Top Stock Market Highlights of the Week: Nanofilm Technologies, Keppel REIT, Singapore Core Inflation and China’s Economic Growth

Welcome to this edition of top stock market highlights.

Nanofilm Technologies (SGX: MZH)

The nanotechnology solutions company released its business update for the first quarter of 2023 (1Q 2023).

Revenue for 1Q 2023 plunged 40% year on year to S$33 million, principally due to the cyclical nature of the 3C production cycle along with China’s slow recovery post-re-opening.

The Advanced Materials division, which made up three-quarters of the group’s revenue, reported a slower quarter mainly because of a strong comparative base in 1Q 2022.

Nanofilm’s Industrial Equipment division, which took up nearly one-fifth of group revenue, also saw softer demand as customers remained cautious and cut back on capital spending.

Its smallest division, Nanofabrication, similarly suffered from a weaker quarter because of lower end-consumer demand.

Despite the weak quarter, Nanofilm continued with its business development initiatives.

In Japan, renovation for a 900 square metre manufacturing site has commenced while in Europe, the group is currently sourcing for a site to offer its advanced materials coating services.

Meanwhile, the group is also exploring collaborations and partnerships that can help it to extend its presence into more regions and markets.

Nanofilm has admitted that the near-term outlook remains challenging but expects business to pick up in the second half of this year.

Keppel REIT (SGX: K71U)

Keppel REIT has also released its 1Q 2023 operational update.

Property income rose 5.9% year on year to S$57.7 million with net property income (NPI) inching up 1.3% year on year to S$40.5 million.

The better performance came about from higher NPI recorded across the majority of the REIT’s properties in 1Q 2023.

However, borrowing costs spiked up 27.3% year on year to S$15.4 million, resulting in distributable income falling by 6.7% year on year to S$50.2 million.

The manager of Keppel REIT has declared an anniversary distribution of S$20 million annually to celebrate the REIT’s 20^th anniversary in 2026; hence the REIT has an additional S$5 million of distributable income for 1Q 2023.

After accounting for this additional distribution, distributable income inched up 2.6% year on year to S$55.2 million.

Keppel REIT’s portfolio occupancy level remained healthy at 96.3% as of 31 March 2023 with aggregate leverage at 38.7%.

The REIT’s cost of debt has surged from 2.29% in the previous quarter to 2.86% in the current quarter.

To be sure, 75% of its borrowings are on fixed rates which will help to mitigate higher finance costs.

Furthermore, the REIT’s project in Sydney, Blue & William, achieved practical completion on 3 April and will start contributing to the REIT’s income from 2Q 2023 onwards.

Singapore’s core inflation

The Monetary Authority of Singapore (MAS) released its half-yearly policy statement recently, and it was a welcome relief.

The central bank expects core inflation to decline considerably in the second half of 2023, even though it may stay “elevated” for the next few months.

As a recap, Singapore’s core inflation hit 5.5% for February, its highest level in 14 years.

For 2023 as a whole, core inflation is projected to average between 3.5% and 4.5%.

However, the higher inflation is partially driven by the increase in the GST rate from 7% to 8%.

Excluding this, MAS has stressed that core inflation should be even lower than the estimated 2.5% by the end of this year and will be more in line with historical averages.

This news should soothe the worries of anyone concerned about persistently-high inflation that is raising the prices of necessities, food and beverages.

China’s economic growth rate

There’s good news for investors who parked their money in China.

The country’s economy grew at its fastest pace in a year due to a combination of stronger consumer spending and higher factory output.

Gross domestic product (GDP) grew by 4.5% year on year in 1Q 2023, according to the National Bureau of Statistics.

This level was significantly higher than the 2.9% logged in the fourth quarter of 2022 and above the 4% forecasted by economists.

Despite the healthy GDP number, other economic indicators have provided mixed signals.

Inflation remained weak even though credit and exports surged, hinting at possibly weak domestic consumer demand.

The government may decide to roll out more stimulus measures to boost growth as Beijing had set a GDP growth target of 5% for 2023.

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

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