Date: November 18, 2024
- Gains of 1.3-2.3% in the banks pushed the STI up 0.5% to 3,744.7
- Broad market did not follow – more falls than rises every day
- US Fed announced it’s in no hurry to lower interest rates
- Probability of a Dec rate cut down from 72 to 62%
- US stocks faltered in face of rising bond yields
- Singtel’s H1 profit falls 42.4% to S$1.23 billion in absence of exceptional gain
- Starhub’s Q3 profit up 11% to S$40.4m but revenue fell 5.8% to S$575.2m
- Avarga receives S$0.25 per share offer from its executive chairman
- Analysts still positive on Genting Spore despite profit drop
It was all about the banks as far as the STI was concerned
Once again, it was all about the three banks as the Straits Times Index rose to its highest since Aug 2007 but amidst a weakening every day in the broad market.
The Straits Times Index enjoyed a nett gain of 20 points or 0.5% last week at 3,744.70 but in every one of the four days that it rose, the broad market recorded more falls than rises.
On Monday for example, when the index gained 15 points, the advance-decline score was 229-354, whilst on Thursday when it rose by about 18 points, the score was 233-303.
For the week, DBS rose S$0.54 or 1.3% to S$42.94, UOB added S$0.68 or 1.9% at S$36.37 and OCBC jumped S$0.38 or 2.3% to S$16.44.
Banks have been in play after they announced solid 3Q results, share buyback plans and on expectations that interest rates may not be lowered as quickly as previously thought.
The US Fed is in no hurry to lower interest rates
Federal Reserve Chair Jerome Powell is in no rush to cut interest rates, with a solid economic backdrop giving policymakers the luxury of time to figure out the best path lower. Inflation remains on a bumpy road to the Fed’s 2% target.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in prepared remarks for an event at the Dallas Regional Chamber on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
Wall Street’s rise faltered in the face of rising bond yields
Stocks struggled this week in the face of rising bond yields. The yield on the 2-year Treasury note was up to 4.298% this week. It’s risen in seven-straight weeks, according to Dow Jones Market Data. The 10-year yield rose to 4.426%, its eighth weekly rise in the past nine weeks.
Certain sectors, such as healthcare and industrials, also took hits this week as Wall Street reacted to Donald Trump’s preferences for various cabinet positions and plans for a government efficiency department led by Elon Musk and Vivek Ramaswamy.
As a result, Wall Street posted its worst weekly performance since the start of September and has now notched a negative week in three of the last four. It was still a historic week for the S&P 500, which on Monday closed above 6,000 points for the first time ever.
That milestone was achieved when sentiment was still in a post-election hangover. Former President Donald Trump’s victory over Vice President Kamala Harris on November 5 sparked a furious rally that had propelled the S&P (SP500) to its best week in over a year.
However, thanks to Powell’s comments and the latest US inflation data, according to the CME FedWatch tool, the probability of a 25 basis point interest cut in December has fallen to about 62% from 72% a day earlier and nearly 65% a week ago.
For the week, the S&P slipped 2.1%, while the Nasdaq Composite lost 3.1%. The Dow Jones Industrial Average fell 1.2%.
Singtel’s H1 profit falls 42.4% to S$1.23 billion in absence of exceptional gain
Singtel reported a 42.4% drop in net profit for the first half ended September to S$1.23 billion mainly because of the absence of a S$1.2 billion exceptional gain booked in the same period a year prior, for the issuance of Telkomsel shares to integrate Indonesian broadband provider IndiHome.
Underlying net profit, which is the basis of core dividend payout, grew 6% to S$1.2 billion. Singtel declared an interim dividend of S$0.07 per share, up from S$0.052 in H1 FY2024.
The latest dividend comprises a core dividend of S$0.056 per share and a “value realisation” dividend of S$0.014 per share, both of which will be paid out on Dec 9.
