Top Stock Market Highlights of the Week: US Inflation, Singapore Post, Lendlease REIT and SIA Engineering

Welcome to this week’s edition of top stock market highlights.

US inflation rate

All eyes are on the inflation rate in the US.

It was just a week ago when we highlighted that the US Federal Reserve made its 10th consecutive rate hike to bring its benchmark overnight interest rate to between 5% and 5.25%.

This round, inflation data came in lower than anticipated and the inflation rate showed signs of moderating.

Prices rose by 4.9% year on year, dropping below the key 5% mark for the first time in two years.

A narrower measure tracked by central bank officials involving services that have boomed as the pandemic’s effects fade showed even more cooling.

The increase in prices for this basket of goods has increased at its slowest pace since the middle of 2022.

It’s good news for investors who are worried that the US Federal Reserve will continue to increase interest rates, thereby triggering a much-feared recession.

However, the central bank will need to observe more than one month of data before deciding to keep rates constant; while inflation remains above its long-term target of 2%.

Singapore Post Limited (SGX: S08)

Singapore Post, or SingPost, released its fiscal 2023 (FY2023) earnings ending 31 March 2023.

Revenue rose 12.4% year on year to S$1.87 billion but operating profit fell by 16.9% year on year to S$93.2 million because of higher expenses.

Net profit plunged by 70.3% year on year to S$24.7 million because of an exceptional charge of S$7.7 million for FY2023.

The loss comprised fair value losses from a put option along with merger and acquisition expenses and restructuring charges, offset by fair value gains from investment properties.

The weak performance was because SingPost’s Post & Parcel division reported its first-ever full-year operating loss of S$15.9 million.

Management expects this division to continue to post losses for FY2024 and has initiated a strategic review to assess the commercial sustainability of the division.

The reasons for the loss include a persistent decline in letter mail volume and lower e-commerce volumes because of customer re-insourcing.

A final dividend of S$0.004 was proposed, taking FY2023’s dividend to S$0.0058.

This total dividend was a sharp drop from the S$0.018 that was paid out in FY2022.

Lendlease Global Commercial REIT (SGX: JYEU)

Lendlease Global Commercial REIT, or LREIT, released its fiscal 2023’s third quarter (3Q FY2023) business update where it disclosed its operating and debt metrics.

The REIT’s portfolio committed occupancy stood high at 99.8% with positive rental reversions recorded for both its retail and commercial arms.

Retail rental reversion came in at 3.3% while office rental reversion was a positive 4%.

LREIT’s gearing ratio stood at 39.3% with a low weighted average cost of debt of 2.51%.

Around 61% of the REIT’s loans are on fixed rates.

There was good news on the retail front as tenant sales for 3Q FY2023 shot up more than fourfold year on year to S$202.7 million.

Footfall improved from 5.8 million in the prior year to 15.4 million for the current quarter.

Looking ahead, the manager plans to engage in proactive asset management to enhance LREIT’s portfolio resilience.

It also plans to explore opportunities to conduct asset enhancement initiatives for organic rental income growth.

SIA Engineering Company Ltd (SGX: S59)

SIA Engineering, or SIAEC, is seeing volumes rise sharply for both its line and base maintenance divisions as air travel returns with a bang.

The group reported a commendable set of earnings for FY2023 with revenue climbing 40.6% year on year to S$796 million.

Operating loss, however, came in almost 21% higher than last year at S$26.3 million because of a sharp spike in staff and material costs.

Net profit dipped just slightly from S$67.6 million in FY2022 to S$66.4 million in FY2023, helped by higher interest income and lower taxation.

SIAEC’s Line Maintenance division handled a total of 105,139 flights in FY2023, more than double the 47,877 a year ago.

At this level, flight recovery stood at 78.7% of pre-COVID levels, a sharp improvement from just 38.1% in March 2022.

Over at the Base Maintenance division, the number of light checks at SIAEC’s Singapore base jumped from 348 a year ago to 568 while heavy checks inched slightly from 93 to 94 over the same period.

For Clark Base, heavy checks grew 33.3% year on year to 32 for FY2023.

The group has proposed its first dividend since the onset of the pandemic with a recommended final dividend of S$0.055.

Looking ahead, the pace of recovery remains uncertain but the reopening of China’s borders is positive for a full recovery.

However, the risk of a global recession and higher costs could weigh on SIAEC’s results for FY2024.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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