Taking a Mild Pause After the Rally

Market Review

Malaysia: The FBM KLCI (-0.15%) closed flat due to profit taking activities as regional market sentiment turned negative following China’s poor property data, and investors traded cautiously amid the ongoing 3Q results. On the broader market, the Healthcare sector (+2.60%) gained the most carried by glove counters.

Global markets: Wall Street ended flat as profit taking activities emerged after a significant rally as investors reassessed the softer economic data such as rising jobless claims and weaker-than-expected industrial output. Both the European and Asian stock markets ended lower after the US-China meeting.

The Day Ahead

The FBM KLCI ended marginally lower amid profit taking activities following a twoday rally. Similarly, Wall Street traded flat for the session after a significant run as investors reassessed the softer economic data, where the impact from the elevated interest rate hike environment was noticed. We believe the overall market sentiment may slow down further as investors could be eyeing on the home start and building permits data later tonight. Thus, the FBM KLCI may expect further profit taking activities with traders slowing down on their exposure ahead of the weekend break. On the commodity markets, the Brent oil prices traded below the USD78/bbl on the back of rising inventories, slowing demand amid the softer economic activities.

Sector focus: Given the interest rate will be taking a pause for the near term, coupled with the healthy growing earnings, the REIT sector has been traded on a positive note. Meanwhile, we expect traders to avoid the O&G sector amid falling Brent oil prices. Also, we favour the Construction, Property, Building Material, Utilities and Consumer sectors in anticipation of better earnings momentum under a normalised costs and higher demand environment for the respective sectors.

FBMKLCI Technical Outlook

The FBM KLCI ended marginally lower, forming a small hammer candle. The technical readings on the key index are mixed, with the MACD Histogram extending another negative bar, while the RSI maintains above 50. The resistance is pegged around 1,470-1,480 and the support is at 1,440-1,455.

Company Brief

Sunway Real Estate Investment Trust’s (Sunway REIT) net property income (NPI) increased by 6.6% to RM136.75m for the third quarter ended Sept 30, 2023 (3QFY2023), from RM128.24m a year earlier in line with higher revenue driven by sharp increase in hotel segment’s earnings. Furthermore, strong performance in both the domestic and international leisure sectors, coupled with full room occupancy at Sunway Resort Hotel since July this year are also other factors contributing to higher earnings for the quarter. The REIT said its revenue rose 5.8% to RM175.84m from RM166.24m. No income distribution was declared for 3QFY2023. (The Edge)

Pecca Group Bhd has reported a 55.8% surge in net profit for its first financial quarter ended Sept 30, 2023 (1QFY2024) at RM13.01m, from RM8.35m a year earlier, thanks to higher sales of upholstery car seat covers and improved operational efficiency. This the automotive upholstery maker's highest-ever quarterly net profit. Pecca has posted record profit and revenue for the past three financial years, and 1QFY2024 is also the fifth consecutive quarter of record profit. The record net profit was on the back of a 16.7% growth in quarterly revenue to RM64.05m, against RM54.86m in 1QFY2023. (The Edge)

United Plantations Bhd (UP) recorded a net profit of RM235.68m for its third quarter ended Sept 30, 2023 (3QFY2023), up 19.8% from RM196.72m in the previous year’s corresponding period, despite lower revenue and share of results from its joint ventures, thanks largely to lower operating and income tax expenses. The group declared an 80 sen dividend for its financial year ending Dec 31, 2023 (FY2023), comprising an interim payout of 40 sen per share and an extraordinary dividend of 40 sen per share. Both dividends will be paid on Dec 14. (The Edge)

Formosa Prosonic Industries Bhd’s net profit rose 10.47% to RM48.87m in the third quarter ended Sept 30, 2023 (3QFY2023) from RM44.24m a year before, thanks to a gain on disposal of property plant and equipment amounting to RM7.3m. On operations, Formosa's gross profit fell 4.57% to RM47.81m from RM50.1m. This was on the back of a 21.87% drop in revenue to RM234.46m from RM300.1m previously, due to lower sales volume. (The Edge)

