Mixed Trading Expected On The Local Front

Market Review

Malaysia: The FBM KLCI (-0.18%) closed lower, in line with the mostly negative performance of the regional markets, due to selling pressure in selected Healthcare, Industrial Products and Telco heavyweights. On the broader market, the Utilities sector (+0.88%) was the leading sector, while the Plantation sector (-0.75%) fell.

Global markets: Wall Street closed mixed with some strong corporate earnings but poorer sentiment on tech stocks, while traders turned cautious ahead of the FOMC meeting. Meanwhile, the European stock markets ended higher, while Asia ended lower due to China’s Evergrande liquidation order dragging the sentiment.

The Day Ahead

The FBM KLCI snapped a 6-day winning streak as profit taking activities emerged despite YTL-related heavyweights gaining further momentum. Meanwhile, the US stock markets ended on a mixed note with the Dow charged towards fresh all-timehighs, while S&P500 and Nasdaq fell as the market stayed cautious on the Technology shares prior to the conclusion of the FOMC meeting. Hence, we expect continuation of profit taking activities on the local front with the Evergrande incident. On the commodity markets, Brent oil traded firmer above USD82/bbl after the solid US jobs data, suggesting that the US economic activities continue to grow, coupled with the ongoing Middle East tension.

Sectors focus: We expect the overall market may consolidate with the FBM Small Cap turning lower at this juncture. Nevertheless, we still like the Construction, Property, Building Material sectors for the trading theme within the (i) KL-SG HSR, (ii) easing requirements of the MM2H and (iii) Johor-related investments. Meanwhile, we believe the O&G sector may sustain its momentum as Brent oil price hovers above USD82/bbl. Besides, with the LSS5 announcement recently, there will be a spike of trading interest within solar EPCC players.

FBMKLCI Technical Outlook

The FBM KLCI ended lower, snapping a 6-day winning streak. The technical readings on the key index were positive, with the MACD Histogram extending the 3rd positive bar, while the RSI maintains above the 50 level. The resistance is envisaged around 1,520-1,530 and the support is set at 1,490-1,480.

Company Brief

Sunway Real Estate Investment Trust's (Sunway REIT) net property income (NPI) decreased by 7.2% to RM135.7m for the fourth quarter ended Dec 31, 2023 (4QFY2023) from RM146.2m a year earlier, on higher reversal of doubtful debt provision the impact of increased Imbalance Cost Pass-Through (ICPT) electricity charges across all segments. Revenue for the quarter, meanwhile, inched up 2% to RM190.5m from RM186.7m, primarily driven by the retail and hotel segments, buoyed by strong retail footfall and healthy retail sales, as well as higher tourist arrivals during festive seasons and school holidays. Sunway REIT declared a final income distribution of 4.68 sen per unit — to be paid on Feb 29 — bringing its total distribution per unit (DPU) for FY2023 to 9.3 sen. (The Edge)

Higher rental income lifted IGB Real Estate Investment Trust’s (IGB REIT) NPI by 9.08% to RM115.24m for 4QFY2023 from RM105.64m recorded in the same period a year earlier, as it posted a 6.6% rise in revenue to RM158.47m from RM148.71m previously. Sister company IGB Commercial REIT logged an NPI of RM32.86m for 4QFY2023, 20.51% higher than the RM27.27m recorded a year earlier, as revenue increased by 15.13% to RM56.92m from RM49.44m previously on higher average occupancy rate of properties. IGB REIT declared an income DPU of 2.7 sen, bringing total DPU for FY2023 to 10.47 sen. This is higher than the 9.86 sen declared for FY2022. IGB Commercial REIT, on the other hand, announced an income DPU of 1.75 sen — raising total income distribution for FY2023 to 3.49 sen — slightly higher than the 3.42 sen declared for FY2022. (The Edge)

CapitaLand Malaysia Trust (CLMT) reported a 54.4% jump in its NPI for 4QFY2023 to RM63.02m from RM40.8m a year ago, as it reported a 57.5% rise in revenue to RM108.51m from RM68.9m previously. The trust announced a DPU of 2.24 sen for the July 1, 2023 to Dec 31, 2023 period, payable by March 2024. This will raise its total DPU for FY2023 to 4.17 sen, from FY2022's 4.01 sen. It posted stronger earnings for FY2023, with its NPI jumping 42.6% to RM217.4m from FY2022's RM152.5m, while annual gross revenue rose 43.4% to RM395.4m from RM275.82m a year earlier. (The Edge)

Sapura Energy Bhd has been served with a €50m (RM256.16m) arbitration claim from the developer of the Yunlin offshore wind farm project over alleged contract breaches. The oil and gas engineering firm said it has, together with its wholly-owned Sapura Offshore Sdn Bhd (SOSB), been served with a request for arbitration by Yunneng Wind Power Co Ltd, which has made a provisional claim of €50m for the alleged contract breaches. Yunneng, it said, also reserved its right to further specify and expand its claims, and to claim for any damages incurred. (The Edge)

