DAILY MORNING NOTE | 9 March 2023

The US Federal Reserve chair’s testimony last night has not only opened the door to more interest rate hikes, but has also sent investors in Asian markets – including Singapore – scurrying for the exit on Wednesday (Mar 8). Across the broader Singapore market, decliners beat gainers 334 to 199, with 1.5 billion securities worth a total S$1 billion transacted.

Wall Street stocks were mixed at the end of a choppy session on Wednesday as markets weighed recession fears while a Federal Reserve report described inflation as persisting. The Dow Jones Industrial Average finished down 0.2 per cent at 32,798.40. The broad-based S&P 500 added 0.1 per cent at 3,992.01, while the tech-rich Nasdaq Composite Index advanced 0.4 per cent to 11,576.00.

SG

More funds deposited by its sponsor for loan repayment have been released from escrow to help pay for some of the Reit’s outstanding mandatory repayments, EC World Real Estate Investment Trust’s (Reit) manager said on Tuesday (Mar 7). Around S$5.7 million and US$1.9 million were used to partially repay existing offshore bank loans on Mar 2, while 29.3 million yuan (S$5.7 million) was used to repay existing onshore bank loans partially on Mar 7. The outstanding amount of relevant deposits stands at 29.9 million yuan, which the onshore facility agent continues to hold in escrow. The deposits held in escrow with the offshore facility agent have been fully utilised.

Yangzijiang Financial Holding has resumed buying back shares after a hiatus of around five months. On March 8, the company paid 38 cents each for 5 million shares, bringing the total bought back to 264.6 million shares, equivalent to 6.698% of the total share base. The most recent share buyback was on Oct 31, when it paid 33 cents each for one million shares. It has spent just over $100 million to date. When YFH launched its buyback programme, it committed to spending up to $250 million to buy back up to 10% of its shares.

US

TDCX reported profit of S$25 million for the fourth quarter ended December 2022, representing a 13.3 per cent decline from its Q4 FY2021 earnings of S$28.8 million. The customer solutions provider said that this was largely due to foreign exchange losses of S$6 million as the US dollar weakened in the last quarter of the fiscal year, resulting in higher other operating expenses of S$9.5 million compared to S$2.5 million previously. Earnings per share (EPS) stood at S$0.17 in Q4, down from the prior year’s EPS of S$0.20

The US dollar scaled multi-month highs against most other major currencies on Wednesday (Mar 8), after Federal Reserve (Fed) chair Jerome Powell warned that US interest rates might need to go up even faster and higher than expected to rein in stubborn inflation. Higher rates benefit the US dollar by improving its yield and as traders look for safety while global stock markets drop. The US dollar hit a two-month high against the euro of US$1.0524, extending Tuesday’s 1.2 per cent jump while also braking above its 200-day-moving average against the yen for the first time this year, rising as far as 0.5 per cent to a nearly three-month high of 137.9 yen.

Adidas slashed its dividend and offered no concrete plans to dispose of US$1.3 billion worth of Yeezy gear. The company’s sales in the Asia-Pacific region plunged 31 per cent in 2022, in large part because it failed to overcome the country’s widespread boycotts of Western brands. It said on Wednesday (Mar 8) that it would recommend slashing its annual dividend for 2022 to 70 euro cents from 3.30 euros in 2021. The end of Covid lockdowns in China is expected to drive up sales for major retail brands, but for Adidas, that boost will likely be wiped out by the impact of its split with Yeezy collaborator Ye (formerly known as Kanye West)

Alphabet’s Google said on Wednesday (Mar 8) it will launch a T$300 million (S$13.2 million) fund over the next three years to help boost the Taiwanese media’s continuing operations and digital competitiveness. The fund will help Taiwan local media “hone digital skills, gain expertise and support the sustainable development of Taiwan’s news industry”, the company said. Google said Taiwan’s media industry has been facing major competitive challenges in adapting to the digital age, pointing out that advertising revenues for traditional media outlets have dropped 70 per cent from 2003 to 2020.

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

RESEARCH REPORTS

Hyphens Pharma International – Assembling multiple growth engines

Recommendation: BUY (Maintained); TP S$0.445 Last close: S$0.35; Analyst Paul Chew

– FY22 results exceeded expectations. FY22 revenue and PATMI were 109%/118% of our forecasts. Revenue jumped across all segments in 2H22, in part driven by pent-up demand after the re-opening. Dividends surged by 66% to 1.11 cents.

– We believe the re-opening saw the return of surgeries deferred during the pandemic, and increased visits drove specialty pharma revenue. Around 86% of FY22 earnings is from specialty pharma.

– We raise FY23e earnings by 31% to S$13.2mn and the DCF target price is nudged up to S$0.445 (prev. S$0.43). Our BUY recommendation is maintained. We underestimated the rebound in sales post re-opening. Hyphens has assembled multi-franchise drivers in the medium term, namely DocMed, proprietary skincare brands and specialty pharma distribution into public sector verticals. A near-term headwind is the upfront costs to develop the DocMed healthcare platform.

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