Date: March 4, 2024
- The local market’s decoupling this year from Wall St continued
- The STI fell 1.5% to 3,135.76 even as US stocks rose to new highs
- Probability of US rate cut only 5% in March, 27% in May
- OCBC latest victim of “buy in anticipation, sell on news’’
- Great Eastern shareholders table resolutions to unlock value
- CDL’s 2023 net profit fell 75% to S$317.3m
- CapitaLand Investment reported a 2H loss of S$170m
- AEM sank into a loss for its second half
The decoupling continued
Over the course of the five trading sessions last week, the Straits Times Index continued to forge its own path, seemingly unmoved by rises and falls on Wall Street as has been the case for most of this year.
After the STI fell on Monday, Tuesday and Wednesday when the US market was powering to new highs, a modest rebound on Thursday ensued, most likely due to “portfolio rebalancing’’ on the final day of the month.
Friday however saw weakness set in again, with the nett result that the index recorded a loss of 49 points or 1.5% for the week at 3,135.76.
Daily volume however, so far this year has improved when compared to last year’s sub-S$1b totals. Last week, the average turnover done was S$1.45b, the figure raised by the S$2.06b done on Thursday.
The S&P 500 and Nasdaq Composite closed at record highs
Over in the US, stocks continued to rise, seemingly unaffected by strong inflation numbers. On Friday, the S&P 500 and Nasdaq Composite closed at new all-time highs of 5,137.08 and 16,274.94 respectively. The 10-year Treasury yield slipped slightly to 4.18%.
In the futures market, the probability of a rate cut at the 20 March Federal Open Markets Committee meeting was only 5%, though it rose to 27% for the next meeting on 1 May.
OCBC latest victim of “buy in anticipation, sell on news’’
OCBC was the last of the three banks to release its latest results last week, and like its two predecessors, fell victim to “buy in anticipation, sell on news’’. The stock started February at S$12.89 and surged to a month-high of S$13.45 on 22 Feb.
After its results were released on Wednesday last week – including a 27% increase year-on-year of net profit for FY2023 to a record S$7.02b – OCBC fell S$0.30 to S$13.01 that day, and slipped a further S$0.03 to S$12.98 on Thursday. The shares ended the week at S$12.99.
UOB and DBS also managed rebounds on Friday after dropping sharply following release of their results the previous week.
Great Eastern shareholders table resolutions to unlock value
A group of minority shareholders of Great Eastern Holdings have proposed three resolutions to be tabled at the insurance provider’s upcoming annual general meeting (AGM), in an attempt to “protect and preserve” shareholder value.
The resolutions are calls to withhold directors’ fees, to change the share option schemes of employees, and to appoint an independent financial advisor (IFA).
According to The Business Times, a group of close to 80 shareholders have raised concerns over GEH’s depressed share price and continued valuation decline over the last decade, despite its “strong financial position”.
At the market close on Friday, shares of GEH – which is majority owned by OCBC – were flat at S$17.85. This represents a discount of 51.2% from its embedded value per share of S$36.59 for the full year ended 2023.
CDL’s 2023 net profit fell 75% to S$317.3m
Property giant City Developments Ltd (CDL) last week reported a 75% fall in net profit to S$317.3 million for its year ended 31 Dec 2023, as higher financing costs ate into profits in the absence of divestment gains.
This translates to an earnings per share (EPS) of S$0.336, against that of S$1.403 in the previous corresponding year.
The property group reported a 50% rise in revenue to a record S$4.9 billion for the year ended Dec 31, 2023, driven by its property development segment. But it missed analysts’ earnings estimates, which averaged S$358 million in forecasts compiled by Bloomberg.
CDL said that its net finance costs doubled and eroded profits last year. Average borrowing cost rose to 4.3 per cent per annum, up from 2.4 per cent in FY2022. It expects rate cuts before the end of this year will help alleviate its burden. The company also said it is targeting divestments of S$1 billion this year.
A final dividend of S$0.08 per share was proposed for the second half-year, bringing the total dividend for 2023 to S$0.12 per share and dividend payout ratio to 36%.
Shares of CDL took a beating after the results were announced on Wednesday, losing S$0.18 at S$5.78. They finished the week at S$5.70.
