DAILY MORNING NOTE | 9 May 2023

Singapore shares lost 0.3 per cent or 8.97 points to 3,257.66. Across the broader market, gainers outnumbered losers 290 to 249, after 1.2 billion securities worth S$922.2 million changed hands. The trio of local banks ended mixed on Monday. DBS rose 0.2 per cent to S$31.95, UOB gained 1.5 per cent to S$28.41, while OCBC declined 3.2 per cent to S$12.25. The top gainer was Jardine Matheson Holdings, rising 1.7 per cent to close at US$50.18. Meanwhile, Venture Corp led the declines, falling 6.5 per cent to S$15.95. Seatrium was the top-traded counter by volume on Monday. The counter closed 0.8 per cent lower at S$0.129.

Wall Street stocks finished mixed on Monday ahead of key inflation data as a survey of lenders showed greater caution among banks following recent industry turmoil. The Dow Jones Industrial Average ended down 0.2 per cent at 33,618.69. The broad-based S&P 500 edged up 0.1 per cent to 4,138.12, while the tech-rich Nasdaq Composite Index added 0.2 per cent at 12,256.92. Markets are looking ahead to Wednesday’s release of key consumer price data, which will be followed by a reading on wholesale prices the next day.

SG

SIA Engineering Company (SIAEC) recorded a 20.4 per cent fall in net profit to S$33.9 million for the six months ended Mar 31, 2023, from S$42.6 million the year before. This is while revenue for the second half rose 43.4 per cent to S$433.8 million, from S$302.6 million a year earlier. While the recovery of flight activities following the lifting of pandemic-era border restrictions have led to a pick-up in demand for maintenance and overhaul services, the group saw expenditure rise by 39.9 per cent due to the progressive step-down of government wage support, as well as higher manpower and material costs. Earnings per share stood at 3.02 Singapore cents for the six months, down from 3.79 cents the previous year. A final dividend of 5.5 cents per share was declared for the full year. For the full year ended Mar 31, 2023, net profit fell 1.8 per cent to S$66.4 million, while revenue was up 40.6 per cent to S$796 million.

Sea Ltd. said it is giving most employees a 5% pay increase after turning profitable. Workers who joined on or before March 31 will get the salary bump effective this July, billionaire founder Forrest Li said in a memo to staff on Monday. He said the company has reached “self-sufficiency” as its cash balance is now increasing rather than shrinking every quarter, a goal it achieved ahead of a target set last year.

Paragon Reit reported on Monday (May 8) a 0.6 per cent year-on-year increase in first-quarter gross revenue to S$72 million for the three months ended Mar 31, 2023, from S$71.6 million in the year-ago period, on the back of higher revenue both in Singapore and Australia. In local currency terms, Singapore assets gross revenue grew 0.7 per cent on year, while Australia assets gross revenue rose 8.1 per cent year on year, the manager said. The manager noted that there was “near full occupancy” across its portfolio, and a weighted average lease expiry of 5.3 years by net lettable area.

Chuan Hup Holdings, on May 8, announced that it has completed its acquisition of 51% of the total shares in Homestead Capital. Under the terms of the acquisition, Chuan Hup acquired 408 shares, or 7.7% of the total shares in Homestead Properties, Homestead Capital’s sole shareholder, for $800,000. It also subscribed to 2,295 shares, or 43.3% of the total shares in Homestead Capital, for $4.5 million. The sum was paid in cash and is funded through internal resources. It is not expected to have any material impact on the company’s net tangible asset (NTA) per share and earnings per share (EPS) for the FY2023 ending June 30. According to Chuan Hup, the transaction will enable the company to expand its property-related business and capture the opportunities in the rising demand for student accommodation and leasing.

Kim Heng Shipbuilding and Engineering (KHSE), a wholly-owned subsidiary of Kim Heng, has been awarded an additional variation contract totaling US$7.8 million ($10.33 million). KHSE will provide design, engineering, modification and shipbuilding for a marine-based asset, with the project expected to be completed by the fourth quarter of 2024. Kim Heng expects the contract to contribute positively to its earnings per share and net tangible assets for FY2023 and FY2024 ending 31 December 2023 and 31 December 2024.

