DAILY MORNING NOTE | 9 February 2024

Trades Initiated in the past week


Singapore shares finished lower on Thursday (Feb 8), as investors assessed China’s falling consumer prices ahead of a half-day trading session for the eve of Chinese New Year. Across the broader market, losers beat gainers 272 to 254, as 1.4 billion shares worth S$1.1 billion changed hands. CapitaLand Ascendas Real Estate Investment Trust was the biggest loser, shedding 3.9 per cent or S$0.11 to S$2.70. On the other hand, DFI Retail Group climbed 3.4 per cent or US$0.07 to US$2.10. The trio of local banks were mixed. OCBC ended up 0.1 per cent or S$0.01 to S$12.98, while UOB fell 0.2 per cent or S$0.05 to S$28.22. DBS closed nearly flat at S$32.46.

The S&P 500 flirted with a landmark new peak on Thursday, but finished just shy of 5,000 points following another round of solid earnings. The S&P 500 got to within less than a half point of 5,000 before retreating. The broad-based index ended at 4,997.91, up 0.1 per cent. The Dow Jones Industrial Average also edged up 0.1 per cent to 38,726.33, while the tech-rich Nasdaq Composite Index advanced 0.2 per cent to 15,793.72.

Top gainers & losers


Events Of The Week



Mainboard-listed Marco Polo Marine has posted a 75.8 per cent increase in its gross profit to S$11.6 million for the first quarter ended Dec 31, 2023, from S$6.6 million in the previous corresponding period. In a business update on Thursday (Feb 8), the shipyard and marine logistics company attributed this to an uptick in its ship chartering business and only a marginal decrease in its shipyard operations. Revenue climbed 22.8 per cent to S$29.1 million from S$23.7 million previously. The gross profit margin was 39.9 per cent, up from 27.8 per cent in the previous corresponding period. It said that the significant increase in gross profit was mostly due to the increased charter and utilisation rates of the group’s fleet of offshore supply vessels. There was a 9 percentage point year-on-year increase in average utilisation rates, bringing operating capacity to 70 per cent.

Aircraft maintenance provider SIA Engineering Company (SIAEC) will be selling its entire stake in Additive Flight Solutions, an aerospace additive company, to its joint-venture partner Stratasys. Under the joint venture, Stratasys, an additive manufacturing company, owns 40 per cent of Additive Flight Solutions; it will purchase the remaining 60 per cent owned by SIAEC for US$90,000. In a bourse filing on Thursday (Feb 8), SIAEC said the deal size was based on the net book value of Additive Flight Solutions, and was arrived at after arm’s-length negotiations on a willing-buyer, willing-seller basis. The deal also took into account the net asset value and financial performance of Additive Flight Solutions.

Mapletree Industrial Trust Treasury has priced S$50 million notes with a fixed coupon rate of 3.751 per cent per annum. These notes, which are due in Feb 2027, is expected to be issued on Feb 16, 2024, said the manager of the real estate investment trust (Reit) in a bourse filing on Thursday (Feb 8). The notes will be issued under the S$2 billion Euro Medium Term Securities Programme established in September 2018. Proceeds raised from the issuance of these notes will be used towards refinancing Mapletree Industrial Trust’s existing borrowings. The notes are expected to be assigned a rating of “BBB+” by Fitch Ratings, the same rating as the Reit’s long-term rating.

Singapore Post has reported group operating profit of S$27.7 million for the third quarter ended Dec 31, 2023, down 18.3 per cent from the previous corresponding period at S$33.9 million. Group revenue dipped 8 per cent to S$455.4 million from S$495.1 million year on year. Group operating expenses narrowed by 6.7 per cent to S$430.1 million from S$460.8 million. In a business update on Thursday (Feb 8), the company said that it had registered good performances across its businesses in the year-end seasonal peak, despite a difficult macroeconomic environment and continued strength of the Singapore dollar against the Australian dollar and Chinese yuan.

Property developer Oxley Holdings has posted a loss of S$1.1 million in the first six months of its financial year ended Dec 31, 2023, down from a profit of S$0.3 million in the previous corresponding period. In a bourse filing on Thursday (Feb 8), the group put the result largely down to “lower gross profit attributable to lower revenue, and lower share of results from joint ventures and associates”. It noted, however, that this was partially offset by lower finance costs on reduced borrowings. It reported a 63 per cent decrease in revenue to S$164.4 million, down from S$438.4 million year on year, mainly due to lower revenue recognised from Singapore development projects.


