Market Review

Malaysia: The FBM KLCI (-0.18%) Closed Lower in Line With the Negative Performance of the Regional Markets, Dragged by Industrial Product and Transportation Heavyweights. On the Broader Market, the Utilities Sector (+1.03%) Gained Thanks to the YTL Counters, While the Industrial Products & Services Sector (-1.59%) Fell.

Global markets: Wall Street was ended lower after the retail sales data came in stronger-than-expected, suggesting that there may be delays in the implementation of rate cuts. Meanwhile, traders will be eyeing the upcoming weekly jobless claims later today. Overall, both the European and Asian stock markets ended lower.

The Day Ahead

The FBM KLCI traded lower for the second session as the market sentiment remains negative as we believe margin calls were activated in most of the counters after several companies hitting limit-down conditions. For the upcoming session, we believe the negative sentiment could persist on the fundamentally weak companies, but bargain hunting activities will be seen in solid companies. Meanwhile, on Wall Street, the 3 major indexes ended lower following a spike in US Treasury yield after a stronger-than-expected retail sale report. This has contributed to lower probability of the Fed cutting its key policy rate in March, down from 66% to 56% based on Bloomberg. On the commodity markets, the Brent oil price traded marginally higher around uSD78, despite weak China data.

Sectors focus: With several companies hitting limit-down, we opine that traders will be focusing on fundamentally solid companies going forward. We expect the ongoing theme on the KL-SG HSR, coupled with the Johor-region catalysts may be the winners for 2024, thus trading activities could focus on the Construction, Property, Building Material as well as the Utilities companies at least for the near term. Meanwhile, we like the defensive Consumer sector as we think the overall consumption is stable and growing at this juncture.

The FBM KLCI ended lower for the second consecutive days. The technical readings on the key index were however mixed, with the MACD Histogram extending another negative bar, while the RSI maintains above the 50 level. The resistance is envisaged around 1,510-1,520 and the support is set at 1,470-1,480.

Company Brief

Technology solutions provider Infomina Bhd’s net profit for the second quarter ended Nov 30, 2023 (2QFY2024) jumped 77.23% to RM8.95m from RM5.05m in the previous year, fuelled by lower administrative expenses and higher revenue. Its quarterly revenue jumped 41.85% to RM59.65m from RM42.05m, mainly due to higher revenue recognised from the renewal of contracts under technology infrastructure operations. Moving forward, the group said it is well positioned to leverage on the artificial intelligence (AI) and the extensive use of application programming interface (API) waves. (The Edge)

Techna-X Bhd has acquired a 51% stake in Netsec Sdn Bhd and formed a joint venture with the company, as part of Techna-X’s efforts to improve the cyber security landscape in the country and beyond, the group said in a statement on Wednesday. The digital ecosystems and energy storage solution provider said the cyber security landscape in Southeast Asia presents a dynamic and rapidly evolving market, with an estimated value projected to reach US$4.49bn (RM21.2bn) by 2024. (The Edge)

Cuscapi Bhd’s executive chairman Datuk Jayakumar Panneer Selvam has ceased to be a substantial shareholder of the point-of-sale systems provider, after he disposed of 55m shares or a 5.821% stake. Jayakumar received RM8.52m on Tuesday from the sale of the shares at 15.5 sen per share through a direct business transaction via his private vehicle Ultimate Quality Success Sdn Bhd. Post-disposal, his indirect shareholding in Cuscapi was reduced from 7.713% to 1.892%. He also has a direct stake of 0.315% in the company, for a cumulative stake of 2.207%. (The Edge)

Advancecon Holdings Bhd has secured RM21.19m in subcontract works from China Communications Construction (ECRL) Sdn Bhd (CCC-ECRL). The group’s 51%- owned indirect unit Spring Energy Sdn Bhd accepted the job from CCC-ECRL on Wednesday for the construction and completion of subgrade works, on Section 8 from CH518+388.00 to CH519+000.00. Advancecon, which is involved in construction and quarry operations, will fund the subcontract via internal funds and external borrowings. (The Edge)

