Oracle Sells US$7b of Debt to Fund Cerner Purchase | 08 November 2022 | Daily Morning Note

Summary

Singapore shares closed higher on Monday, even as China’s decision over the weekend to stick to its zero-Covid policy dampened investor sentiment. The Straits Times Index gained 11.2 points or 0.4 per cent to close at 3,141.31.

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Wall Street stocks rose for a second straight session on Monday as the dollar retreated and markets began to look past midterm US elections. The Dow Jones Industrial Average gained 1.3 per cent to finish at 32,827.00. The broad-based S&P 500 advanced 1.0 per cent to 3,806.80, while the tech-rich Nasdaq Composite Index rose 0.9 per cent to 10,564.52.

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Singapore News

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Lendlease Global Reit’s portfolio occupancy for the quarter ended Sep 30 fell 0.1 percentage point to 99.7 per cent, down from 99.8 per cent last quarter, said the manager on Monday. Weighted average lease expiry – the mean time remaining on its leases – stood at 8.5 years when adjusted by net lettable area and 5.5 years when adjusted by gross rental income.

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Defence and engineering group ST Engineering is proposing to divest all of its US marine subsidiaries, namely VT Halter Marine and ST Engineering Halter Marine and Offshore to Bollinger Shipyards Lockport for US$15 million. The transaction will be on a cash-free, debt-free basis and subject to net adjustments to working capital, if any, post-closing. It is expected to result in a non-cash loss on disposal of about S$13.3 million.

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Transport operator ComfortDelGro has secured three metropolitan bus contracts in Sydney with a total value of A$1.7 billion, or S$1.5 billion. On Monday, CDG said the contracts make up a significant part of the city’s public transport network, as it covers regions that are home to over 700 buses transporting 18 million passengers each year. The Greater Sydney Bus Contracts include two regions (4 and 14) which CDG currently operates.

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US News

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Apple’s biggest iPhone maker, Taiwan’s Foxconn, said on Monday that it was working to resume full production at a major plant in China’s Zhengzhou as soon as possible, with the area hit by Covid-19 curbs. China ordered an industrial park that houses an iPhone factory belonging to Foxconn to enter a seven-day lockdown on Wednesday, in a move set to intensify pressure on the Apple supplier as it scrambles to quell worker discontent at the base.

Our analyst Maximilian Koeswoyo says: The lockdown in Zhengzhou would pose a significant challenge for Apple, especially during the holiday season which is the best performing quarter of its financial year. Although supply is likely going to be negatively affected during the current quarter, we view that Apple should be able to re-capture the sales when the supply has stabilized as it enjoys strong loyalty and customers who would be willing to wait despite the extended lead time instead of switching to another smartphone brand.

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Meta Platforms is planning to begin layoffs that will affect thousands of workers from this week, Wall Street Journal reported, citing people with knowledge of the matter. The job cuts could come as early as Wednesday, the newspaper said. The company has already told employees to cancel non-essential travel from this week, according to the report. Chief executive officer Mark Zuckerberg in September outlined plans to reorganise teams and reduce headcount for the first time, following a sharp slowdown in growth at the parent of Facebook and Instagram.

Our senior analyst Jonathan Woo says: The layoffs come as no surprise after Zuckerberg’s frosty comments during Meta’s 3Q22 earnings call, it seemed to be merely a matter of time before the company followed other tech companies in freezing or cutting headcount. With total expenses piling up to the tune of US$22bn last quarter – a lot of which are long term commitments, and net margins cut in half to 16%, it made sense for Meta to reduce headcount to alleviate margin pressures.

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Palantir Technologies posted third-quarter sales results that edged Wall Street estimates, while disclosing strong demand from the U.S. defense sector. For the quarter, Palantir reported revenue of $478 million, up 22%, ahead of both the company’s guidance range of $474 million to $475 million.

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In our recommendation section...

Analyst Glenn Thum maintains his Accumulate Recommendation for CapitaLand Investment Limited, with a target price of S$4.12. It was last done at S$3.34.

He says: “The pick-up in travel and lifting of lockdowns in China will be immediate catalysts for CLI.”

CapitaLand Investment Limited –Growth supported by RevPAU recovery

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Recommendation: Accumulate (Maintained)

Last done: S$3.24

TP: S$4.12

Analyst: Glenn Thum

 
• 9M22 revenue of S$2,331mn (+36% YoY) was above our estimates, forming 88% of our forecast.
• RE investment revenue grew 48% YoY, driven by an occupancy recovery in their core markets, Singapore and India. Fee-related revenue was up 16% YoY, lifted by PE fund management (+44%) and lodging management (+48%) as RevPAU recovered to 92% of pre-pandemic 3Q22 levels.
• Maintain ACCUMULATE with an unchanged SOTP TP of S$4.12. We raise FY22e earnings by 8% as we increase RE investment revenue estimates for FY22e. The pick-up in travel and lifting of lockdowns in China will be immediate catalysts for CLI.