Top Stock Market Highlights of the Week: Manulife US REIT, SATS, China Cuts Interest Rates and Sea Limited

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

Manulife US REIT (SGX: BTOU)

Manulife US REIT, or MUST, released its fiscal 2023’s first half (1H 2023) earnings recently.

The US office REIT saw its distributable amount tumble 17.4% year on year to US$37.9 million on the back of a 3.9% year on year decline in net property income.

However, there was no distribution declared for 1H 2023 because of a breach of a financial covenant in some of MUST’s financing documents.

CEO Tripp Gantt is working with MUST’s sponsor to negotiate with the REIT’s lenders to address this breach and, if necessary, bolster its liquidity needs.

Other measures include a disposition mandate to be tabled for unitholder approval that seeks to offload certain assets to generate more liquidity.

Concurrently, MUST is also undertaking a strategic review to decide on asset sales or capital injection to strengthen the REIT.

Meanwhile, the occupancy rate for its portfolio stood at 85.1% and MUST recorded a positive rental reversion of 3.7% for new leases signed.

Gearing came in at 56.7% because of a 14.6% decline in MUST’s portfolio valuation but is not considered a breach as the drop in valuation was beyond management’s control.

SATS Ltd (SGX: S58)

SATS has reported its fiscal 2024 first quarter (1Q FY2024) results, and this is the first time that the ground handler is incorporating the financial performance of its Worldwide Flight Services (WFS) acquisition.

Revenue leapt more than three-fold year on year to S$1.2 billion and the group reported an operating profit of S$10.2 million for 1Q FY2024.

Core net loss (excluding one-off integration expenses and government reliefs) improved by 39.8% year on year to S$17.4 million from a net loss of S$28.9 million a year ago.

Going forward, SATS has also successfully restructured its debt and will enjoy annualised interest cost savings of S$40 million.

Because of the addition of WFS’ numbers, SATS saw flights handled soar more than three-fold year on year to 145,900 while meals served went from 13.7 million in 1Q FY2023 to 22.4 million in 1Q FY2024.

The number of passengers handled nearly doubled year on year to 18.9 million.

The group has leveraged the expanded network to clinch new contracts with more than S$15 million in annual revenue.

Singapore’s Ministry of Transport anticipates that Changi Airport should fully recover its pre-pandemic capacity by the first half of 2024, providing a further boost for SATS’ financial numbers.

China’s latest economic data

It is looking increasingly bleak for China as the country released its latest batch of economic data.

The world’s second-largest economy saw retail sales inch up just 2.5% year on year for July, down from the 3.1% year-on-year growth in June.

This level was also below analysts’ expectations and signalled a slump in China’s post-COVID rebound.

Industrial production grew just 3.7% year on year for July, down from the 4.4% logged in June.

China’s central bank cut a key interest rate, the medium-term lending facility rate, just before the latest figures were released, underscoring the government’s effort in boosting its economy.

To make matters worse, China’s National Bureau of Statistics also stopped publishing youth unemployment figures, leading many to believe that the problem may be worsening.

Back in June, joblessness among 16-to-24-year-olds hit an all-time high of 21.3%, an alarming statistic by any standard.

With the Middle Kingdom slipping into deflation for the first time in two years because of weak consumption and exports, China is in danger of falling short of its 5% target growth rate for 2023.

Sea Limited (NYSE: SE)

Sea Limited reported its 2023’s second quarter (2Q 2023) earnings and it was a pleasant surprise to see the gaming cum e-commerce company report its third consecutive quarter of profits.

Revenue rose 5.2% year on year to US$3.1 billion while net profit clocked in at US$331 million, reversing the net loss of US$931.2 million in the prior year.

Sea’s e-commerce division saw revenue jump 20.6% year on year to US$2.1 billion.

However, adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) slipped to US$150.3 million for 2Q 2023, lower than 1Q 2023’s US$207.7 million.

The Singaporean company’s digital entertainment division, however, continued to see year-on-year user attrition.

Quarterly active users fell by 12.1% year on year to 544.5 million in 2Q 2023 while quarterly paying users plunged by a larger 23.7% year on year to 443 million.

Bookings also slipped by 4% quarter on quarter to US$443.1 million.

A bright spot was Sea Limited’s digital financial services division which enjoyed an encouraging 53% year-on-year rise in revenue to US$427.9 million.

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

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