January 20, 2023


Netflix Added Millions More Subscribers in Fourth Quarter

Netflix added millions more subscribers in the fourth quarter than Wall Street expected. The company also disclosed that co-CEO Reed Hastings would be stepping down from his position and transitioning to the post of executive chairman. Greg Peters, the company’s chief operating officer has been promoted to co-CEO alongside the already established Ted Sarandos. The EPS was 12 cents vs 45 cents per share, according to Refinitiv. Netflix’s EPS missed largely due to a loss related to euro-denominated debt, but its margins of 7% still topped Wall Street’s expectations. The depreciation of the U.S. dollar compared to the euro during the fourth quarter isn’t an operational loss.The revenue was US$7.85 billion. The company predicts that revenue growth in the first quarter 2023 will rise 4%, higher than the 3.7% Wall Street is currently projecting. Netflix says this growth will be driven by more paid memberships and more money per paid membership. 

This is the first quarter that Netflix’s new ad-supported service is included in its earnings results. The company launched this cheaper tier in November, but has not disclosed what portion of the new subscriptions are from users who have opted for this service. Netflix said that it has seen comparable engagement from its new ad tier members as it has seen with its regular consumers. Additionally, it noted that it has not seen a significant number of people switching plans. So, those who subscribe to its premium and more expensive offerings are rarely bumping down to the cheaper ad-supported model. “We wouldn’t be getting into this business if it couldn’t be a meaningful portion of our business,” said Spencer Neumann, the company’s chief financial officer, during the call. “We’re over US$30 billion in revenue, almost US$32 billion in revenue, in 2022 and we wouldn’t get into a business like this if we didn’t believe it could be bigger than at least 10% of our revenue.” Additionally, the first quarter will mark Netflix’s preliminary roll out of its paid sharing program, which aims to make money from users who previously shared passwords with people outside their own homes.

JP Morgan and Standard Chartered Received Regulatory Approval to Expand in China

JPMorgan and Standard Chartered won Chinese regulatory approval to expand operations in China as it encourages expansion by foreign companies after lifting its restrictive COVID-19 policies. China is speeding up the process of granting permission to foreign institutions to boost the confidence of overseas investors as part of efforts to revive its economy battered by the COVID measures, which were scrapped last month. JPMorgan’s asset management arm will be allowed to take full ownership of China International Fund Management Co. (CIFM), in which it holds a 49% stake, the China Securities Regulatory Commission (CSRC) said. The approval came more than two years after the U.S. bank had applied to buy out CIFM, in 2020. JPMorgan Asset Management (JPMAM) said that CIFM, which overseas client assets of roughly 170 billion yuan, would be integrated into its global operating model. “Our strategic goal is to significantly grow JPMAM China to become the leading foreign asset manager in China and contribute to JPMAM becoming the leading manager of China assets to global investors,” Dan Watkins, its Asia Pacific chief executive officer, said in a statement. “Symbolically it’s very important, given both the size of the deal, and also the fact that China is meant to be one of JPMorgan’s primary growth engines moving forward,” said Peter Alexander, managing director of fund consultancy Z-Ben Advisors, which estimates the deal to be worth about US$1 billion. 

Also, British bank Standard Chartered won approval to set up a new securities brokerage unit in China, the CSRC said. Chinese regulators and government officials were preoccupied with the zero-COVID policy in 2022, and preparation for October’s 20th Communist Party Congress, but approvals granted to foreign institutions have recently picked up pace, Z-Ben’s Alexander said. The CSRC gave a green light to Schroders on Jan. 13, allowing the British asset manager to expand its footprint in China by setting up a mutual fund unit. Canada’s Manulife Financial Corp in November received regulatory approval to take full control of its Chinese mutual fund venture. The same month, U.S. asset manager Neuberger Berman won approval to set up a fund unit in China. JPMorgan said that CIFM would be operating under the JPMAM brand and its China private fund unit would also be integrated into JPMAM China as it consolidates onshore operations.

SunLife Struck A 15-Year Bancassurance Partnership with Hong Kong with Dah Sing Bank

Sun Life Financial Inc has struck a 15-year bancassurance partnership in Hong Kong with Dah Sing Bank, a move that is likely to boost the Canadian insurer’s presence in the special administrative region of Hong Kong. “Sun Life will pay an amount of HK$1.5 billion for this exclusive arrangement, with ongoing variable payments to Dah Sing Bank based on the success of the partnership, both companies said in a joint statement.  Under the bancassurance deal, Sun Life will exclusively provide life insurance services to Dah Sing Bank’s 570,000 retail banking customers. Sun Life said it had a 130-year history in Hong Kong, catering to individual and group clients for life, health and wealth products and services. The distribution of Sun Life products is expected to start in July 2023 after the completion of regulatory processes and approval, the companies said.

