Date: November 14, 2023
- Falling US Treasury bond yields helped – but only early in the week
- Hawkish comments by US Fed chairman Powell brought sellers out
- The STI fell 37 points 02 1.2% to 3,106.68
- SIA reported record first half profit of S$1.4b
- DBS reported 16% rise in 3Q profit to S$2.59b
- OCBC’s Q3 profit up 21.4% to S$1.8b
- Singtel’s shares under pressure after Optus network breakdown
- Average gearing of 6 S-REITs in the STI in Sep was 37.6%: SGX Research
Falling US Treasury yields helped stocks – but only in early part of the week
Falling US Treasury yields helped push stock prices higher in the early part of the week, but trading thereafter was choppy and largely directionless.
On Tuesday, the 10-year US Treasury yield, which only a few weeks ago rose above 5%, fell to 4.57% thus helping Wall St extend a rally which reportedly was its best in two years.
As a result, the Straits Times Index kicked off the week on a positive note, rising almost 37 points on Monday with the market doing fairly brisk business of S$1.1b.
It was the index’s sixth consecutive rise during which it added 120 points or about 3.9%, a rise that took it from it recent low of 3,061.85 to a closing high last week of 3,180.53.
Hawkish comments by US Fed chair Powell brought pressure to bear
However, after a slight wobble on Tuesday, the pressure intensified on Wednesday, with the index losing 44 points or 1.4%. By the end of the week, the STI stood at 3,106.68, a net loss of 37 points or about 1.2% over the five days ahead of the Deepavali long weekend.
Average daily volume came in at S$982m versus S$928m the week before.
Friday’s 29-points loss for the STI came after a Thursday slide on Wall St that occurred after comments by US Federal Reserve chairman Jerome Powell regarding interest rates.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Powell said Thursday afternoon at an event hosted by the International Monetary Fund.
Powell acknowledged that price growth has decelerated in recent months, saying that the Fed was “gratified by this progress” and noting that central bank officials expect economic growth to moderate in the coming quarters as well. But even still, Fed officials are not sure monetary policy is now “sufficiently restrictive,” or tight enough to bring inflation back to its target level of 2% annual growth.
“We are not confident that we have achieved such a stance,” Powell said. “We know that ongoing progress toward our 2 percent goal is not assured.”
“I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our 2% target in a timely way,” Fed Gov. Michelle Bowman, one of the more hawkish members of the bank’s rate-setting committee, said earlier in the day on Thursday.
SIA reported record first half profit of S$1.4b
Singapore Airlines reported a 55.4% increase in net profit to a record S$1.4 billion for the first six months of its financial year ended Sep 30 on the back of an 8.9% rise in revenue over the same period to S$9.2 billion.
The higher net profit came amid a 15.3% year-on-year fall in net fuel costs to S$2.3 billion for the half-year period.
Earnings per share for the period stood at S$0.312, up from S$0.144 a year earlier. SIA also declared an interim dividend of S$0.10 per share for the half year, equivalent to that paid out a year earlier. Shareholders who own shares in the company as at 5 pm on Dec 7, 2023 will be entitled to receive the interim dividend on Dec 22, 2023.
Over the week, SIA’s shares closed unchanged at S$6.21.
DBS reported 16% rise in 3Q profit to S$2.59b
DBS reported net profit of S$2.59 billion for the third quarter ended September, 16% higher than earnings of S$2.24 billion in the corresponding period last year.
This includes one-off costs of S$40 million accrued from the acquisition of Citigroup’s Taiwan consumer banking business in Q3. Notwithstanding this one-off item, Q3 net profit would have been up 18% to S$2.63 billion, driven by a record-high total income, higher than the S$2.54 billion consensus forecast in a Bloomberg survey of four analysts.
Total income for the third quarter stood at a record high of S$5.2 billion, 16% higher on the year. The lender declared a dividend of S$0.48 per share for the period, up from the S$0.36 in the previous Q3. This brings the total dividend for the three quarters ended Sep 30 to S$1.38 per share.
Maybank said it is raising its estimated 2023=2024 earnings by 1-2%. “Our multi-stage DDM (dividend discount model) target price has been rolled forward to 2024 (estimated) but lowered to S$37.81 from S39.36 from slower mid-cycle growth’’ said Maybank.
