Comprehensive Analysis of FSSTI Index and Featured Companies

Broker Name: Lim & Tan Securities

Date of Report: 12 November 2024

Financial Markets Overview

U.S. stocks ended higher on Monday, with the S&P 500 closing above 6,000 for the first time and Bitcoin surging past 88,000 U.S. dollars. The Dow Jones Industrial Average rose by 0.69%, the S&P 500 added 0.10%, and the Nasdaq Composite Index increased by 0.06%. Six of the eleven primary S&P 500 sectors ended in green, led by consumer discretionary and financials, while technology and real estate were the laggards.

Riverstone Holdings Limited

Riverstone Holdings Limited, a leading manufacturer of specialized cleanroom and healthcare gloves, announced its financial results for the third quarter (3QFY24) and nine months (9MFY24) ended 30 September 2024. The Group reported a revenue increase of 33.9% year-on-year to RM298.4 million for 3QFY24, driven by increased production volume and higher average selling prices. Gross profit rose by 33.2% year-on-year to RM103.6 million for 3QFY24, with a relatively flat gross profit margin at 34.7%.

Operating profit margin dropped by 2.7 points to 30.3%, primarily due to the impact of foreign exchange loss from a strengthening RM against the USD. Net profit rose by 21.8% year-on-year to RM72.2 million. The Board of Directors recommended an interim dividend of 4.0 sen (RM) per ordinary share for the nine months ended 30 September 2024, bringing the total dividend payout ratio to 82.0%.

Executive Chairman and CEO, Mr. Wong Teek Son, highlighted the company’s focus on operational efficiency and customized gloves. They are on track to increase capacity for six new cleanroom production lines and six healthcare glove lines, expected to be commissioned by the end of this year, with further expansions by 1Q2025.

Frasers Hospitality Real Estate Investment Trust

Frasers Hospitality Real Estate Investment Trust (FH-REIT) announced its second half financial year (2H FY2024) and full-year results for FY2024. The trust’s gross revenue rose by 7.6% year-on-year to S\$132.5 million, supported by growth in Europe, Malaysia, and Japan markets. Net property income grew at a slower pace of 2.1% year-on-year to S\$92.5 million, affected by higher property taxes and expenses. Despite these gains, higher finance costs led to a 7.5% year-on-year decline in distributable income and dividends per share.

Singapore recorded 8.3 million international visitor arrivals in 2H FY2024, a 14.8% year-on-year increase. However, competitive pressures led to a 5.9% year-on-year decline in revenue per available room for FH-REIT’s Singapore portfolio. In Australia, the portfolio’s RevPAR edged up by 0.5% year-on-year, though higher operating costs impacted gross operating profit. In the UK, the portfolio saw a 2.1% year-on-year increase in RevPAR, driven by higher occupancy and lower operating costs.

Japan’s tourism sector benefited from a weaker yen, with ANA Crowne Plaza Kobe’s RevPAR rising by 14.6% year-on-year. FH-REIT’s investment portfolio was valued at approximately S\$2.0 billion as of 30 September 2024, with a gearing ratio of 34.9%. The trust maintains ample debt headroom and liquidity to meet operational needs and financial commitments.

Nio’s Strategic Moves in the EV Market

Chinese electric vehicle (EV) maker Nio is planning to launch its first hybrid model in 2026, targeting overseas markets including the Middle East, North Africa, and Europe. This move aims to address challenges faced by Chinese firms in foreign markets, such as trade barriers and slower installation of charging facilities. The hybrid vehicle, under the Firefly brand, is expected to boost sales in regions where infrastructure is not ready for mass adoption of EVs.

The model will not be sold in China, where Nio will continue to offer only EVs with swappable batteries. The company received US\$2.2 billion in investment from Abu Dhabi’s CYVN Holdings in 2023, which helped alleviate liquidity pressures. Nio plans to unveil the first model under the Firefly brand at its annual event on December 21, targeting the European mass market with designs catering to European consumers.

Market Insights and Economic Data

The Cleveland Federal Reserve’s latest Nowcast estimates annual headline CPI at 2.6% as of November 8, up from 2.4% in September. This week’s earnings calendar includes reports from Home Depot, Cisco Systems, and Walt Disney. The International Monetary Fund’s October 2024 World Economic Outlook highlights that global inflation has significantly eased, with headline rates projected to decline to 3.5% by the end of 2025. Despite tight monetary policies, the global economy remains resilient, with growth forecasted at 3.2% in 2024 and 2025.

Investment Trends and Recommendations

Institutional and retail investors have shown varying trends in their net buys and sells. Institutional investors net bought stocks like DBS, UOB, and Singtel, while retail investors favored CapitaLand Ascendas REIT and CapitaLand Integrated Commercial Trust. Key interest rates and bond yields remained stable, with the US 10-year bond yield at 4.3% and the SG 10-year bond yield at 2.8%.

Overall, the financial market continues to show resilience amidst economic uncertainties, with companies like Riverstone Holdings and FH-REIT demonstrating strong performance and strategic growth plans. Nio’s strategic move to introduce hybrid models in overseas markets reflects its adaptability and forward-thinking approach in the EV industry.

Conclusion

In conclusion, the financial markets and featured companies exhibit a mix of growth, strategic planning, and resilience. Investors should keep a close eye on these developments and consider the insights provided in this comprehensive analysis for informed decision-making.