U.S. Government Hit its US$31.4 Trillion Borrowing Limit on Thursday

The U.S. government hit its US$31.4 trillion borrowing limit, amid a standoff between the Republican-controlled House of Representatives and President Joe Biden’s Democrats on lifting the ceiling, which could lead to a fiscal crisis in a few months. Treasury Secretary Janet Yellen informed congressional leaders including House Speaker Kevin McCarthy that her department had begun using extraordinary cash management measures that could stave off default until June 5. Republicans, with a newly won House majority, aim to use the time until the Treasury’s emergency manoeuvres are exhausted to exact spending cuts from Biden and the Democratic-led Senate.Corporate leaders and at least one credit ratings agency warned a long standoff could rattle markets and unsettle an already shaky global economy. Yellen warned that the June date was subject to “considerable uncertainty” due to the challenge of forecasting payments and government revenues months into the future. But there was no sign that either Republicans or Biden’s Democrats were willing to budge. Republicans are trying to use their narrow House majority and the debt ceiling to force cuts to government programs, and argue that the Treasury could avoid default during a standoff by prioritising debt payments. 

The White House is rejecting the idea out of hand. “There will be no negotiations over the debt ceiling,” White House deputy press secretary Olivia Dalton reiterated. The prospect for brinkmanship has raised concerns in Washington and on Wall Street about a bruising fight over the debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted a downgrade of the U.S. credit rating and years of forced domestic and military spending cuts. Congress adopted a comprehensive debt ceiling, the statutory maximum of debt the government can issue, in 1939, intending to limit its growth. The measure has not had that effect, as, in practice, Congress has treated the annual budget process separately from the debt ceiling. The Republican plan calls for balancing the federal budget in 10 years by capping discretionary spending at 2022 levels. In the meantime, House Republicans are vowing to reject sweeping government funding bills from Senate Majority Leader Chuck Schumer, akin to the US$1.66 trillion bipartisan omnibus package that Congress passed late last year.

South Korea’s Economy Forecast to Have Contracted in the Fourth Quarter

South Korea’s export-dependent economy is forecast to have contracted in the fourth quarter, putting in its worst performance in 2-1/2 years as falling foreign demand and rising interest rates hurt private consumption, a Reuters poll found. Asia’s fourth-largest economy is expected to have shrunk by a seasonally-adjusted 0.3% in the October-December quarter after growing 0.3% in the preceding period. All but one of 13 economists in the Jan. 16-19 Reuters poll forecast a contraction, with the other expecting growth to flatline. If realised, it would be the sharpest contraction since mid-2020 when the COVID-19 pandemic was cementing its grip on the world.On a year-on-year basis, gross domestic product (GDP) likely grew 1.5% in the fourth quarter, the median forecast of 21 economists showed, half the 3.1% growth in the third quarter. Forecasts ranged from 0.7% to 1.9%.The data will be released on January 26. Exports fell 9.5% in December from the year before and may weaken further amid growing fears of global recession and an economic slowdown in China, the country’s largest trading partner. That, along with the Bank of Korea’s (BOK) aggressive interest rate hikes to curb decade-high inflationary pressures will weigh on the economy.

The BOK raised its key policy rate by 25 basis points last week to 3.50%, delivering a total of 300 basis points of hikes since August 2021 to contain inflation. But as inflation cools and growth declines investors have boosted bets the BOK has reached the end of its rate hike cycle, which would make it the first central bank in the region to do so. Surging living costs are eroding household income and darkening the outlook for consumption in Korea, where private spending accounts for roughly half of gross domestic product. House prices fell by nearly 2% last month, the fastest drop since at least 2003. “We expect a sharp contraction in exports this year. We also expect quarterly contractions in private consumption and fixed investment in H1,” said Sung Eun Jung, senior economist at Oxford Economics. “As we enter H2, we think both domestic and external forces will turn more favourable as price pressures ease and China’s growth recovers.” According to a separate Reuters poll, growth was forecast at 2.5% in 2022, slowing to 1.9% this year.