CapitaLand Investment reported a 2H loss of S$170m
CapitaLand Investment (CLI) reported a second half loss of S$170m versus last year’s profit of S$428m because of losses from the revaluation of its investment properties.
The fair value losses, largely from its China and United States assets, dragged full-year profit down. For the year ended Dec 31, 2023, net profit dropped 79% to S$181 million.
In FY2023, CLI recorded S$600 million in revaluation and impairment losses, compared with revaluation gains of S$30 million in FY2022.
Excluding the revaluation loss, cash profit after tax and minority interests stood at S$781 million. CLI’s revenue for the full year was down 3.2% to S$2.8 billion.
CLI group chief operating officer Andrew Lim said: “The fair value loss is nothing to sneeze at, but it’s 2% of our investment property portfolio and is offset by pockets of strength in Singapore and India.”
Interest rate increases have led to capitalisation rate expansion in the US, and valuations for office assets have collapsed as Americans continue working from home.
In China, weak rental reversions and poor business sentiment affected valuations, said Lim.
Manohar Khiatani, CLI’s senior executive director, said that the group’s assets under management in India have grown more than three-fold in the last 10 years and many tailwinds can be captured, in the data centres, logistics and business parks sectors.
Earnings per share for the year fell to S$0.035 versus S$0.168 in the previous corresponding period. The board has proposed a final dividend of S$0.12 per share for FY2023, unchanged from FY2022.
CLI’s shares rose S$0.04 to S$2.78 on Wednesday but fell back to end Friday at S$2.71.
AEM sank into a loss for its second half
Semiconductor equipment maker AEM Holdings reported a net loss of S$20.9 million for the six months ended Dec 31, 2023, reversing a net profit of S$44 million in the corresponding period a year earlier.
The loss follows the declining trend in the group’s net profit, which has plunged 76% year-on-year to S$19.7 million in the first half of FY 2023. The results translate into a loss per share of S$0.0676, as compared to an earnings per share of S$0.1423 for H2 2022.
For the full year, revenue was down 45% to $481.3 million from $870.5 million in financial year 2022.
Net loss stood at S$1.2 million, a significant decrease from the net profit of $126.8 million a year earlier.
No final dividend was declared but the company said it will undertake a bonus issue of shares of one share for every 100 shares pursuant to a general share issue mandate, subject to approval of shareholders.
Maybank in its “Hold’’ recommendation said it has reduced its target price for AEM from S$3.26 to S$2.05 based on a blended 15x FY24/25E as the prospect of a rebound in FY25E is higher due to AEM’s new customer ramp up as well as that of its key customer.
AEM’s shares started the week at S$2.76 but finished at S$2.24 for a nett loss of S$0.52 or 19%.
Earnings in brief
Cordlife’s net profit for the second half ended Dec 31, 2023, plunged 50.3% to S$1.5 million from S$3 million in the year prior whilst earnings per share (EPS) for the second half stood at S$0.0058, down from the previous year’s H2 EPS of S$0.0117. Revenue for the private cord blood bank firm fell 4.5% year on year to S$27.6 million, mainly due to lower banking revenue contributions amid a decrease in new samples processed and stored in Singapore, India and Indonesia. Cordlife’s top line decline comes amid a six-month suspension imposed by the Ministry of Health (MOH) from Dec 15, 2023.
17Live reported a net loss of US$129.7 million for the second half ended December 2023, widening from the previous year’s H2 net loss of US$9 million. The Taiwanese livestreaming platform said that this comes after factoring in US$130.4 million in non-operating expenses versus just US$18 million in H2 FY2022, along with non-cash revaluation losses on financial liabilities at fair value. The latest half-year period’s non-operating expenses were incurred mainly from its business combination with Vertex Technology Acquisition Corp (VTAC).
ST Engineering’s net profit for the second half ended Dec 31, 2023, rose 19.9 per cent to S$305.9 million due to strong business growth, higher productivity and cost savings. Revenue for H2 FY2023 rose 9.9% to S$5.2 billion, largely due to higher contributions from the commercial aerospace segment, where revenue grew 29% year on year to S$2.1 billion. Group earnings before interest and tax (Ebit) grew 34.2% to S$470.5 million, driven by growth across all business segments. ST Engineering’s board proposed a final dividend of S$0.04 per share, unchanged from the previous year. This would bring the group’s dividend for the full year to S$0.16 per share, similar to FY2022.
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