| Greetings, Here's your daily business briefing. - Sam Altman is seeking trillions to rebuild the global semiconductor industry.
- Emaar Properties posts strong revenues amidst the best-ever year for Dubai's real estate.
- Owens Corning is acquiring door-maker Masonite International for $3.9B.
Thanks for reading! Stjepan
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| 1 | Sam Altman, CEO of OpenAI, is seeking trillions of dollars to revolutionize the global semiconductor industry, which sold $527B worth of chips in 2023. OpenAI, the most touted AI company, has struggled to secure adequate supply from Nvidia. More: - Altman has plans to raise funds between $5T and $7T, dwarfing the current size of the global semiconductor industry.
- The initiative aims to build chip foundries with the support of investors and chipmakers, potentially funded by debt, to address the increasing demand for AI computation and mitigate supply chain constraints.
- Challenges include determining the location of new chip plants, with Altman preferring the U.S. despite existing challenges in expanding chip production domestically.
- The entire list of investors is unknown, but potential partners reportedly include the United Arab Emirates Government, SoftBank, and Taiwan Semiconductor Manufacturing Company (TSMC).
Zoom Out: - Open AI's revenues have surpassed $2B annually, making it among the fastest-growing tech companies in history.
- The Semiconductor Industry Association expects global chip sales to hit $595.3B in 2024.
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| 2 | Emaar Properties, a leading real estate developer in Dubai, posted strong financial results for the first nine months of 2023, with revenues of $5B (AED 18.4B) and a net profit of $2.2B (AED 8.2B). Booming real estate demand and increased tourism caused Dubai's luxury real estate prices to outperform in 2023. More: - Emaar recorded a 42% increase in net profit compared to the previous year, supported by a notable growth of 29% in EBITDA, reaching $2.9B (AED 10.8B).
- The company achieved group property sales of $8.5B (AED 31.1B) for the first nine months of 2023, with a revenue backlog from property sales reaching $18.9B (AED 69.5B) as of Sept. 30, 2023.
- Emaar shopping malls, retail, and commercial leasing operations reported revenue of $1.2B (AED 4.3B) during the same period, attributing success to robust tenant sales and the unveiling of Dubai Mall Chinatown.
- The Dubai real estate market experienced its best-ever performance in 2023, with transactions exceeding $172.6B (AED 634B) and a remarkable growth of 16.9% compared to 2022, driven by a surge in residential and office space demand.
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| 3 | Owens Corning has entered into a $3.9B cash deal to acquire Masonite International, a leading door manufacturer. Acquiring the prominent Florida-based door maker would bolster Owen's position in residential building materials. More: - The acquisition deal values Masonite at $133 per share, representing a 38% premium to its closing share price on Feb. 8, 2024. The deal is expected to close in mid-2024.
- Owens Corning plans to fund the transaction using cash and $3B of committed debt financing from Morgan Stanley.
- Cost synergies are estimated at approximately $125M annually through scale and operational savings, with most realized within a few years post-acquisition.
- The combination is strategically significant for Owens Corning, allowing it to extend its product offering in residential building materials and leverage Masonite's leading position in the doors market.
- The deal is part of a broader strategy for Owens Corning to enhance its operational efficiencies and deliver increased value to customers and shareholders.
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| 4 | First Energy announced full-year 2023 results, reporting operating (non-GAAP) earnings of $2.56 per share and providing 2024 guidance at $2.61- $2.81 per share. The company has abandoned its 2030 greenhouse gas emissions reduction target, citing challenges in replacing crucial coal plants in time. Instead, First Energy intends to become carbon neutral by 2050. More: - 2024 earnings guidance ranges from $1.5B to $1.62B, or $2.61 to $2.81 per share, reflecting strong growth in regulated businesses with improved earnings quality.
- Q1 2024 guidance is $0.48 to $0.58 per share, influenced by lower planned earnings contributions from legacy investments.
- Management reaffirmed the long-term target of a 6-8% annual operating EPS growth rate.
- The company also presented Energize365, a $26B systemwide capital investment program.
Why It Matters: The decision to abandon its 2030 emissions reduction target underscores the challenges faced in transitioning away from coal and meeting stringent climate goals. The reliance on coal plants for regional electricity supplies showcases the complex trade-offs involved in aligning with environmental objectives amid economic and operational considerations. The move also reflects broader industry struggles in fulfilling climate commitments, raising questions about the achievability of ambitious carbon reduction targets across the utility sector. | | | |
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| 5 | Real estate investment trust W.P. Carey Inc. (WPC) reported Q4 funds from operations (FFO) of $1.19 per share, missing estimates by $0.01, and revenue of $412.4M, a 2.4% YoY increase but falling short by $11.16M. CEO Jason Fox largely attributed the results to the near-term impact of executing the office exit strategy announced in September. More: - Operating expenses declined to $129.5M in Q4, and the net lease portfolio achieved 4.1% contractual same-store rent growth on a constant currency basis.
- Portfolio occupancy stood at 98.1%, and real estate portfolio non-office gross dispositions totaled $133.6M in Q4 2023.
- 2024 full-year AFFO is projected between $4.65 and $4.75 per diluted share, compared to the consensus estimate of $4.72, based on investment volume of $1.5B to $2.0B and disposition volume of $1.2B to $1.4B.
- Strategic office exit program saw 79 properties sold in 2023, and 71 properties sold in January 2024, including the company's largest office portfolio. Office sales brought office exposure below 3% of the annualized base rent.
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| 6 | General Motors (GM) has signed a $19B battery supply deal with South Korean firm LG Chem. The Koreans will supply GM with over 500,000 tons of cathode materials, supporting the production of approximately five million electric vehicles (EVs) with a range of over 300 miles while aiding LG Chem's expansion into the North American market. More: - The largest EV deal for GM involves LG Chem supplying materials, including nickel, cobalt, manganese, and aluminum. These metals are essential for EV battery production.
- LG Chem's cathode materials, produced in a Tennessee plant currently under construction, will support GM's joint venture battery cell plants in North America, including those with LG's spinoff Ultium Cells.
- The partnership, initially announced in July 2022 with no details, was set to expire in 2030. Per the new agreement, it will last until 2035.
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- Insiders are buying New York Community Bankcorp shares after a recent 50% crash. So far, top executives have bought more than $800,000 worth of shares.
- Sara Stratoberdha replaces Kevin Worth as the new CEO of CoinDesk. Stratoberdha has previously run business development for Bullish, CoinDesk's new owner.
- Hedge Funds face a slowdown as new investments dry up. The negative trend started in 2023 and is poised to continue in 2024.
- AI is driving more layoffs than companies want to admit.
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 | Freelance Writer | | Stjepan Kalinic is an analyst and writer with a background in institutional investment research. He's passionate about reading, playing music, lifting weights, and practicing martial sports. He values interesting books above everything else, and you can send recommendations through LinkedIn. | | This newsletter was edited by Megan LaBruna | |
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