Riverstone Holdings has announced earnings of RM46.7 million ($13.94 million) for 1QFY2023, a 57% y-o-y decline. For the period ended March 31, the company recorded revenue of RM238.0 million, a 40.8% y-o-y decrease from RM402.3 million in 1QFY2022 million due to lower average selling prices. Despite the ongoing consolidation in the generic healthcare glove sector, Riverstone says its results have improved on a q-o-q basis on the back of steady demand in cleanroom gloves. On a q-o-q basis, revenue was up 1.2% while net profit jumped 11.2%.

US

Qualcomm said on Monday (May 8) that it would acquire Israel’s Autotalks, a maker of chips used in crash-prevention technology in vehicles. The company did not disclose the terms of the deal but said Autotalk’s technology would be incorporated into its assisted and autonomous driving product, called Snapdragon Digital Chassis. Qualcomm said in September last year that its automotive business “pipeline”, or potential future orders, rose by more than US$10 billion to US$30 billion since its third-quarter results were announced in late July, as automakers increasingly equip their cars with driver-assistance systems.

Apple is selling debt in the US blue-chip bond market on Monday (May 8) as a flood of borrowers raise cash ahead of key inflation readings later this week. The deal, targeted at about US$5 billion, is expected to come in as many as five parts, according to a person familiar with the matter. The longest portion, a 30-year bond, could yield 135 basis points over comparable Treasuries, the person said. Proceeds from Apple’s sale will be used for general corporate purposes. That could include stock repurchases, dividend payments, working capital, capital expenditures, acquisitions and repayment of debt, the person said. The sale will be the first for Apple since it sold US$5.5 billion to fund buybacks and dividends in August.

Paypal Holdings warned that its adjusted operating margin won’t grow as quickly as the company previously anticipated, even after spending on its platforms jumped more than expected in the first quarter. PayPal’s adjusted operating margin is likely to expand by at least 100 basis points this year, the company said in a statement on Monday (May 8). That compares with an earlier forecast of growth of about 125 basis points. The lowered guidance comes even after payments volume climbed 12 per cent to US$354.5 billion, topping the US$349.5 billion analysts in a Bloomberg survey were anticipating. Firmwide revenue jumped 10 per cent to US$7.04 billion. Excluding one-time items, earnings totalled US$1.17 a share, topping the US$1.10 average of analyst estimates compiled by Bloomberg.

Meta Platforms said it would end news content on Facebook and Instagram in Canada if lawmakers there pass legislation that would force social-networking platforms to pay media publishers to feature their work. Canada’s proposed legislation is to establish a “fair revenue sharing” system between digital platforms and news outlets and provide for collective bargaining by media. Canada is certainly not the first country that Meta has warned on the prospect of pulling its content. The company had said last year that it would remove Facebook and Instagram from Europe altogether over European Union data regulations.

Lucid Group on Monday reported widening first-quarter losses, but said that it still has enough cash to continue operations into next year. Lucid’s first-quarter net loss was $779.5 million, or 43 cents per share, much wider than the net loss of $81.3 million, or 5 cents per share, it reported in the first quarter of 2022, when it was still ramping up production of the Air. Revenue, however, jumped year over year to $149.4 million from $57.7 million. Lucid ended the first quarter with about $3.4 billion in cash and about $700 million in available credit lines. The automaker’s expected 2023 production of “over 10,000” Air sedans is well below the “more than 28,000″ reservations it recorded as of its fourth-quarter earnings report in February. And, in April, Lucid said it produced 2,314 Airs in the first quarter while delivering just 1,406 to customers during the period, a gap the company blamed on a “slow January” and changes to the U.S. government’s EV tax credits.

Palantir’s revenue for the quarter increased 18% year over year, and its U.S. commercial revenue grew 26%. The software company, which is known for its work with the government, said its U.S. commercial customer count increased 50% year over year, growing from 103 customers to 155. The company reported its second-ever quarter of positive net income on a GAAP basis, at $17 million, and in a letter to shareholders, CEO Alex Karp said the company expects to remain profitable “each quarter through the end of the year.” Palantir said it expects to report between $528 million and $532 million in revenue during its second quarter and between $2.19 billion and $2.24 billion for the full year.

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

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