Sarawak Consolidated Industries Bhd (SCIB) is in talks with the Sarawak state government over a potential land acquisition, the company said in response to an unusual market activity (UMA) query issued on Wednesday, after its shares hit limitdown for the second consecutive day, while the intra-day short-selling of the stock was suspended on the same day. “The company had on Jan 4, 2024 received the letter of offer from the Land and Survey Department of Sarawak to acquire some parcels of land measuring approximately 22 acres in size for the purpose of expanding the production capacity of the group. The management is in the midst of discussion and considering the acceptance of this proposal. The board believes that it would be more appropriate to release announcement to Bursa Securities once the decision is made,” it said. Shares of SCIB had plunged 35.93% or 30 sen to 53.5 sen as at Wednesday’s close, wiping out all gains of the past three months. (The Edge)

Besides SCIB, Artroniq Bhd, APB Resources Bhd and Globetronics Technology Bhd also succumbed to heavy selling pressure on Wednesday, making them among Bursa's top losers of the day. Incidentally, these four companies seem to have several common directors. Artroniq was also issued an UMA query, to which it responded that it had no idea what could have caused the unusual trading activity after its share price dived to a more than one-year low on Wednesday. Also under selling pressure was Jentayu Sustainables Bhd, whose intraday short selling was suspended by Bursa, together with APB Resources'. (The Edge)

At the same time, Bursa froze the lower limits of Rapid Synergy Bhd, SCIB and YNH Property Bhd, after they hit limit-downs for two consecutive trading days. Accordingly, Bursa set Rapid Synergy's lower limit at RM3.96, SCIB at 53.5 sen and YNH at RM1.22. Steel products maker Leform Bhd, which lost over 60% of its share price in the last two days, also told Bursa it has no idea what happened to have caused the UMA. The sell-off since Tuesday has wiped out RM459m in the group’s value. (The Edge)

Mercury Securities Bhd, whose share price plunged as much as 40% to 45 sen from 75 sen on Wednesday, before closing at 45.5 sen, was also issued an UMA query. The brokerage firm’s stock dive came just a couple of days after it hit an all-time high of 88.5 sen on Monday. The share price tumble led to a loss of RM384m in market capitalisation, as its market cap fell from RM790.3m to RM406.3m. (The Edge)

Hillcove Sdn Bhd has ceased to be a substantial shareholder in Excel Force MSC Bhd after it disposed of 24.70m shares or a 4.42% stake in the financial services business solutions provider. The group said Hillcove had disposed of the shares on Jan 16 via a direct business transaction. However, it is not known who purchased the block of shares. Following the disposal, Hillcove now has 4.15m shares or a 0.74% stake in the group. (The Edge)

Plantation and healthcare outfit TDM Bhd, a subsidiary of the Terengganu state government, has invested RM29.1m to build two hospitals this year. Its executive director Najman Kamaruddin said the group’s healthcare sector contributes more than 50% to its overall profits and the two new hospitals are expected to increase profits considerably. Najman also said the group plans to expand its medical network on the East Coast in the next five years, to meet the increasing demand for the health services offered by TDM. (The Edge)

Construction crane manufacturer Favelle Favco Bhd (FFB) has secured five contracts for the supply of cranes to machinery replacements, worth a combined RM79.4m. The contracts, which are expected to be delivered by mid- to end-2024, were awarded to its subsidiaries Favelle Favco Cranes (M) Sdn Bhd, Favelle Favco Cranes Pty Ltd and Sedia Teguh Sdn Bhd between Nov 30, 2023 and Jan 17, 2024. The clients are Servizi Energia Italia SpA, Resolution Rigging Services Pty Ltd, E&P O&M Services Sdn Bhd, Petron Malaysia Refining & Marketing Bhd and Petronas Carigali Sdn Bhd. (The Edge)

Ancom Nylex Bhd's net profit rose 7.59% to RM22.12m for its second quarter ended Nov 30, 2023 (2QFY2024), from RM20.56m a year earlier, helped by an improvement in profit margins from the lower cost of sales of its industrial chemical products. Earnings per share increased to 2.33 sen from 2.30 sen, the group's filing with Bursa Malaysia showed. Quarterly revenue was down 4.91% to RM505.16m from RM531.25m in 2QFY2023. Ancom Nylex declared its first interim dividend by way of distributing treasury shares on the basis of one dividend share for every 100 Ancom Nylex shares held. Looking ahead, the group said the El Nino phenomenon, coupled with the geopolitical tensions and tighter monetary policy, will affect the group’s businesses. (The Edge)

Source: Mplus Research - 18 Jan 2024