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United States

News Feed

1. US: Wall Street ends lower after US jobs report, Apple weighs

2. Dollar slides after slowing US jobs growth in July

3. Fed’s Michelle Bowman says more US rate hikes likely will be needed

4. JPMorgan raises US economic growth estimate, no longer expects 2023 recession

5. Foxconn’s July sales drop 1.23% y/y, Q3 outlook better

Hong Kong

News Feed

1. China pumps out coal plants at increasing pace to allay power-security fears, risking climate transition: Greenpeace

2. China to lift tariffs on Australian barley after 3 years

3. China’s Zhengzhou city launches property support measures

4. Floodwaters rise in China’s north-east as rains lash Heilongjiang province

5. China eases entry visa and hukou rules in all-out push to save the economy

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Oversea-Chinese Banking Corp Ltd (OCBC SP): Stellar results

• BUY Entry 12.70 – Target – 13.40 Stop Loss – 12.35
• Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services. The Company’s services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.
• Benefit from rate cut expectations. Even though it is uncertain when rates will start to decline, Singapore banks will continue to thrive in this volatile environment as our local banking system is heavily regulated and conditioned under various stresses by the Monetary Authority of Singapore (MAS). MAS has also expressed its readiness to provide liquidity to maintain financial stability and orderly market functions. The overall market believes that the Feds will start cutting rates in 2024, with interest rates expected to peak at 5.25% to 5.5%. The expected decrease in interest rates could result in borrowers refinancing their loans, which were granted at higher rates.
• Growing wealth segment. Singapore is seeing an influx of wealthy individuals and family offices, which has led to a rise in assets under management at the country’s banks. The Monetary Authority of Singapore estimated there were about 700 family offices in 2021, but the current estimate is around 1,400, with mainland Chinese being the biggest drivers of growth. Although the family offices generate jobs indirectly through external finance, tax, and legal professionals, little of the money is being invested in funds or private equity firms. Despite this, the influx of wealth will still benefit banks in Singapore, particularly with the tax exemption programs for family offices, which have led to higher assets under management at banks in the country. Furthermore, with fear brewing due to the deteriorating US-China ties, the ultra-rich in Taiwan are considering setting up family offices in Singapore to protect their wealth. BDO Tax Advisory has reported an increase in inquiries from the ultra-rich in Taiwan. OCBC’s wealth management income contributed 36.6% to the Group’s total income in 1H23. The group wealth management AUM was S$274bn as of 1H23, driven by continued growth in net new money inflows which offset negative market valuation. As Singapore continues to attract a growing number of wealthy individuals, the country’s banks are expected to receive a boost in assets and deposits.
• Dividend yield. The bank declared an interim dividend of S$0.4, and the ex-dividend date is 14th August. OCBC’s FY23F/24F dividend yield is 6.13%/6.29%.
• 1H23 results review. PATMI jumped by 38.5% YoY to S$3.59bn. Net interest income surged by 47.6% YoY to S$4.73bn.

PBT by segment

(Source: Company)

• Market consensus.

OCBC share price and USD/SGD comparison

(Source: Bloomberg)

(Source: Bloomberg)

Banyan Tree Holdings Ltd. (BTH SP): Tourism revival

• RE-ITERATE BUY Entry 0.445 – Target – 0.485 Stop Loss – 0.425
• Banyan Tree Holdings Limited operates as a holding company. The Company, through its subsidiaries, owns and manages hotel groups. The Company focuses on hotels, resorts, spas, galleries, golf courses, and residences, as well as provides investments, design, construction, and project management services. Banyan Tree Holdings serves customers worldwide.
• 70th property milestone. The Banyan Tree Group has reached a significant milestone with the addition of its 70th property to its portfolio. This growth is evident through recent hotel debuts in Vietnam and Japan, including Angsana Ho Tram, Dhawa Ho Tram, Folio Sakura Shinsaibashi Osaka, and Homm Stay Yumiha Okinawa. The group has plans for further expansion, with additional properties set to open in Vietnam, Japan, Indonesia, China, and Thailand. With the company’s growing presence and commitment to strengthening connections between travel destinations, we remain optimistic about the group’s continued growth in the reviving tourism sector.
• Appeal to tourists. In June, Thailand’s economic recovery continued on track, supported by the expansion of the tourism sector due to an increase in foreign tourist arrivals. Thailand’s Tourism Authority (TAT) is concerned about the potential overcrowding of flight slots at international airports as the high tourism season approaches. This year the country has received more than 14mn foreign tourists, with 1.6mn visitors from China and 826k Indian tourists, contributing to the tourism revival. The resumption of flights is currently at over 70% of 2019 levels. To manage the influx of tourists, TAT suggests airlines consider using other international airports in popular tourist provinces. EVA Air and TAT have signed a letter of intent to increase the number of tourists flying to Thailand via EVA Air’s network, with plans to inaugurate a new route to Phuket.