P&G’s Sales Volumes Fell 6% in the Second Quarter

Tide detergent maker Procter & Gamble Co raised its full-year sales forecast and said it plans to continue raising prices despite a drop in sales volumes, warning that high commodity costs were pressuring profits. P&G’s sales volumes fell 6% in its second quarter ended Dec. 31, led by declines in the company’s grooming business, which includes brands like Gillette and Braun, and its fabric & home care division, which includes Tide, Ariel and Mr. Clean. P&G, like other consumer goods companies, has hiked prices multiple times to cover soaring transportation, commodity and labour costs, as well as the impact of a stronger U.S. dollar on its overseas revenue. While the price hikes have been met with less pushback compared to discretionary products, customers have still bought fewer of its products. P&G sees the United States, its largest market, as relatively strong, while consumers in China, its second-biggest market, have yet to bounce back following the COVID lockdowns. P&G’s store brand competitors in Europe, where shoppers are buckling under inflation, have also raised prices more slowly than the company, Chief Financial Officer Andre Schulten said, adding to pressure on sales in the region.

Average prices across P&G’s product categories rose 10% in the quarter compared to a year earlier. P&G said organic sales in China were down 7% due to COVID lockdowns and weaker consumer confidence. Schulten added that China’s re-opening has not had an impact yet on consumption. “None of us globally really understand what the recovery rate in China is going to be,” said CEO Jon Moeller. P&G’s high-end SK-II skincare brand, popular in Asia, saw COVID-related declines. The company said it expects fiscal 2023 total sales to range between flat to a 1% drop, compared with its previous forecast of a 1% to 3% fall. It maintained its annual earnings forecast of flat to a 4% rise. P&G said net sales fell 1% to US$20.77 billion in the quarter, hurt by the impact of a stronger dollar on overseas revenue but beating Wall Street expectations. It’s the company’s first fall in quarterly net sales in a little over five years, according to Refinitiv data. Analysts’ on average estimated sales of US$20.73 billion, according to IBES data from Refinitiv. The company’s earnings per share of US$1.59 was in line with analysts’ average estimate.

JPMorgan Chase Set Aside at Least US$10 Billion into the World of Direct Lending

JPMorgan Chase & Co has set aside at least US$10 billion to back its foray into the world of direct lending, a person with knowledge of the matter told Reuters. The Wall Street titan’s move into the market is likely to put it head to head with established sector heavyweights such as Ares Management Corp and Apollo Global Management. The largest U.S. bank by assets is also prepared to make many more billions of dollars available if it sees the opportunity to deploy additional capital, according to Bloomberg Law, which had first reported the news. Last week, JPMorgan Chief Financial Officer Jeremy Barnum told investors the bank was “absolutely open for business” in leveraged lending even as other U.S. banks are expected to book significant losses on risky loans underwritten last year. The bank’s finance chief was commenting alongside its fourth-quarter results, which saw the lender beat forecasts for profit on the back of a strong performance at its trading unit. JPMorgan Asset Management has in recent years separately expanded its private credit platform unit, which targets opportunities in the direct lending segment, with plans to expand into other private credit strategies in the future.

Lufthansa Offered to Buy Minority Stake in ITA Airways

German carrier Lufthansa said it had offered to buy a minority stake in ITA Airways, betting on reviving the loss-making successor to Italy’s Alitalia and expanding its footprint in Europe. Lufthansa said Italy is the most important market outside of its existing home markets and the United States, noting its prominence as both a business and tourism destination. The offer was for a 40% stake in the company, two sources close to the matter said. One of the sources said it was valued at 200-300 million euros. The move comes as Europe’s airlines have struggled to recover their balance sheets after the years-long COVID-19 pandemic and as legacy carriers have looked to consolidation to help them compete with low-cost airlines. The cost-of-living crisis in Europe has stirred concerns about softening demand at a time when carriers are also struggling with higher costs of wages, fuel and other inputs. Italy’s Economy Ministry said later Lufthansa was the only bidder. It will now review the offer and decide whether to approve it. Under the terms of the bidding process, Lufthansa has to ensure it will develop Italy’s main hubs and guarantee ITA has access to strategic markets as well as increases its long-haul routes.

