DAILY MORNING NOTE | 8 March 2023

Trade of the Day

Keppel DC REIT (SGX: AJBU)

Analyst: Zane Aw

(Current Price: S$2.01) – TECHNICAL BUY
Buy price: S$2.01 Stop loss: S$1.96 Take profit: S$2.12

Singapore shares were marginally higher on Tuesday (Mar 7), as investors focused their attention on an upcoming speech by Federal Reserve chair Jerome Powell on the monetary policy of the United States. Decliners beat gainers 267 to 251 in the broader market, with two billion securities worth a total S$1.1 billion transacted. Investors are waiting to find out interest-rate forward movements from Powell’s testimony before the US Senate on Tuesday and Wednesday.

Wall Street stocks tumbled on Tuesday (Mar 7) after Federal Reserve chair Jerome Powell said the US central bank could hike rates more than expected to quash inflation. The Dow Jones Industrial Average shed around 575 points, or 1.7 per cent, to finish at 32,856.46. The broad-based S&P 500 shed 1.5 per cent to 3,986.37, while the tech-rich Nasdaq Composite Index dropped 1.3 per cent to 11,530.33.

SG

Lian Beng Group has won a new construction project which brings its total order book in Singapore to $2.1 billion. These contracts will provide a “sustainable” flow of activity through FY2021 ending May 2027. In the company’s most recent update on Feb 2, its total order book was $1.9 billion. For its 1HFY2023 ended Nov 30 2022, the company announced earnings of $22 million, up 48% y-o-y. Revenue in the same period was up 11.6% to $421 million, as construction activities resuming with the pandemic easing.

Mainboard-listed Cosco Shipping International has entered into a joint-venture (JV) agreement with Supply Fortune to invest in logistics infrastructure assets. Through these investments, they seek to grow the logistics supply chain value in South-east Asia, and plan to also lease the assets for rental income. Under the agreement, Cosco Shipping will subscribe for 49 per cent of the issued and paid-up share capital of the JV company, while Supply Fortune will subscribe for the remaining 51 per cent. The agreement is not expected to have any material impact on the net tangible assets and earnings per share of the company for the financial year ending Dec 31, 2023.

US

The Federal Reserve (Fed) will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation, Fed chair Jerome Powell told US lawmakers on Tuesday (Mar 7).

The US dollar climbed on Tuesday (Mar 7) ahead of testimony before Congress by Federal Reserve (Fed) chair Jerome Powell, and gaining most dramatically against the Aussie after the Reserve Bank of Australia (RBA) hinted the end is near to its monetary tightening. The US dollar index, which measures the unit against six major rivals, was up 0.25 per cent at 104.52, having slipped 0.26 per cent a day earlier. Its gains were broad based with the euro down 0.22 per cent to US$1.0655, sterling down 0.32 per cent at US$1.19885 and the US dollar up 0.1 per cent against the Japanese yen to 136.05.

Sea reported its first-ever profit, a milestone in the Southeast Asian gaming and e-commerce giant’s turnaround effort to convince investors of its money-making potential. The stock gained as much as 19% in US trading to its highest intraday level since August after the Singapore-based company said net income was US$426.8 million in the fourth quarter, helped by drastic cost reductions. Sea’s net income performance was clouded by a series of gains from adjustments in accounting for debt and expenses. Fourth-quarter revenue from Shopee, Sea’s e-commerce unit, gained 32% to about US$2.1 billion.

Apple is returning to a frequent trick it uses to keep buyers interested in its current iPhone line until the new model arrives: adding a new colour. The company announced a yellow version of the iPhone 14 and 14 Plus on Tuesday (Mar 7), adding to the existing midnight, blue, purple, red and starlight options. The new model – which doesn’t add any additional enhancements – becomes available for preorder on Mar 10 and will go on sale in retail stores on Mar 14.

Quotient Technology, the parent of Coupons.com, is exploring options that include a sale of the company as it grapples with a collapse in advertising revenue, according to people familiar with the matter. Quotient benefited from the Covid-19 pandemic lockdowns that drove many consumers to online grocery shopping. But the company’s fortunes have reversed as its clients slashed advertising spending amid fears of an economic slowdown. Its shares have lost 80 per cent of their value since April 2021.

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

RESEARCH REPORTS

Salesforce Inc – Cost-cutting efforts boost earnings

Recommendation: BUY (Maintained); TP: US$219.00

Analyst: Ambrish Shah

– FY23 revenue was in line with expectations at 101% of our forecasts, but Adj. PATMI was higher than expected at 106% of our FY23 forecasts due to higher operating leverage. 4Q23 revenue grew 17% YoY in constant currency to US$8.4bn driven by reignited MuleSoft and Tableau licenses sales.

– Adj. operating margin was a record high 29.2% in part due to recent job cuts. Future contracted revenue or remaining performance obligations (RPO) grew by 11% YoY to US$48.6bn.

– We maintain a BUY recommendation with a higher DCF target price of US$219 (WACC 7%, g 4%), up from US$205. Our FY24e revenue is nudged lower by 2% as many corporations continue to scrutinize their IT spending; while we have increased our Adj. PATMI by 24% due to lower expenses. Salesforce enjoys tailwinds from digital transformation trends as companies seek to have a single view of their customer data.

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