Top Stock Highlights of the Week: Alibaba, Retail Rents, Daiwa House Logistics Trust and StarHub

Welcome to this week’s edition of top stock highlights where we feature interesting business snippets.

Alibaba Group (HKSE: 9988) (NYSE: BABA)

Alibaba’s list of troubles is far from over.

According to Bloomberg, the Chinese technology firm could be one step closer to being kicked off the US stock exchange for failing to allow American officials access to review its financial audit.

While other countries have allowed this practice as a standard procedure, Chinese and Hong Kong officials have adamantly refused.

Their reasons for doing so? Confidentiality and “national security”.

If Alibaba fails to comply by the end of this year, it risks being delisted from the New York Stock Exchange.

To add to its woes, its recent fiscal 2023’s first quarter (1Q2023) results for the period 30 June 2022 saw net profit halving to RMB 22.7 billion.

Revenue was flat year on year at RMB 205.6 billion while operating profit declined 19% year on year to RMB 24.9 billion.

On a positive note, free cash flow increased slightly to RMB 22.2 billion from RMB 20.7 billion in 1Q2022.

Daniel Zhang, CEO of the group, remarked that signs of recovery had begun appearing in June and believes that Alibaba’s business model will keep the company resilient and allow it to cater to different customers’ demands.

Retail rents

Retail rents in suburban areas have probably hit bottom and are set to rise again soon.

Analysts from Cushman and Wakefield, Savills and Edmund Tie have chimed in to give their views.

More people are adopting a hybrid working model and continue to visit the malls near their homes to purchase food and essential items.

These suburban malls have similar offerings to malls in central areas as retailers have begun expanding their presence to capture more customer footfall.

Edmund Tie expects suburban retail rents to rise by close to 8% this year, while other segments will grow by 3% to 5%.

These observations are music to the ears of retail REITs as this implies that they should see positive rental reversions soon.

Leading the pack is Frasers Centrepoint Trust (SGX: J69U) with its portfolio of nine Singapore suburban malls worth S$6.1 billion as of 30 June 2022.

Starhill Global REIT (SGX: P40U) should also benefit as it owns interests in Wisma Atria and Ngee Ann City malls along Orchard Road.

Retail and commercial REITs CapitaLand Integrated Commercial Trust (SGX: C38U) and Mapletree Commercial Trust (SGX: N2IU) will also enjoy higher retail rentals for the retail portion of their portfolios.

Daiwa House Logistics Trust (SGX: DHLU)

Daiwa House Logistics Trust, or DHLT, has released its inaugural set of financial statements for 2022’s first half (1H2022).

Gross revenue stood at S$38.9 million, 3.6% below its forecast of S$40.4 million.

Net property income came in at S$30 million, 4.5% lower than the forecast of S$31.5 million.

The discrepancies were due to the weakening of the Japanese Yen (JPY) against the Singapore dollar (SGD), as the REIT’s properties earn rental income in JPY.

Distribution per unit was in line with the REIT’s forecast at S$0.0309.

DHLT’s portfolio maintained high occupancy at 98.6% and has renewed all leases that were set to expire in 1H2022.

Meanwhile, the REIT also enjoyed a positive rental reversion of 3.1% for its new and renewed leases.

Elsewhere, aggregate leverage stood at 34% with a very low cost of debt of just 0.9%.

All the REIT’s debt is on fixed rates, thus protecting its distributable income from surging interest rates.

StarHub Limited (SGX: CC3)

StarHub has also released its 1H2022 earnings.

Total revenue rose 8.7% year on year to S$1.06 billion but operating profit dipped 8.6% year on year to S$95.7 million.

Net profit came in 10.3% lower year on year at S$60.9 million.

Free cash flow plunged by 66.4% year on year to S$61.3 million from S$182.1 million a year ago.

An interim dividend of S$0.025 was declared, unchanged from the prior year.

Drilling into the second quarter of 2022 (2Q2022), the telco’s Mobile segment saw revenue inch up 3.8% year on year to S$134.2 million due to higher postpaid revenue, while churn remained low at 0.7%.

Meanwhile, the group’s Broadband division saw a 33% year on year jump in revenue for the quarter to S$64.4 million with average revenue per user (ARPU) heading higher to S$34 from S$32 a year ago.

Elsewhere, StarHub’s Entertainment segment enjoyed higher revenue at S$49.2 million versus S$46.7 million in 2Q2021 but saw ARPU decline by 11.4% year on year to S$31.

For 2022, the telco expects service revenue to rise by at least 10% year on year and it will pay out a dividend per share of no less than S$0.05.

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

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