The new right-wing administration in Rome passed a decree in December to initially sell a minority stake through capital increases, in order to speed up a full divestment in ITA. Beside its domestic German business, Lufthansa already operates the brands Swiss, Austrian Airlines and Brussels Airlines. ITA in 2021 posted an operating loss of 170 million euros and analysts believed a merger with a stronger rival was the only option left for the airline, seen as unable to survive national and international competition as a standalone company. Lufthansa became the frontrunner after Italy held talks last year with U.S. private equity fund Certares, Air France KLM and Delta about a deal but failed to reach an agreement. Alitalia was considered a national icon in Italy, and successive governments spent an estimated 10 billion euros to keep it afloat in its last 14 years of life, despite heavy losses and bad management. Rome has already pledged more than 1 billion euros for ITA and under a deal with the European Union, it could provide another 250 million this year. Analysts say it could take a long time before Lufthansa can turn ITA around.


Suntec REIT FY2022 Distributable Income Up 3.4% to S$255.5 Million

Suntec REIT reports distributable income of S$255.5 million for the period from 1 January to 31 December 2022 (“FY 22”), which was 3.4% higher than the year ended 31 December 2021 (“FY 21”). Distribution per unit (“DPU”) to unitholders of 8.884 cents for FY 22 was 2.5% higher year-on-year. The increase in DPU was attributed to a capital distribution of S$23.0 million, with improvement in distributable income from better operating performance being eroded by higher financing costs. For the period 1 July to 31 December 2022 (“2H 22”), the Singapore and United Kingdom portfolios remained resilient while contribution from the Australia portfolio was lower year-onyear due to leasing downtime and absence of surrender fee received in 2H 21. 2H 22 DPU of 4.074 cents was weighed down by a sharp increase in financing costs. 

The cautious economic outlook will slow the pace of demand for office spaces. Office market is expected to soften notwithstanding tightness in new office supply. Rent reversion is expected to remain positive, though moderated. Revenue of the Singapore Office Portfolio is expected to strengthen on the back of past quarters of positive rent reversion. 

Mapletree Logistics Trust Third Quarter DPU Up 1.9% to 2.227 Cents

Mapletree Logistics Trust Management Ltd., as manager (the “Manager”) of Mapletree Logistics Trust (“MLT”), announced MLT’s financial results for 3Q FY22/23. Gross revenue for 3Q FY22/23 rose by 8.0% year-on-year (“y-o-y”) to S$180.2 million, mainly due to accretive acquisitions completed in 1Q FY22/23 and FY21/22. In tandem with higher gross revenue, net property income increased by 7.3% y-o-y to S$157.2 million. Overall growth was moderated by the depreciation of foreign currencies, mainly Japanese Yen, South Korean Won, Chinese Renminbi and Australian Dollar, against the Singapore Dollar. At the distribution level, the impact of weakening currencies is partially mitigated through the use of foreign currency forward contracts to hedge the income from overseas assets. Accordingly, the amount distributable to Unitholders was S$107.1 million, 10.8% higher y-o-y, while distribution per Unit (“DPU”) grew 1.9% to 2.227 cents on an enlarged unit base. DPU would have increased by 8.6% or 0.189 cents in 3Q FY22/23 on a like-for-like basis based on the 3Q FY21/22 exchange rates. 

Amidst the current uncertain economic environment, MLT’s portfolio has remained resilient. Leases for approximately 540,935 square metres (“sqm”) were successfully renewed or replaced during 3Q FY22/23. The average rental reversion achieved for the period was +2.9%, with positive rental reversions registered in most markets across MLT’s portfolio. Accordingly, portfolio occupancy increased to 96.9% as at 31 December 2022 from 96.4% in the preceding quarter. The 0.5% improvement was attributable to higher occupancy rates in Singapore, China and Japan, partially offset by lower occupancy rates in Hong Kong SAR and South Korea. The occupancy rate of Malaysia was maintained at 99.7% while the portfolios in Australia, India and Vietnam continued to be 100% occupied. The weighted average lease expiry for the portfolio is approximately 3.2 years.  

GuocoLand 1HFY2023 Profit Attributable to Equity Holders Down 13% to S$59 Million

GuocoLand Limited (“GuocoLand”) and its subsidiaries (the “Group”) continued to achieve strong growth in revenue from both its Property Development and Property Investment businesses for the half year ended 31 December 2022 (“1H FY23”), proving the real estate group’s resilience amidst a challenging landscape for the sector. The Group’s profit from continuing operations leapt 51% to S$81.5 million in this period, while revenue grew 46% year-on-year to S$661.6 million from the same period a year ago (“1H FY22”). This was driven by the strong performance from both the Group’s Property Development and Property Investment businesses, where revenue grew 45% to S$550.4 million and 25% to S$74.8 million, respectively. As a result of the strong performance, the Group has reported profit attributable to equity holders of S$59.0 million for 1H FY23, down 13%. Excluding a one-off disposal gain of S$14.3 million recognised in 1H FY22, the Group had grown its overall profit for the period by 11%. 