Salutica Bhd, which is involved in a legal suit with Apple's unit in Malaysia for alleged patent infringement, on Thursday filed a similar suit against the US tech giant's Singapore-based subsidiary, Apple South Asia Pte Ltd. The new suit was filed at Singapore's High Court by Salutica's wholly-owned unit, Salutica Allied Solutions Sdn Bhd (SAS), which manufactures mobile communication products, wireless electronic and lifestyle devices and vertical integration processes covering design and development. SAS is seeking, among others, a declaration that its patent is valid and has been infringed by Apple South Asia, and an injunction to restrain the Apple firm from making, disposing, using, importing or keeping products that infringe the patent. (The Edge)

MAA Group Bhd emerged as one of the top gainers, after announcing a plan to divest an 85% stake in its wholly-owned Philippine general insurance business — MAA General Assurance Philippines Inc — to Triple P Philippines Pte Ltd for US$49.3m (RM234.86m) cash. Shares in MAA opened 15.5 sen or 34.83% higher at 60 sen on Thursday, and rose further to hit an intraday high of 61 sen, the highest in 13 months. The stock then closed at 44.5 sen, still up 10 sen or 28.99%, giving the group a market value of RM117.36m. The counter saw a total of 11.84m shares changing hands, 73 times its two-month average of 161,750 shares. (The Edge)

ELK-Desa Resources Bhd, a non-bank lender focused on the used-car sector, saw its net profit decline 23.3% to RM8.84m in the second quarter ended Sept 30, 2023 (2QFY2024), from RM11.53m a year earlier, on higher impairment allowances. Revenue rose 8.77% to RM39.2m from RM36.04m in 2QFY2023, primarily due to the expansion of the group’s hire purchase portfolio. ELK-Desa declared an interim dividend of 2 sen per share, to be paid on Dec 18. (The Edge)

Bumi Armada Bhd’s net profit increased by 18.73% to RM177.77m for the third quarter ended Sept 30, 2023 (3QFY2023) from RM149.72m a year earlier, on higher operating income and lower finance cost. Revenue declined 19.64% to RM524.8m from RM653.07m in 3QFY2022 as cost of sales fell 24.07% to RM283.47m from RM373.35m. Net profit for the first nine months of FY2023 slipped 4.64% to RM497.55m from RM521.73m in the previous corresponding period, on lower contribution from its Armada Kraken floating, production, storage and offloading (FPSO) facility and foreign exchange losses. (The Edge)

MAG Holdings Bhd has called of its proposal to take up a 50% stake in an Indonesian shrimp farm via a S$6.1m (RM22m) investment. The group had entered into a term sheet with LIM Shrimp Organization Ltd (LSOL) for the proposed investment in Lim Shrimp Aquapolis Pte Ltd (LSA). MAG has now decided to terminate the term sheet due to "deviation of the terms agreed" by LSOL, the group said in a stock exchange filing on Thursday. (The Edge)

Hume Cement Industries Bhd has posted a net profit of RM48.33m for the first quarter ended Sept 30, 2023 (1QFY2024), its highest quarterly earnings since 3QFY2003, thanks to the revision in cement selling price to cushion the increase in energy costs, coupled with higher sales volume amid recovery of construction activities. The group had reported a net loss of RM12.04m for 1QFY2023. Revenue grew 48.3% to RM306.66m, from RM206.79m in 1QFY2023, according to Hume Cement’s stock exchange filing on Thursday. The group has declared an interim dividend of 2 sen, with Dec 4 as the ex-date. This is its first dividend payout since FY2017. (The Edge)

Sime Darby Bhd has obtained shareholders’ approval to buy a 61.18% stake in UMW Holdings Bhd for RM3.57bn cash from Permodalan Nasional Bhd (PNB), and make a mandatory general offer (MGO) to acquire the remaining 38.82% stake for RM2.27bn or RM5 per share. At Thursday's extraordinary general meeting, 1,159 shareholders with 1.78bn shares voted in favour of the deal, while 100 shareholders with 5.56m shares voted against, according to Sime Darby’s disclosure to Bursa Malaysia. This means shareholders who participated in the voting represented 26% of Sime Darby’s total share capital of 6.82bn shares. (The Edge)

Dayang Enterprise Holdings Bhd has fully redeemed the last two series of issues of its sukuk murabahah programme amounting to RM220.5m on Nov 15, ahead of the due redemption dates in 2024 and 2025. The company had used internal funds and fresh borrowings for this redemption, Dayang said in a bourse filing on Thursday. Dayang noted that the original amount for the two series was RM313.95m, but part of this amount was redeemed earlier with funds from a prior private placement exercise and internally generated funds. (The Edge)

Source: Mplus Research - 17 Nov 2023