Fastest growing airports by international seats – Thailand (Bangkok)

(Source: OAG)

• FY22 results review. Revenue for FY22 increased 23% to S$271.3mn, from S$221.2mn a year ago. Return to profitability in 2022, from the previous year’s loss after tax and minority interests of S$55.2mn to a profit of S$0.8mn.
• Market consensus.
  
• Read the full fundamentals-based report here.

(Source: Bloomberg)

Alibaba Group. (1928 HK): Increasing demand for cloud services

• BUY Entry – 92 Target – 100 Stop Loss – 88
• Alibaba Group Holding Ltd provides technology infrastructure and marketing platforms. The Company operates through seven segments. China Commerce segment includes China retail commerce businesses such as Taobao, Tmall and Freshippo, among others, and wholesale business. International Commerce segment includes international retail and wholesale commerce businesses such as Lazada and AliExpress. Local Consumer Services segment includes location-based businesses such as Ele.me, Amap, Fliggy and others. Cainiao segment includes domestic and international one-stop-shop logistics services and supply chain management solutions. Cloud segment provides public and hybrid cloud services like Alibaba Cloud and DingTalk for domestic and foreign enterprises. Digital Media and Entertainment segment includes Youku, Quark and Alibaba Pictures, other content and distribution platforms and online games business. Innovation Initiatives and Others segment include Damo Academy, Tmall Genie and others.
• Expectations of rising demand for cloud services. Alibaba Cloud, the cloud computing division of the Chinese internet behemoth Alibaba Group, is experiencing a rise in demand across diverse sectors within the Malaysian market. Anticipating further demand growth from various industries, the company is committed to ongoing investment in the market, fostering the utilization of cutting-edge cloud computing solutions. This strategic approach enables businesses to embark on their digital transformation journey. As more enterprises prioritize cost efficiency, the trend leans towards partnering with cloud service providers like Alibaba Cloud rather than building individual servers. This shift is contributing to the escalating demand for cloud services.
• Large Language Model AI Race. Alibaba Cloud, the cloud computing arm of Alibaba Group, has introduced two open-source AI-powered large language models (LLMs), a move that experts say will enhance technological progress and practical use of LLMs. These models, named Qwen-7B and Qwen-7B-Chat, each feature 7 billion parameters and are available for commercial use. This is the first instance of a major Chinese tech company open-sourcing its LLMs. Alibaba Cloud highlights that these open-source LLMs will simplify model training and deployment for enterprises, enabling them to efficiently and affordably fine-tune the models to create their own high-quality AI models.
• Recovery of consumption levels in China. China announced a raft of measures last week to boost consumption as part of a package of measures to bolster domestic demand and shore up the world’s second-largest economy. These new measures aim to expand service-related consumption across different sectors such as catering, cultural, tourism, sports, and healthcare. The new measures also aim to promote rural consumption and put more effort into rural tourism. The expectation that the travel economy will perform better in the second half of the year is also likely to drive up the level of consumption within China.
• FY22 earnings. Revenue rose to RMB208.2bn, up 2.03% YoY. Net profit was RMB 23.5bn, compared to a net loss of RMB13.3 during the same period. Non-GAAP diluted earnings per share was RMB1.34, an increase of 35% YoY.
• Market Consensus.

(Source: Bloomberg)

Sands China Ltd. (1928 HK): Policy support for the tourism industry

• RE-ITERATE BUY Entry – 29.0 Target – 32.0 Stop Loss – 27.5
• Sands China Ltd. is an investment holding company principally engaged in the development and operation of integrated resorts in Macao. The Company operates many places, including gaming areas, meeting space, convention and exhibition halls, retail and dining areas and entertainment venues. The Company operates its business through six segments: The Venetian Macao, Sands Cotai Central, The Plaza Macao, Sands Macao, Ferry and Other Operations and The Parisian Macao. Through its subsidiaries, the Company is also engaged in the provision of high speed ferry transportation services. The Company’s subsidiaries include Cotai Ferry Company Limited, Hotel (Macau) Limited and Development Limited.
• 20 points measures to support tourism and more. The central government recently announced 20 measures to support tourism and boost consumption. China has seen a pick up in local tourism after the country lifted COVID-19 measures. Data also showed domestic flights in July having recovered to slightly more than their 2019 levels, and the movie box office is also above pre-pandemic levels. The new measures now encouraged employers to give more paid days off and for people to take off-peak vacations, as well as expand service-related consumption across different sector including tourism. The new measures also aims to promote rural consumption and put more efforts into rural tourism.
• Sands Shopping Carnival. Sands China Ltd. recently launched its 2023 Sands Shopping Carnival at The Venetian Macao, a luxury hotel owned by Sands China, featuring some 580 local SMEs. The carnivals spans over a week at the end of july, and aimed to spur economic growth and to offer a fun weekend destination hotspot for locals and tourists. The event saw over 110,000 visitors flocking to the the signature shopping event, with over 50% of the visitation coming from tourists.
• Increase in tourist arrivals. Tourist arrivals in Macau jumped 480.6% from a year earlier to 2,210,000 in June 2023, and an increase by 467.6% in total tourist arrivals YTD. This increased level of tourism is expected to drive revenue growth for Sands China over the period.