DoorDash, already the top restaurant delivery company in the US, is now looking to strengthen its presence abroad. The San Francisco-based company operates in 28 countries outside the US, mostly in continental Europe, Japan and Australia. Yet, it does not enjoy the same name recognition in any of those markets the way it does in the US, chief executive officer Tony Xu said in an interview. Xu said during last November’s earnings call that there is more work to do in its Eastern European markets, in particular, to upgrade technology, acquire more customers and partner with more merchants. DoorDash is looking to invest its cash pile not only overseas but also in its non-restaurant businesses like grocery delivery, which has outpaced the growth of its core restaurant delivery business.

Ralph Lauren on Thursday (Feb 8) beat Wall Street expectations for revenue for the 12th straight quarter, powered by robust demand from wealthier US shoppers for its expensive sweaters and shirts, coupled with a strong rebound in China. It also bested holiday-quarter profit estimates and said it had exited the key shopping season with healthy inventory levels. Despite economic uncertainties, wealthy shoppers in the US went on a luxury spending spree over the holiday season, driving a 6 per cent jump in Ralph Lauren’s retail store sales and a 4 per cent increase in e-commerce. Ralph Lauren’s sales surged more than 30 per cent in China, building on the 20 per cent increase seen in the prior quarter. Peer Tapestry, which makes Coach handbags, also saw sales in China bounce back strongly in the quarter. The company also lifted its profit margin outlook and now expects its full-year gross margin to increase by roughly 140 to 180 basis points, in constant currency, compared with the 120 to 170 basis point increase it had previously expected.

Under Armour said Thursday that its holiday-quarter sales slowed, but its earnings beat estimates as the athletic apparel retailer worked to rein in costs. Soft demand in North America and a slowdown in wholesale orders led revenue to drop 6% during the period, but the company posted big gains in its gross margin. Under Armour now anticipates full-year sales will decline slightly more than it previously expected. Even so, it raised its expectations for full-year gross margin and earnings just weeks away from the end of its fiscal year.

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


DBS Group Holdings Ltd – Fee income recovers; strong dividend growth

Recommendation: Buy (Maintained), Last done: S$32.46, TP: S$38.90, Analyst: Glenn Thum

– 4Q23 adjusted PATMI of S$2.39bn was slightly above our estimates due to higher NII, fee income, and other non-interest income offset by higher allowances. FY23 adjusted PATMI is 102% of our FY23e forecast. 4Q23 DPS is raised 29% YoY to 54 cents with an additional 1-for-10 bonus issue, dividend payout ratio was higher at 48.5% in FY23 (FY22: 47.7% excluding special dividends).

– NII rose 5% YoY on NIM expansion of 8bps despite loan growth remaining flat. Fee income rose 31% YoY, while other non-interest income grew 9% YoY. DBS has maintained its FY24e guidance of double-digit fee income growth (from wealth management and credit card fees), stable NII as higher NIMs from higher-for-longer rates will be offset by lower loan growth and total allowances to normalise to 17-20bps of loans. FY24e PATMI to be maintained at around the current levels in FY23.

Maintain BUY with a lower target price of S$38.90 (prev. S$41.60). We lower FY24e earnings by 1% as we lower NII estimates for FY24e due to lower NIMs, and increase allowances and OPEX estimates, offset by higher fees, and other non-interest income. We assume 2.14x FY24e P/BV and ROE estimate of 16.0% in our GGM valuation. Stable NII from a recovery in loan growth and double-digit growth in fee income will sustain earnings momentum.

Keppel DC REIT – Uncollected rents impact DPU

Recommendation: ACCUMULATE (Downgraded), Last Done: S$1.65
Target price: S$1.86, Analyst: Darren Chan

– FY23 DPU of 9.383 Singapore cents (-8.1% YoY) fell short of our expectations at 94.7% of our FY23e forecast, mainly due to the uncollected rental and coupon income of c.5.5 months amounting to S$10.5mn at the Guangdong DCs.

– To date, Guangdong Bluesea Data Development (Bluesea), the tenant at Guangdong Data Centre (GDC) 1, 2 & 3, has only settled RMB0.5mn of the RMB48.3mn in arrears. Therefore, we think that Bluesea will likely be unable to meet its rental obligations, and KDCREIT will have to eventually replace the tenant.

– Downgrade from BUY to ACCUMULATE with a lower DDM-derived target price of S$1.86 from S$2.26. FY24e, FY25e, and FY26e DPU estimates are cut by 14%, 11%, and 8%, respectively, after we factor in the default and eventual replacement of Bluesea. Organic growth will stem from renewals in FY24e (27.5% of leases expire in 2024); we expect portfolio rental reversions of c.4% for FY24e. Potential catalysts include accretive acquisitions and the collection of rental in arrears from Bluesea. The current share price implies FY24e/25e DPU yields of 5.4%/5.8%.

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