Date: January 29, 2024
- The STI added 0.2% or 7 points at 3,159.53
- Benign US inflation and economic numbers drove Wall St to new highs
- US Fed though unlikely to cut rates next week, finds itself in “sweet spot’’
- Futures market pricing in 47% chance of rate cut in March
- Ministry of Health found more lapses at Cordlife
- Sabana REIT reported 21.2% fall in DPU because funds were retained for internalisation of its manager
- FCT to buy 24.5% stake in Nex from Frasers Property
Trading volume in the local stock market improved last week, from a daily average of S$928m the week before to just over S$1. The improvement came in tandem with a 7-points or 0.2% rise in the Straits Times Index to 3,159.53, a modest gain that in tandem with new all-time highs on Wall Street.
US Fed in a “sweet spot’’ – inflation is easing, the economy is growing but not too strongly
The Federal Reserve’s preferred inflation metric revealed price pressures eased markedly in December while the latest economic growth estimates were equally encouraging.
The gain in the core personal consumption expenditures price index, which excludes the more volatile costs of food and energy, slowed to 2.9% year over year in December, according to data released by the Bureau of Economic Analysis on Friday.
The latest inflation data put the Federal Reserve in a relative sweet spot as earlier in the week, the Commerce Department announced that in the final quarter of 2023, the U.S. economy grew at an annualized rate of 3.3%, setting up some solid momentum going into 2024.
And while a strong economy suggests the central bank won’t be in a rush to lower rates, a inflation gauge embedded within the GDP data showed price gains are stable at 2%, in line with Fed’s goals.
So it was that up to Thursday, the S&P 500 set five consecutive all-time highs before weakening on Friday. Still, all three major US equity indices rose for the week – the Dow Jones Industrial Average rose 0.5% to 38,109, the S&P 500 added 0.8% at 4,890.97 and the Nasdaq Composite gained 0.4% at 15,455.36.
No rate cut expected at next week’s FOMC meeting but maybe in March?
The US Federal Reserve meets next week to decide on the direction of interest rates. The futures market is currently pricing in a 97.4% chance that rates will be left unchanged; however, it is pricing in a 47% probability that rates will be lowered at the 20 March meeting.
Ministry of Health found more lapses at Cordlife
In a statement on Tuesday Cordlife said MOH found three other process lapses:
- A new cord-blood processing method, implemented in August 2023, was not properly validated according to approved plan and protocol;
- The company’s temperature monitoring system failed to send notifications when temperatures in certain tanks exceeded acceptable levels between February and June 2022; and
- Six-monthly preventative maintenance was not carried out for two tanks in 2022.
“The company has been informed that it is required to rectify the potential non-compliances by May 31, 2024,” said Cordlife, adding that it will work closely with MOH to ensure all identified issues are rectified by the deadline.
Cordlife was issued a suspension notice on Nov 30, 2023, after MOH investigations found seven of the group’s 22 cord-blood storage tanks had recorded temperatures above acceptable limits.
On Jan 22, MOH followed up with a letter listing other potential areas of non-compliance with the Healthcare Services (General) Regulations and the Healthcare Services (Cord Blood Banking Services) Regulations.
MOH highlighted the cord-blood bank’s ineffective incident reporting frameworks, inadequate training and competence of staff, and the inappropriate storage of cord-blood units.
Sabana REIT reported 21.2% fall in DPU because funds were retained for internalisation of its manager
Sabana Industrial Real Estate Investment Trust (Sabana REIT) posted a distribution per unit (DPU) of S$0.0115 for the half-year ended Dec 31, 2023, down 21.2% from the year-ago period mainly because 10% of total income available for distribution in FY2023 was retained for “prudent capital management”, in view of additional costs that would be incurred during the internalisation of the Reit manager.
The manager also warned that further retention of distributable income may be required in FY2024 and FY2025.
Without the retention, total income available for distribution in H2 2023 remained stable on year, at S$15.9 million.
Gross revenue for H2 2023 rose 13.1% on year to S$56.6 million, uplifted by positive rental reversions across the portfolio as overall occupancy rate remained stable whilst net property income (NPI) improved slightly to S$27.8 million in H2 2023 from S$26.3 million in the corresponding period a year earlier.
Last June, activist investor Quarz Capital requisitioned an EGM to pass two resolutions: to remove Sabana Reit’s manager, and to direct the trustee to internalise the Reit’s management function.
It said that the cost savings from the removal of the external manager would benefit unitholders. However, Sabana’s manager, the trustee and sponsor ESR Group, had warned that the process was not so straightforward, as there were risks and uncertainty for unitholders.
FCT to buy 24.5% stake in Nex from Frasers Property
Frasers Property is selling its stake in retail mall Nex for an estimated price of S$523.1 million to Frasers Centrepoint Trust (FCT), said the manager Frasers Centrepoint Asset Management.
The trustee of FCT, HSBC Institutional Trust Services, has entered into the share purchase agreement on behalf of FCT with the sponsor of FCT, Frasers Property.
Richard Ng, chief executive of the FCT manager, said: “The acquisition follows from our initial acquisition of 25.5% in Nex in February 2023 and will raise FCT’s effective interest to 50% on completion.”
The acquisition of Nex will be done via buying the total issued share capital of the sponsor’s unit FCL Emerald, which holds a 49% interest in Nex Partners (NP) Trust. FCL Emerald also holds a 49% stake in Frasers Property Coral, the trustee-manager of NP Trust.
NP Trust is a private trust which holds 50 per cent of the issued and paid-up share capital of Gold Ridge, which in turn holds the retail mall Nex – located at 23 Serangoon Central.
Upon completion of the acquisition, FCT will hold a 100 per cent interest in each of NP Trust and the NP trustee-manager, as well as an effective 50 per cent interest in Nex, with the acquired 24.5 per cent stake in Nex, said the manager.
FCT’s manager proposed a private placement at an issue price of between S$2.16 and S$2.204 per unit to raise no less than S$200 million to partially fund the acquisition.
On Friday, the placement price was set at S$2.18. The issue was 2.5 times subscribed.
Earnings in brief
Mapletree Industrial Trust reported a 0.9% drop in distribution per unit (DPU) to S$0.0336 for its third quarter ended Dec 31 on an enlarged unit base, down from S$0.0339 in the year-ago period. On a quarter-on-quarter basis, the DPU in Q3 was 1.2% higher than Q2. Gross revenue in Q3 was up 2% to S$173.9 million, whilst property income (NPI) grew 0.8% year on year (yoy) to S$129.9 million for the quarter. The increase in NPI was attributable to the contribution from the acquisition of a data centre in Japan, and new leases at the redeveloped property, Mapletree Hi-Tech Park @ Kallang Way. However, the gain was partially offset by loss of income from non-renewal of leases, said the manager.
Mapletree Logistics Trust reported a 1.2% rise in DPU to S$0.02253 for its third quarter ended Dec 31, 2023, underpinned by a resilient portfolio, contributions from acquisitions and divestment gains. Gross revenue for the quarter went up 2.1% to S$184 million, mainly due to higher contribution from existing properties in Singapore and contribution from acquisitions in Japan, South Korea and Australia, which were completed in the first quarter of FY 2023/24. NPI rose 1.5% year on year to S$159.5 million, and the amount distributable to unitholders grew 4.8 per cent yoy to S$112.2 million.
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