Samaiden Group Bhd has received approval to construct and operate a biomass power plant in Tangkak, Johor, with an installed capacity of seven megawatts, as it aims to supply a net export capacity of six megawatts to Tenaga Nasional Bhd (TNB). This is following the Feed-in Tariff approval certificate received by the group's indirect wholly-owned subsidiary Samaiden Biomass Energy Sdn Bhd from the Sustainable Energy Development Authority Malaysia in a letter dated Jan 22, 2024. The agreement to supply the electricity to TNB spans 21 years and is scheduled to commence on Jan 22, 2027. (The Edge)

After falling into the limelight due to being listed as one of the assets former finance minister Tun Daim Zainuddin failed to declare to the Malaysian Anti-Corruption Commission (MACC), Avillion Bhd has assured that it is business as usual for the company. On Monday, Avillion and 23 of its subsidiaries were listed among 71 assets in the MACC’s charge sheet in charging Daim for failing to declare his assets to the anti-corruption body. The former finance minister pleaded not guilty before Sessions Court judge Azura Alwi to one charge pertaining to disclosure of assets. (The Edge)

The largest shareholders of Malayan Flour Mills Bhd (MFM) saw their stakes in the flour miller rise due to the mandatory conversion of redeemable convertible unsecured loan stocks (RCULS). MFM executive deputy chairman cum managing director Teh Wee Chye converted a total of 98.57m units of five-year 5% RCULS 2019/2024 into ordinary shares at five sen apiece, for an aggregate sum of RM49.28m. The conversion of the RCULS raised Teh’s stake in MGM to 23.11%. Meanwhile, the group’s second largest shareholder Datin Seri Azlin Arshad converted 24.87m loan stocks at a total exercise price of RM12.43m. This raised her stake in the group to 7.96%. (The Edge)

Uzma Bhd’s 70%-owned unit Malaysian Energy Chemical & Services Sdn Bhd has won a contract from Hibiscus Oil & Gas Malaysia Ltd for the supply of chemicals and related services to the PM3 offshore fields over a five-year period between Nov 16, 2023 and Nov 15, 2028. The PM3 Commercial Arrangement Area project is located in Northeast Malay Basin, offshore Malaysia and Vietnam. The job scope involves the supply of integrated production, integrity and water injection chemical and associated services. The value will be based on work orders issued by the client. (The Edge)

Sarawak Consolidated Industries Bhd (SCIB) deems the RM21.62m cash it plans to fork out for five leasehold plots in Demak Laut Industrial Park in Kuching, Sarawak, as “fair and reasonable”, after taking into account the prices of comparable properties in the same location. It also noted that it has no authority to respond on behalf of the department and the Sarawak state government in regards to exempting the group from having to pay the fourth and fifth instalment payments for the land — RM7.44m in total or 34.4% of the total price tag — in the event the factory is completed within three years. (The Edge)

Offshore support vessel (OSV) operator Alam Maritim Resources Bhd on Tuesday announced that it has been ordered to pay a judgement sum of US$2.35m (RM11.1m) to RHB Islamic Bank Bhd (RHBI), following a judgment in default of appearance (JID) issued against it. Alam Maritim claims that it was not aware of the issuance of a writ of summons dated Dec 26, 2023. The group had on Jan 24, via its solicitors Messrs Azhar Yong & Co, filed and served an unsealed notice of application to RHBI for, among others, the JID dated Jan 22, 2024 be stayed pending its application, and for the JID to be set aside. (The Edge)

Reneuco Bhd said it was unable to release its annual report for the financial year ended Sept 30, 2023 (FY2023) by Jan 31 as required under the listing rules. The renewable energy specialist attributed the delay in the issuance of the report to additional time needed by the external auditor to complete its audit. "The company is working with the external auditor to finalise the audit expeditiously," said Reneuco in a bourse filing on Tuesday, adding that it expects to issue the report by March. The company at the same time is "working towards" the Feb 8 deadline, it said, referring to the date by which it must submit the annual report to avoid a suspension in the trading of its shares. (The Edge)

Lau Pak Lam and Liew Fook Meng emerged as substantial shareholders in PUC Bhd as of last Friday (Jan 26), setting the stage for the return of the co-founders of Cocoaland Bhd to the public listed arena of corporate Malaysia. PUC announced on Tuesday that on Jan 26, Lau acquired 232m units of PUC’s shares via off market transactions, representing 9.64% of the group’s share base. On the same day, Liew acquired 241.55m shares, or 9.8% stake. On Monday, Lau acquired another 10m shares in PUC, increasing his stake in the integrated media services and payment solutions provider to 248m shares, or 10.05%. (The Edge)

Source: Mplus Research - 31 Jan 2024