Macau’s 5 years visitor arrival

(Source: Bloomberg)

• FY22 earnings. Revenue fell to US$1605mn, down 44.2% YoY from US$2,874mn in FY21. Net loss increased from US$900.3mn in FY21 to US$1,577.6mn in FY22. Adjusted EPS fell from -US$0.11 in FY21 to -US$0.19 in FY22.
• Market Consensus.

(Source: Bloomberg)

Cloudflare Inc (NET US): Cybersecurity critical

• BUY Entry – 68.0 Target – 75.0 Stop Loss – 64.5
• Cloudflare, Inc. designs and develops software solutions. The Company offers a platform for load balancing, video streaming, security, analysis, and domain registration. Cloudflare serves customers worldwide.
• Good results. Cloudflare surpassed expectations with its Q2 results and has revised its annual revenue and profit forecasts. The company now projects FY23 revenue in the range of $1.283bn to $1.287bn, up from the earlier estimate of $1.280bn to $1.284bn. This positive outlook comes as companies are investing more in technology due to cooling inflation and strong consumer activity, indicating a stabilising macroeconomic outlook. The cybersecurity business is showing promising signs of growth.
• Growing demand for internet security. Cloudflare is a cloud-first software company that offers advanced cybersecurity solutions to address the rapidly evolving and complex threats in the digital world. Despite the current soft-spending environment, the company has experienced strong growth. With the increasing shift of businesses and individuals to online operations, the demand for robust Internet security solutions is expected to grow further. Cloudflare’s suite of security products, including DDoS protection and web application firewalls, is highly sought after, enabling the company to capitalise on the expanding market. Customers seek cybersecurity solutions that are compatible across various cloud platforms to avoid being locked into a single provider, making specialised “pure play” security-focused companies like Cloudflare well-positioned to continue thriving in this market.
• 2Q23 earnings review. Revenue rose 31.6% YoY to $308.5mn, beating estimates by $2.68mn. Non-GAAP earning per share was $0.10, $0.03 above expectations.
• Market consensus.

(Source: Bloomberg)

Boeing Co (BA US): Strong travel demand

• RE-ITERATE BUY Entry – 230 Target – 250 Stop Loss – 220
• The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide.
• Strong international travel demand. Airlines are experiencing a strong recovery in both domestic and international travel demand, leading them to expand flights between countries and anticipate further sales growth in the coming months. Domestic air travel has fully rebounded, and international traffic is nearing pre-pandemic levels, resulting in a higher demand for commercial planes and aviation personnel. The surge in travel demand during the previous quarter has fueled airlines’ predictions for an increase in international travel. As a result, airlines are looking to acquire more commercial planes to meet the needs of global travellers. Boeing’s management foresees significant growth in various markets, including the world fleet, aircraft services, and the global cargo aircraft fleet, driven by factors like passenger traffic growth and the increasing popularity of e-commerce.
• Secured US Navy contract. Boeing has been awarded a firm-fixed-price order worth approximately $115.14mn for initial spares and repair equipment for the MQ-25A Stingray aircraft. This order supports the readiness, maintainability, and reliability of the aircraft for its first deployment. The work is scheduled to be completed by July 2026, and the Naval Air Systems Command is the contracting activity.
• Increased production. Boeing reported a substantial backlog of $440bn, which includes more than 4,800 commercial planes. The 737 program is gradually increasing production and aims to produce 38 planes per month, with plans to reach 50 per month by 2025/2026. This year, the program intends to deliver 400-450 planes. The 787 program has also boosted production to four planes per month and aims to reach five per month in late 2023, eventually reaching 10 per month by 2025/2026. The program plans to deliver 70-80 planes this year.
• New deliveries. Boeing plans to commence delivery of its smallest and largest B737 MAX variants to customers in the coming year, with expectations for B737-7 certification in 2023 and first deliveries in 2024, and B737-10 certification flight testing in 2023 and first deliveries also in 2024. The delays are attributed to stricter FAA requirements after the MAX aircraft’s worldwide grounding. Southwest Airlines is the major customer for the B737-7, ordering 207, followed by other airlines with smaller orders. The B737-10 has gained popularity with 1,018 orders across 19 customers, and United Airlines is set to be its launch customer. The FAA emphasises safety as the priority for certification projects, refraining from discussing ongoing processes.
• 2Q23 earnings review. Revenue rose 18.4% YoY to $19.75bn, beating estimates by $1.16bn. Non-GAAP earning per share was -$0.82, $0.07 above expectations.
• Market consensus.

(Source: Bloomberg)

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Trading Dashboard Update: Take profit on Interactive Brokers (IBKR US) at US$90. Cut loss on Airbnb (ABNB US) at US$139.

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