Top Stock Market Highlights: SATS, ARA US Hospitality Trust, Nanofilm Technologies and Singapore’s Inflation

Welcome to the latest edition of top stock market highlights.

SATS Ltd (SGX: S58)

Investors have been waiting with bated breath for news on SATS’ rights issue ever since the ground handler announced its S$1.6 billion transformative acquisition.

Just this week, the airline food catering group finally announced the details of this rights issue.

A shareholder is entitled to subscribe to 323 rights shares for every 1,000 existing shares at an issue price of S$2.20 per rights share.

This issue price represents a 16% discount to the theoretical ex-rights price based on the closing price of S$2.75 for SATS before the announcement of the rights issue.

Temasek Holdings, which owns close to 40% of SATS, will take up its pro-rata entitlement to the rights issue while the remainder will be underwritten by five banks which include Singapore’s three local banks along with Citigroup (NYSE: C) and Bank of America (NYSE: BAC).

SATS’ shares will trade cum rights up till 28 February and will go “ex-rights” on 1 March.

Investors should note that the total cost of the acquisition will be funded via this rights issue as well as the issuance of a three-year Euro-denominated bond of around S$700 million plus the group’s internal cash balance.

ARA US Hospitality Trust (SGX: XZL)

ARA US Hospitality Trust, or ARAHT, is a hospitality trust that owns 36 select-service hotels with 4,707 rooms across 19 states in the US.

The hotel brands include Hyatt Place and Hyatt House under the Hyatt Hotels Corporation (NYSE: H), and AC Hotels, Courtyard, and Residence Inn, brands that are parked under Marriott International (NASDAQ: MAR).

ARAHT reported a sharp recovery for its 2022 results along with an increase in its portfolio’s valuation.

Revenue jumped 29.3% year on year to US$169 million as pent-up travel demand led to a surge in bookings for the trust’s hotels.

Net property income surged by 66.4% year on year to US$41.4 million and distributable income shot up more than eightfold year on year to US$17.5 million.

ARAHT’s distribution per stapled security (DPSS) soared 760% year on year from US$0.00355 to US$0.03054.

The trust also enjoyed stronger operating metrics, with the occupancy rate across its portfolio rising by 8.2 percentage points year on year to 65.3%.

Average Daily Rate climbed by 17.2% year on year to US$131 while revenue per available room climbed by 33.9% year on year to US$85.

To add icing to the cake, ARAHT’s portfolio also saw a 9.4% year on year valuation uplift to US$747.8 million.

The increase in asset value and a slight decline in total debt allowed the trust’s aggregate leverage to dip below 40% from 44.3% a year ago.

However, the cost of debt rose from 3.4% in 2021 to 3.8% in 2022, but ARAHT had 82% of its borrowings on fixed rates to mitigate the impact of higher finance costs.

Nanofilm Technologies International Ltd (SGX: MZH)

Nanofilm reported a tough 2022 as geopolitical tensions impacted supply chains and customers delayed their capital spending.

The group reported a 3.8% year on year dip in revenue to S$237.4 million.

Net profit, however, fell by 29.6% year on year to S$43.8 million due to higher selling, distribution, and administrative expenses.

Nanofilm’s core division, Advanced Materials, saw revenue dip by 3.6% year on year to S$187.2 million.

The decline was somewhat offset by a more than year on year doubling of revenue for its Nanofabrication business unit to S$19.1 million.

Its Industrial Equipment business unit, however, saw revenue plunge nearly 31% year on year to S$30.9 million as customers withheld orders because of uncertain business conditions.

Despite the poorer results, Nanofilm managed to generate a positive free cash flow of S$10.3 million for 2022, a reversal from the negative free cash flow of S$34.5 million in the previous year.

The group raised its final dividend by 10% year on year to S$0.011 despite the weaker results.

Nanofilm has warned that 2023 will continue to be “challenging” but that it will continue to execute its strategic plans to grow the business to achieve its target of S$500 million in revenue and S$100 million in net profit by 2025.

Singapore’s inflation rate

The first month of 2023 has continued the trend of high inflation witnessed last year.

Singapore’s core inflation weighed in at 5.5% year on year for January and was at its highest level since November 2008.

The increase was driven by the rise in the Goods and Services Tax from 7% to 8%.

The headline inflation rate stood at 6.6%, slightly above the 6.5% recorded in December 2022.

Food inflation was the main culprit this time, posting an 8.1% year on year jump as the price of prepared meals surged.

Housing rents also played a part in pushing inflation higher, with the increase registering a 5% year on year jump in accommodation inflation.

Fortunately, the government has announced its recent Budget 2023 which will help to partially offset the negative effects of inflation.

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

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