$0.80 to S$32.45. Singapore’s largest bank on Wednesday posted full-year net profit of S$10.06 billion, up 23 per cent year on year. The other local banks also ended higher. OCBC rose 1.5 per cent or S$0.19 to S$12.97, while UOB increased 0.4 per cent or S$0.10 to S$28.27.

US stocks closed higher on Wednesday, as the steady flow of strong company earnings continued amid an improving economic outlook. The Dow Jones Industrial Average closed up 0.4 per cent at 38,677.36, while the broad-based S&P 500 rose 0.8 per cent to end the day just shy of 5,000 at 4,995.06. The tech-rich Nasdaq Composite Index was the best of the bunch, rising by 1.0 per cent to 15,756.64.

Top gainers & losers

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Events Of The Week

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SG

City Developments Ltd (CDL) on Wednesday (Feb 7) said it acquired Yardhouse, its first UK private rented sector (PRS) property, for £88 million (S$148.6 million). The mainboard-listed property developer said it plans to develop the 250-year leasehold site into a 17-storey apartment block with 209 co-living studio units, totalling 102,600 square feet (sq ft) in gross floor area. CDL will fund the land purchase and construction in payments staged according to progress, as part of a forward-funding arrangement. It has appointed a third-party developer to build the project at a fixed price.

Thomson Medical Group (TMG) on Wednesday (Feb 7) posted a 91.1 per cent year-on-year drop in net profit to S$2 million from S$22.8 million in the half-year ended Dec 31. Revenue for the period fell 8.6 per cent to S$168.1 million from S$184 million the year earlier, the mainboard-listed group’s condensed interim financial statements showed. In Singapore, revenue was down 18.2 per cent to S$113.7 million from S$139 million; in Malaysia, revenue grew 20.8 per cent to S$54.2 million from S$44.9 million. The decrease in revenue from Singapore is largely due to the lower income received from project-related services, such as the management of vaccination centres and transitional-care facilities, said the group in a regulatory filing. Earnings per share (EPS) for the period stood at 0.008 Singapore cent, down 90.7 per cent from 0.086 cent in the corresponding year-ago period.

The manager of Digital Core Real Estate Investment Trust (Digital Core Reit) has proposed a private placement to raise gross proceeds of no less than US$100 million. The issue price ranges between US$0.60 and US$0.625 per new unit, said the manager on Wednesday (Feb 7). The price range represents a discount of between about 8.8 per cent and 5 per cent to the volume weighted average price of US$0.6579 per unit on the preceding market day. The manager said that the issue price will be determined after a book-building process, and it will update on the number of new units as well as the price once they are determined. About 75 per cent of the gross proceeds raised will be used to fund potential acquisitions, which may include acquiring an interest in a data centre located in Japan, said the manager.

Food and beverage (F&B) player Jumbo Group announced on Wednesday (Feb 7) that it had opened its first outlet in Nanjing, China earlier on Saturday. Located at the Nanjing International Finance Centre in the city’s central business district, the Jumbo Seafood outlet spans 668 square metres. The group also said it had recently opened two franchised outlets in collaboration with Sanya Summer Station Le Crab F&B. The Jumbo Seafood and Ng Ah Sio Bak Kut Teh outlets are situated at the Summer Station Plaza in Sanya, the southernmost city in the Hainan province.

Homegrown electronics company Creative Technology posted a net loss of US$4.1 million for its half year ended Dec 31, narrowing from its loss of US$10.6 million the previous year. Revenue for the period increased by 13 per cent to US$31.8 million from US$28.2 million a year earlier, the mainboard-listed company’s condensed interim financial statements showed. The higher revenue recorded was due to the launch of new products, said the company in a regulatory filing on Wednesday (Feb 7). Loss per share for the period stood at US$0.06 compared with US$0.15 in the year-ago period. No dividend was declared for the period.

Indonesian coal producer Geo Energy Resources will be receiving an investment of US$35 million from private commodities investment company, ResInvest, for at least 5.5 per cent of its equity. Out of the US$35 million, US$25 million will be for the purchase of ordinary shares in the company either through the market or directly from the company. The intention is for US$20 million to be injected into the company within eight weeks of the announcement, which was made on Wednesday (Feb 7) through an Singapore Exchange filing. Another US$5 million will be invested over a longer timeframe, with the investment expected to be completed by Mar 31, 2026.

Ready-mix concrete producer Pan-United Corporation on Wednesday (Feb 7) posted a net profit of S$20.4 million for the second half of its 2023 financial year ended Dec 31, up 107 per cent from S$9.9 million the previous year. Revenue for the period increased 13 per cent to S$414 million from S$365.9 million a year ago, the mainboard-listed company’s condensed consolidated financial statements showed. Basic earnings per share for the period stood at 2.94 Singapore cents, up 58 per cent from 1.86 cents in the year-ago period.


US

KFC-parent Yum Brands missed Wall Street estimates for quarterly sales on Wednesday (Feb 7), with weaker growth for all three of its top chains, as fewer customers ordered at Taco Bell, KFC and Pizza Hut amid a choppy spending environment in the US. Shares of the company fell about 2 per cent in premarket trading. With their budgets stretched, Americans – particularly low-income households that frequent fast-food chains like KFC and McDonald’s – have been increasingly cutting costs, including by switching to home-cooked meals as grocery prices moderate at a faster pace than restaurant food.

Tesla staff are bracing for potential job cuts after managers were asked to affirm whether each of their employees’ positions is critical. US managers had to make the binary assessment of their deputies’ roles in recent days, according to people familiar with the matter, who asked not to be identified because the information is private. Tesla sent out the single-line query for each job after cancelling some employees’ biannual performance reviews, some of the people said. The ask was consistent with Elon Musk’s emphasis on cost-cutting efforts in the midst of a marked slowdown in Tesla’s sales growth. The chief executive officer is known to take an unsparing approach with the companies he runs – in late 2022, he gave Twitter staff an ultimatum to either commit to his “hardcore” ethos or leave.

Uber Technologies forecast quarterly core profit and gross bookings above estimates and reported market-beating results for the holiday quarter on Wednesday (Feb 7), fuelled by higher demand in its ride sharing and food delivery businesses. It posted its first annual net profit as a public company as user retention improved, also benefiting from initiatives like memberships, corporate travel and advertising. Shares, however, fell more than 1 per cent as Uber deferred announcements related to capital allocation plans to its investor day on Feb 14.

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


RESEARCH REPORTS

Apple Inc. – Weak demand for products continues

Recommendation : NEUTRAL (Downgraded); TP: US$194.00, Last Close: US$189.30

Analyst: Helena Wang

– 1Q24 results were within our expectations with 1Q24 revenue/PATMI at 30%/33% of our FY24e forecasts. Historically, 1Q revenue/PATMI accounts for 31%/34% of the fiscal year forecast. Services growth of 11.2% YoY remains the standout, with AAPL’s installed base climbing to 2.2bn.

– Gross margin delivery came in at 45.9%, the high end of its guided 45-46% range, up 70 basis points sequentially due to higher iPhone Pro and services revenue. Products and service gross margin were at 39.4% and 72.8% sequentially.

– Weak demand for products remains a drag, with a 13% YoY revenue contraction from China also a concern due to increasing competition from domestic brands like Huawei.

– We downgrade to a NEUTRAL rating from ACCUMULATE due to recent share price gains. Our target price remains unchanged at US$194, a WACC of 6.5%, and a terminal growth rate of 3%. There is no change of forecast. As product sales remain muted, we expect Services to continue being the main drivers of growth.

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