Operating revenue for the half year dropped 0.5% to S$6.99 billion which Singtel considered to be “stable”. Excluding associate contributions, earnings before interest and taxes (Ebit) grew 27% to S$738 million.
Starhub’s Q3 profit up 11% to S$40.4m but revenue fell 5.8% to S$575.2m
Starhub reported an 11.1% increase in net profit to S$40.4 million for its third quarter.
However, revenue for Q3 2024 fell 5.8% to S$575.2 million, mainly due to the timing of revenue recognition in the cybersecurity services segment and was offset by higher revenue from the enterprise managed services, regional information and communications technology services, and broadband businesses.
Mobile revenue fell 6.5% to S$143.3 million in Q3 2024. Mobile postpaid average revenue per user (Arpu) fell to S$30 in Q3 2024 from S$32 in Q3 2023, due to fewer plan subscriptions, lower value-added services revenue, and decreased usage revenue from excess data, SMS, international calls and voice calls.
Broadband revenue rose 1.4% to S$63.2 million in Q3. Arpu in this segment also grew, to S$35 in Q3 2024 from S$34 in Q3 2023. It was also an improvement from the S$34 in Q2 2024.
Avarga receives S$0.25 per share offer from its executive chairman
Paper manufacturing and building materials distributor Avarga has received an unconditional mandatory general cash offer of S$0.25 per share made by special-purpose vehicle TKO, controlled by Avarga’s executive chairman Tong Kooi Ong.
TKO has also acquired 183.2 million shares from major shareholder Lim Eng Hock, representing about 20.1% of total issued shares, for S$45.8 million. That transaction saw Agarva leap into the top volume list on Monday, up S$0.03 or 14.6% to S$0.235 on total volume of 184.6m.
This acquisition has pushed Tong’s control to more than 50% of total issued shares, from about 33.1% previously.
The offer represents a 22% premium over the last traded price on Nov 8 of S$0.205, and a 23.8% premium over the volume-weighted average price (VWAP) for the one-month period till Nov 8.
The premium over the VWAP for the three-month period was 24.3%, for the six-month period was 26.5% and the 12-month period was 33.9%.
The offeror does not intend to preserve the listing status of Avarga following the completion of the offer, and will exercise its rights of compulsory acquisition.
Analysts still positive on Genting Spore despite profit drop
Earlier this month casino operator Genting Singapore reported a net profit of S$79.4 million for the third quarter ended Sep 30, down 63% from the corresponding year-ago period. This came with a 19% slide in revenue to S$561.9m.
The results resulted in pressure on Genting’s shares which fell from S$0.84 on 7 Nov when the results were announced, to S$0.765 on Friday, a loss of about 9%.
However, analysts interviewed by the Straits Times said they were still positive on the stock. UOB Kay Hian’s Jack Goh was quoted noting that the non-gaming segment showed resilient improvement.
Mr Goh said he is optimistic that Genting Singapore will deliver sequential earnings growth for the rest of 2024. This positive outlook is based on an accelerated recovery in foreign visitors and flight frequencies, he said.
He noted that foreign tourist visitation numbers are improving but still hovering below pre-pandemic levels, and that a steady improvement in tourists flying in could also bode well for Genting Singapore.
DBS Bank research analysts Jason Sum and Chee Zheng Feng noted that Genting Singapore operates RWS, one of the largest fully integrated resorts in South-east Asia, holding an enviable position within Singapore, a vibrant tourism hub with a strong domestic market.
“Not only is competition in Singapore relatively less intense compared to other markets due to the duopoly structure in the country, RWS also has better business (higher percentage of non-gaming revenue) and geographical diversification (in terms of source markets),” they said.
Maybank analyst Yin Shao Yang noted that the VIP and mass markets performance in the gaming segment came in weaker than expected, but maintained his call to buy the stock.
“At its current share price, the market is discounting its ‘RWS 2.0’ investments that will increase its appeal and earnings in the long term, in our view,” he said. RWS 2.0 refers to the current phase of development and renovations at Resorts World Singapore.
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