Apple Pauses Hiring in Escalation of Cost Cuts | 04 November 2022 | Daily Morning Note

Summary

Singapore shares tumbled on Thursday alongside a sea of red across the regional markets, following overnight losses in Wall Street amid some confusion – and disappointment – over the messaging from the US Federal Reserve on the speed and extent of the monetary tightening path. The key Straits Times Index fell 1.2 per cent or 38.62 points to close at 3,102.51 points.

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Wall Street stocks retreated on Thursday as markets awaited key US jobs data, while taking in hawkish moves by major central banks. The Dow Jones Industrial Average lost 0.5 per cent to close at 32,001.25. The broad-based S&P 500 dropped 1.1 per cent to 3,719.89, while the tech-rich Nasdaq Composite Index fell 1.7 per cent to 10,342.94.

Singapore News

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OCBC’s 3Q2022 results beat expectations with net profit of S$1.61bn vs consensus estimate of S$1.48bn. Bulk of the beat was from stronger than expected net interest income of S$2.10bn (+44% YoY) and net interest margin growth to 2.06% (+54bps YoY). More details to follow after 10.30am analyst call.

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With business momentum strong in the third quarter of 2022, DBS will likely remain resilient and post a “solid year” in 2023, said DBS chief executive Piyush Gupta. Gupta noted, however, that the tail-risk scenario of high rates and high inflation will likely play out next year, with inflation remaining sticky and the US Federal Reserve continuing its rate hikes. DBS reported a 32 per cent year-on-year rise in net profit for the third quarter ended September, buoyed by higher net interest margins, healthy loan momentum and a stable fee income.

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Singapore Post sank into the red in its latest half-year results reported on Thursday, after taking into account an exceptional item related to the acquisition of an Australian unit. The charge might arise in future depending on whether SingPost’s stake rises, and the value of that unit. SingPost’s profitability took a turn for the worse in the half year to September as it posted a net loss of S$9.9 million, compared to a net profit of S$35 million for the corresponding period a year ago.

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The manager of OUE Commercial Real Estate Investment Trust, or OUE C-Reit, on Thursday reported a 4.4 per cent year-on-year rise in net property income in the third quarter ended Sep 30, although its amount available for distribution continued to shrink. Net property income in Q3 rose to S$48.3 million, due mainly to lower property expenses, the manager said in an exchange filing.

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US News

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U.S. stock futures fell slightly Thursday night after the major averages dropped for a fourth day, and investors looked ahead to the October jobs report for clues into the pace of future rate hikes from the Federal Reserve. Investors weighed the latest 0.75 percentage point rate hike from the Fed, as well as commentary from chair Jerome Powell that suggested a pivot could be further away than traders anticipated.

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Coinbase Global posted a loss of $2.43 per diluted share in the third quarter, compared with earnings of $1.62 a share a year ago, as its main revenue driver—crypto trading—continues to remain depressed in the wake of the market’s crash. The largest U.S. crypto exchange lost $545 million on total sales of $590 million in the quarter, down from a profit of $406 million on $1.3 billion of total sales the same quarter last year.

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PayPal shares fell more than 5% in after-hours trading, despite beating earnings and revenue expectations for the third quarter, as the company’s Q4 revenue estimate came in behind analysts’ expectations – EPS of $1.08 per share, ex-items, vs. 96 cents expected, while revenue came in at $6.85 billion, vs. $6.82 billion expected. The company estimated Q4 revenues to come in at $7.38 billion, which is less than the $7.74 billion consensus expectations, according to analysts.

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Starbucks on Thursday reported quarterly earnings and revenue that topped analysts’ estimates, fueled by U.S. customers spending more on iced coffee drinks and Pumpkin Spice Lattes. The Seattle-based coffee company also said U.S. traffic improved in the quarter, and has nearly bounced back to 2019 levels. Shares rose 2.7% in after-hours trading. The company reported EPS of 81 cents adjusted vs. 72 cents expected and revenue of $8.41 billion vs. $8.31 billion expected.

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In our recommendation section,

our analyst Glenn Thumm maintains a Buy on DBS Group Holdings with a target price of S$41.60. It was last traded at S$34.20.

"We raise FY22e earnings by 3% as we increase NII estimates for FY22e. We assume 1.77x FY22e P/BV and ROE estimate of 13.6% in our GGM valuation. We raised FY23e earnings by 6% as we increase NII estimates for FY23e. Our ROE estimate for FY23e is raised from 14.7% to 14.9%. A 50bps move in interest can raise earnings by 13%."