Slight Profit Taking on Wall Street

Market Review

Malaysia: The FBM KLCI (+0.44%) closed higher as bargain hunting activities picked up after the recent selloff following the positive momentum from Wall Street overnight. On the broader market, the Industrial Products & Services sector (+1.41%) rose, while the Utilities sector (-0.69%) declined.

Global markets: Wall Street ended lower as investors were taking profits after the Fed FOMC meeting minutes, which indicated a cautious approach to managing the interest rates going forward. The European stock market ended lower, while the Asian markets ended mostly higher led by gains in Chinese property stocks.

The Day Ahead

The FBM KLCI closed higher with a flag formation breakout amid a resumption of buying support. However, Wall Street ended marginally lower following the FOMC meeting minutes, suggesting that the Fed may proceed carefully on the interest rate directions and be in a “wait-and-see” mode. Also, profit-taking activities emerged post-market on Nvidia following the release of results; earnings came in above estimates and we expect the profit-taking actions could spill over towards stocks on the local front. Nevertheless, in view of the growing Malaysia GDP by 3.3% in 3Q23, released last week, we expect traders to focus their attention on the upcoming reporting season. On the commodity markets, the Brent oil prices traded above USD82/bbl following the FOMC meeting minutes.

Sector focus: As some of the tech giants on Wall Street were taking a pause on the uptrend move, we expect profit-taking activities to emerge in the Technology sector on the local front. Meanwhile, we noticed the strong set of results as anticipated from Teo Seng, which could provide a bullish tone to the rest of the poultry stocks. Besides, we like the Utilities, Property, Building Material, Construction, and Transportation & Logistics sectors amid the ongoing reporting season.

FBMKLCI Technical Outlook

The FBM KLCI ended higher, forming another flag formation breakout. The technical readings on the key index are positive, with the MACD Histogram extending a positive bar, while the RSI has maintained above 50. The resistance is pegged around 1,470-1,480 and the support is at 1,440-1,455.

Company Brief

Hospitality group Shangri-La Hotels (Malaysia) Bhd's net profit surged 157.7% to RM15.62m in the third quarter ended Sept 30, 2023 (3QFY2023) from RM6.06m a year earlier, on improved level of leisure demand and hotel occupancy rate. Quarterly revenue rose 31.8% to RM141.4m from RM107.29m a year earlier. On a quarterly basis, the group’s net profit came in higher from RM2.63m in 2QFY2023, while revenue grew by 31.5% from RM107.55m. (The Edge)

LBS Bina Group Bhd has recorded a 13.8% growth in net profit for 3QFY2023, underpinned by better site construction activities, as well as cost savings upon delivery of vacant possession for two completed projects. Net profit rose to RM40.21m or 2.11 sen per share, from RM35.35m or 1.78 sen per share in 3QFY2022. This is despite revenue declining 11% to RM471.49m from RM529.89m previously, while finance costs rose 22% to RM17.75m from RM14.6m over the same period. (The Edge)

Hap Seng Consolidated Bhd made a net profit of RM50.3m in 3QFY2023, down 91.1% from RM563.75m a year ago, as it recorded a smaller disposal gain during the quarter, and lower profit contribution from its property, credit financing, automotive and trading divisions — mitigated by higher profit contribution from plantation and building materials divisions. The preceding year's corresponding quarter had included a gain of RM425.1m from the disposal of its credit financing operations in Birmingham, UK, while 3QFY2023 recorded a gain of RM5.3m from the disposal of its wholly-owned Richmore Development Sdn Bhd. (The Edge)

Berjaya Assets Bhd (BAssets) saw a lower net loss of RM2.26m in its first financial quarter ended Sept 30, 2023 (1QFY2024) against RM4.22m the year before, on lower winning prize payout incurred by its lottery unit Natural Avenue Sdn Bhd and higher revenue. Quarterly revenue rose 5.1% to RM56.39m from RM53.67m a year ago, mainly due to higher rental rates for the group's property investment business segment. (The Edge)

Sunway Construction Group Bhd’s net profit rose 54.14% to RM35.01m for 3QFY2023 from RM22.72m a year earlier, in tandem with an increase in revenue, supported by higher topline contributions from all segments. Quarterly revenue climbed 43.53% to RM673.51m from RM469.25m. The group's construction business saw revenue rise 40.9% to RM590.5m in 3QFY2023 from a year ago, fuelled by enhanced contributions from sustainable energy projects and higher revenue recognition as newer projects progress. Consequently, profit before tax rose 18.9% to RM41.6m. (The Edge)

Star Media Group Bhd’s net profit fell 97.45% to RM56,000 for 3QFY2023, from RM2.2m a year ago, as earnings were once again affected by high operating costs. Quarterly revenue was flat at RM54.93m against RM54.43m previously. On a quarter-on-quarter basis, the group’s net profit was 92.92% lower compared with RM791,000 in 2QFY2023, while revenue fell 5.34% from RM58.02m due to lower revenue from the print, digital and events segment and the radio broadcasting segment. (The Edge)