As at 31 December 2022, the Group’s financial position remained strong with total assets of S$11.95 billion, of which investment property assets was S$6.01 billion. The Group’s gearing reduced from 1.0 to 0.9 times as total loans and borrowings were reduced by 8% from 30 June 2022, mainly due to repayments made during the period.  

CapitaLand Malaysia Trust FY2022 NPI Up 47.9% to RM152.5 Million DPU Up 117.9% to 4.02 Sen 

CapitaLand Malaysia REIT Management Sdn. Bhd. (CMRM), the manager of CapitaLand Malaysia Trust (CLMT), announced a distributable income of RM87.5 million for the year ended 31 December 2022 (FY 2022), up 124.1% from the RM39.0 million for FY 2021. Distribution per unit (DPU) for 4Q 2022 was 1.05 sen, bringing the full year DPU for FY 2022 to 4.01 sen, up 117.9%. Unitholders will receive the total DPU of 2.06 sen for the period from 1 July to 31 December 2022 on 22 February 2023. The book closure date is 8 February 2023. Net property income in FY 2022 was RM152.5 million, 47.9% higher than the same period a year ago. The increase was largely driven by higher revenue contribution from most of CLMT’s properties amidst the continued recovery in retail sentiment. Following the completion of CLMT’s acquisition of its maiden logistics property, Valdor Logistics Hub, the fully tenanted logistics park in Penang has begun contributing income from December 2022.

In line with CapitaLand’s 2030 Sustainability Master Plan, CLMT is committed to making a positive environmental and social impact on the communities where it operates. In this regard, CMRM has secured its maiden offer for sustainability-linked loan from CIMB. The five-year RM60 million sustainability-linked loan facility incorporates interest rate reductions linked to pre-determined sustainability performance targets set out for CLMT’s portfolio. Subject to fulfilment of terms and conditions, the loan will be available to refinance the bridging loans drawn for the acquisition of Valdor Logistics Hub. As at 31 December 2022, independent valuers appraised CLMT’s investment properties at RM3.9 billion, a slight decrease from the previous valuation. CLMT’s financial performance continued to strengthen in 4Q 2022 with a year-on-year improvement in portfolio revenue. Portfolio occupancy improved from 83.1% (as at 30 September 2022) to 85.9% as at 31 December 2022. Against the 2019 average, 4Q 2022 portfolio tenant sales per square foot grew 25.3%

Engro Corporation Issued Profit Warning for FY2022

EnGro Corporation Limited informed that based on a preliminary review of the unaudited consolidated results of the Group and the information currently available to the Company, the Group is expected to report a net loss for 2H2022 with a significant deterioration in profit for FY2022 compared to FY2021, whereby even a marginal loss may be possible. In 1H2022 interim results announcement, the Group has guided that its China GGBS JVs were expecting poorer performance in 2H2022. 

MedTecs International Corporation Issued Profit Warning for FY2022

Medtecs International Corporation Limited informed that, based on a preliminary review of the unaudited management accounts of the Group for the second half-year ended 31 December 2022 (“2H2022”) and the financial year ended 31 December (“FY2022”) and information currently available, the Group is expected to incur a significant net loss for 2H2022. The significant net loss for 2H2022 was mainly due to additional inventory provisions for personal protective equipment (PPE) amounting to approximately US$12 million, as a result of the continued easing of the COVID-19 restrictions, leading to reduction of demand and lower average selling price (ASPs) globally. Based on our market survey, including feedback from our existing customers, we have assessed that there is a general global decline in ASPs and demand for PPE. They deem it prudent to recognize the impact of these market factors in the realizability of the Group’s inventories. 

Lion Asiapac Issued Profit Warning for Second Quarter and 1HFY2023 

Lion Asiapac Limited issued a profit guidance on the unaudited financial results of the Group. Based on preliminary review, the Group is expected to report a loss for its second quarter and half year ended 31 December 2022 (“Financial Result”). This is largely owing to escalating production costs, unrealised exchange loss arising from the depreciating Renminbi and a one-time stock take adjustment incurred during the period.