Welcome to this week’s edition of top stock market highlights.
Grab Holdings (NASDAQ: GRAB)
Grab has hit a snag over its proposed acquisition of Trans-cab.
The super-app had signed an agreement back in July to acquire all the shares of Trans-cab, Singapore’s third-largest taxi operator.
The transaction, which is projected to improve Grab’s net profit, included Trans-cab’s entire fleet of 2,500 taxis and private-hire-vehicles (PHVs) along with its car rental business, maintenance workshop, and fuel pump operations.
However, the Competition and Consumer Commission of Singapore (CCCS) has raised concerns over this acquisition.
Based on industry and public feedback, CCCS felt that the purchase would increase the barriers to entry and expansion for Grab’s competitors.
Grab may obtain an edge over its competitors as it could affect Trans-cab drivers’ usage of other, competing platforms.
That said, investors should note that this is just the phase one review by CCCS and both parties involved may submit documentation to address the competition concerns.
Once received, the commission will conduct a more in-depth phase two review and will complete this extensive examination within 120 business days.
CCCS will also accept submissions that will help to “mitigate, remedy, or prevent the substantial lessening of competition” arising from this merger before making its decision.
Should either Grab or Trans-cab submit documentation to assist in this goal, CCCS will then make a favourable decision to bless the union.
This acquisition will have important implications for ComfortDelGro Corporation (SGX: C52), which is currently Singapore’s largest taxi company with a fleet of around 10,000 taxis.
US retail sales
Another data point has emerged to demonstrate the resilience of the US economy.
Retail sales came in stronger than expected for September, supported partly by sales in the automotive sector.
The Commerce Department reported that sales rose 0.7% last month to hit US$704.9 billion while sales for August were revised upwards to 0.8%.
These numbers demonstrate robust consumption despite interest rates hitting their highest level in 22 years.
Analysts have warned, however, that it may be a matter of time before tighter credit conditions bite as these higher rates need time to flow through the economy and impact consumer demand.
The 30-year mortgage rate in the US has hit 8% for the first time since 2000 with treasury yields soaring to 4.9%, their highest level since 2007, as investors expect further interest rate hikes by the US Federal Reserve.
Unsurprisingly, the high mortgage rates have resulted in plummeting housing applications as demand plunges.
The US central bank’s governor, Christopher Waller, said that officials can afford to hold off on interest rate increases as it closely watches incoming economic data.
Officials are slated to meet two weeks later for the Federal Reserve’s next decision and will weigh various data points including jobs and retail sales along with other data to determine if inflation is slowing down.
Aztech Global (SGX: 8AZ)
Aztech Global has released its latest third quarter 2023 (3Q 2023) earnings.
The group provides one-stop design and manufacturing services to blue-chip customers and technology companies.
For the first nine months of 2023 (9M 2023), Aztech Global’s revenue rose 10.7% year on year to S$672 million.
Of note, the sale of Internet of Things (IoT) devices and data communication products climbed 11.1% year on year to S$659.7 million, comprising 98.2% of the group’s total revenue.
Net profit improved by 15.9% year on year to S$73.8 million.
Aztech Global had a net cash position of S$215.4 million as of 30 September 2023 and generated a positive free cash flow of S$26.6 million for 9M 2023.
The group’s 300,000 square-foot Pasir Gudang facility commenced production in 3Q 2023 with total production requirements fulfilled by its facilities in both Singapore and Malaysia.
Aztech Global’s order book stood at S$322.7 million as of 16 October 2023 with the lead time reduced to two to three months, down from nine to 12 months during the pandemic.
Orders were secured for IoT solutions across different market sectors including communication, security, health technology, automotive, and point of sales.
Meanwhile, the group also launched two products for vision technology under its proprietary “Kyla” brand in August 2023.
The plan is to target the local preschool education segment and to expand its market for these two products internationally by the end of 2023.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.