Welcome to this week’s edition of top stock market highlights.
US interest rates
The interest rate debate just got more confusing after the latest speech by Jerome Powell, chairman of the US Federal Reserve.
On one hand, he stated that the country would likely not need another rate increase to temper inflation.
Yet, on the other hand, he avoided providing a timeline for potential rate cuts down the road.
Policymakers at the central bank kept interest rates unchanged in the range of 5.25% to 5.5% once again and would need very persuasive evidence that inflation is not coming down to push them to increase rates.
This announcement effectively left investors in limbo over the timing and extent of rate cuts for the remainder of 2024.
To be fair, the Federal Reserve did state that it would continually assess all economic data before making any decisions.
With the data collected thus far, the policymakers did not have the confidence to start cutting rates yet as inflation has not fallen decisively to the 2% target.
Personal consumption expenditures rose 2.7% in March from a year ago, accelerating from a 2.5% advance back in January.
This so-called “lack of further progress” in bringing inflation down could reflect the difficulty in tweaking policy to achieve specific economic goals.
Of course, these policymakers are also keeping their eye trained on the health of the economy.
If there is an unexpected weakening in the labour market, Powell is prepared to lower borrowing costs to stimulate the economy.
But for now, the bets for an interest rate cut later this year are off.
Wilmar International Limited (SGX: F34)
Wilmar released its first quarter of 2024 (1Q 2024) business update recently.
Revenue dipped by 7.3% year on year to US$15.7 billion in line with the decline in most commodity prices since 1Q 2023.
Sales volume, however, posted year on year increases across its core businesses.
Food Products segment saw sales volume grow by 13.9% year on year to 8.2 million metric tonnes (MT) in 1Q 2024.
Feed and Industrial Products’ sales volume increased by 7% year on year to 14.6 million MT over the same period.
Net profit for the blue-chip integrated agribusiness tumbled by 22.6% year on year to US$302.9 million.
Stripping out one-offs and exceptional items, Wilmar’s core net profit fell by a gentler 14% year on year to US$328.4 million.
The group’s operating cash flow also declined by 17.4% year on year to US$1.8 billion.
Management believes that the global economic outlook will continue to remain uncertain and that the difficult operating conditions will carry on for the rest of 2024.
The agribusiness giant is also grappling with a recent missile attack on its tank terminal facility in Ukraine that will take around six months to rebuild.
CDL Hospitality Trusts (SGX: J85)
CDL Hospitality Trusts, or CDLHT, reported a robust set of financial numbers for 1Q 2024.
Total revenue rose 7.3% year on year to S$65.3 million.
Net property income increased by 6.8% year on year to S$34.9 million.
Its Singapore hotels reported healthy operating statistics with the average occupancy rate at 82.1% as of 31 March 2024, 14.2 percentage points higher than the prior year.
Revenue per available room, or RevPAR, jumped 16.6% year on year to S$205.
As for CDLHT’s overseas hotels, every country recorded a positive year-on-year RevPAR ranging from 0.5% (the UK) to 32.6% (Japan).
The hospitality trust’s gearing stood at 37.8% with a debt headroom of almost S$769 million before hitting the 50% threshold.
However, the trust’s cost of debt was fairly high at 4.3% and its interest coverage ratio remained fair at 2.7 times.
Only slightly more than half of CDLHT’s loans are pegged to fixed rates.
Singapore’s tourism sector still has room for further growth with the development of several attractions such as the Mandai Nature Precinct, Jurong Lake District, and the Sentosa-Brani Masterplan.
The government is also planning to construct Changi Airport’s Terminal 5 which will bring in an additional 50 million passengers per year.
This new terminal will be operational in the mid-2030s.
Meanwhile, CDLHT is lining up asset enhancement initiatives (AEIs) for Ibis Perth to refurbish 192 rooms in phases from May 2024.
Another AEI is slated to commence in April 2024 for the Grand Millennium Auckland.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