Teo Seng Capital Bhd is set to post a record high annual profit for FY2023, as the egg producer's profit for 3QFY2023 surged by more than 84 times to RM43.83m from RM516,000 a year ago, boosted by higher average selling price and sales quantity of eggs. The 3QFY2023 net profit is already more than double the group's full-year net profit of RM21.64m in FY2022, its bourse filing showed. It is the highest quarterly profit recorded since the group's listing in 2008. Its previous highest quarterly net profit was RM25.4m, achieved in the months of April to June under 2QFY2023.Quarterly revenue rose 20.1% to RM199.99m from RM166.68m in 3QFY2022. (The Edge)

Mega First Corp Bhd is increasing its shareholding in the 260MW Don Sahong hydropower project in Laos from 80% currently to 91.25%, through a US$85m (RM396.95 mil) transaction. The deal involves Mega First’s 56.25%-owned unit Mega Ventures Ltd (MVL) buying 20% stake in Don Sahong Power Co Ltd from EDL-Generation Public Co for US$85m. The remaining shareholders in MVL are Laos-incorporated Lao Green Power Corp Co Ltd (25%) and British Virgin Islandsincorporated Enemax Trading Ltd (18.75%). Mega First said the proposed acquisition will enable it to increase its shareholding in a proven and profitable renewable energy asset. Don Sahong hydropower plant commenced operations in January 2020 and generates approximately 2,028GWh per year. (The Edge)

Vessel operator Perdana Petroleum Bhd posted its best quarterly results since 2014, as net profit nearly doubled in the quarter ended Sept 30, 2023 (3QFY2023) to RM22.76m, from RM11.41m, supported by improved daily charter rates (DCR). The improved DCR, added with the increase in chartering of third-party vessels, helped boost revenue by 49.69% to RM103.92m, from RM69.43m. (The Edge)

Privasia Technology Bhd extended its turnaround performance with a net profit of RM2.36m in the nine months ended Sept 30, 2023 (9MFY2023), from losses of RM2.66m in the previous corresponding period (9MFY2022), amid a strong jump in contribution from its satellite-based network services (SAT) segment. The segment helped Privasia to triple its revenue in 9MFY2023 to RM79.37m, from RM26.15m. In 3QFY2023, Privasia’s net profit rose to RM843,000 or 0.14 sen per share, from RM66,000 or 0.01 sen per share. This was in line with the three-fold jump in quarterly revenue to RM31.75m, from RM10.35m. (The Edge)

Improved margins that led to lower costs of both natural rubber and synthetic latex has helped narrow Comfort Gloves Bhd’s net loss for 3QFY2023 to RM7.9m, from RM17.8m a year earlier. The glove maker also attributed the smaller quarterly net loss to its efforts to continuously improve business operational efficiency to stay competitive, as well as a reversal of written down on inventory amounting to RM13.1m. Revenue for 3QFY2023 fell 43% to RM72.45m, from RM126.79m a year earlier, on lower sales quantity. (The Edge)

Kerjaya Prospek Group Bhd’s RM404.35m job from BCM Holdings Sdn Bhd — a subsidiary of EcoFirst Consolidated Bhd — to build a main residential building has fallen through after BCM decided not to proceed with the contract previously agreed upon between both parties. Kerjaya Prospek said it will be taking necessary steps under the letter of award after advice from its solicitors “to enforce its right to recover the pre-agreed damages payable, which is due and payable by BCM to [wholly owned subsidiary] Kerjaya Prospek (M) Sdn Bhd”. (The Edge)

Selangor state-controlled Kumpulan Perangsang Selangor Bhd (KPS) has secured a contract worth RM162.18m to supply various water treatment chemicals to Pengurusan Air Selangor Sdn Bhd (Air Selangor). KPS said its 51%-owned unit Aqua-Flo Sdn Bhd, signed a framework agreement with Air Selangor for the twoyear contract, which runs from Jan 1, 2024 to Dec 31, 2025. Throughout the contract period, Aqua-Flo is required to deliver a performance bond of 5% of the contract amount to Air Selangor, said KPS. (The Edge)

AirAsia X Bhd (AAX) said its Practice Note 17 (PN17) status will be uplifted on Wednesday after Bursa Securities allowed its appeal on the matter. This comes after the medium-haul low-cost carrier reported a net profit of RM5.56m for 3QFY2023, down 77.83% compared with RM25.09m posted for the same period last year due to higher aircraft fuel expenses and maintenance and overhaul costs. AAX said Bursa Securities had resolved to allow the airline's appeal for the upliftment, and from having to implement a regularisation plan, subject to the group announcing a net profit for 3QFY2023. (The Edge)

Source: Mplus Research - 22 Nov 2023