“In the medium term, DBS is likely to experience slower growth from a high base effect, slower macro and higher IT spend. Nevertheless, this is unlikely to impact dividend payout, which we estimate to average 51% 2023-25E generating >5.5% yield. Maintain BUY’’.
Over the course of the week, DBS fell S$0.12 or 0.4% to S$33.17.
OCBC’s Q3 profit up 21.4% to S$1.8b
OCBC reported a 21.4% rise in net profit for its third quarter ended 30 Sep to S$1.8b, in line with a consensus forecast in a Bloomberg survey of four analysts.
Total income rose 13.1% year on year to S$3.4 billion from S$3 billion whilst net interest income for the quarter rose 17% to S$2.5 billion from S$2.1 billion. The bank said this was supported by asset growth and an expansion in net interest margin.
Annualised earnings per share stood at S$1.58 for the quarter, up from S$1.30 in the year-ago period.
Over the course of the week, OCBC’s shares fell S$0.04 or 0.3% to S$12.97.
Singtel’s shares under pressure after Optus network breakdown
Singtel’s shares took a beating on Wed following a 14-hour outage in the network of its Australian unit Optus. The telco’s shares plunged S$0.13 or 5.2% to a low of S$2.35 before recovering marginally to end the day at S$2.36, a net loss of S$0.12 or 4.8% that came with 62m shares traded.
The Business Times quoted DBS Group Research saying there could be some penalties due to the breach of service level agreements, though a bigger issue Optus may face is customer churn if the telco is unable to resolve its issues promptly.
However, DBS does not expect the matter to have any big impact on Singtel’s earnings, as Optus is a small contributor to the group’s net underlying profit.
Over the five days, Singtel’s shares recorded a S$0.09 or 3.7% loss at S$2.36.
Selected earnings in brief
Starhub reported a 36.5% rise in net profit to S$37.3m for the third quarter ended 30 Sep whilst revenue grew 5.3% to S$622.1m compared with the same period last year. For the nine-month period ended 30 Sep, net profit rose 29.1% to S$114m while revenue was up 4.8% to S$1.7b.
Singtel posted an 82.6 % in net profit for the first half of 2023, supported by an exceptional gain from regional associate Telkomsel’s integration of IndiHome, a fixed broadband provider in Indonesia. Net profit for the six months ended Sep 30 stood at S$2.1 billion. The results translate to an earnings per share (EPS) of S$0.1294, compared with an EPS of S$0.0709 in the year-ago period.
Operating revenue, however, was down 3.2% year on year to S$7 billion from S$7.3 billion. The group’s results were “adversely impacted” by the strength of the Singapore dollar against the Australian dollar and regional currencies, said Singtel in its results announcement. The board has approved an interim dividend of S$0.052 per share for the half year period – 77% of the group’s H1 underlying net profit of S$1.1 billion, which was up 12% year on year.
Food Empire reported a 30.6% drop in net profit to US$15.7m for its third quarter ended 30 Sep whilst revenue for the period was down 1.6% to US$106.8m, the latter mainly due to lower contributions from Food Empire’s Russian segment resulting from the depreciation of the Russian ruble. The net profit fall was attributed to the absence of a one-off gain of US$15m from the disposal of a non-core asset in Q3 2022, though this was partially offset by better operating profits and lower foreign-exchange losses.
Average gearing of 6 S-REITs in the STI in Sep was 37.6%: SGX Research
In a 5 Nov report, SGX Research said that in October, the global real estate investment trust (Reit) sector broadly underperformed with the FTSE EPRA Nareit Developed Index declining 4.6 per cent whilst in Singapore, the iEdge S-Reit Index was down 7.2 per cent.
SGX Research also said that institutional investors net sold S$224 million of S-Reits while retail investors net bought S$275 million.
“All six S-Reits within the STI (Frasers Logistics & Commercial Trust, CapitaLand Integrated Commercial Trust, Mapletree Industrial Trust, CapitaLand Ascendas Reit, Mapletree Pan Asia Commercial Trust and Mapletree Logistics Trust) have reported for the latest earnings season’’ said SGX Research.
“While financial performance varied across the six, a majority recorded growth in occupancy rates and rental reversions, and maintained healthy balance sheet ratios. The average gearing ratio of the six S-Reits was at 37.6 per cent as of end-September 2023’’.
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