Key Focus On The Earnings Season

Market Review

Malaysia: The FBM KLCI (+0.33%) ended higher, despite the mixed performance in the regional stock markets, boosted by selected Consumer Products and Banking heavyweights. On the broader market, the Property sector (+0.72%) was the leading sector, while the Utilities sector (-0.89%) declined.

Global markets: The US stock markets were closed for the President’s Day public holiday in the US. The European stock market ended slightly higher, while Asia ended mixed despite stronger travel data in China boosted tourism stocks coupled with the Chinese key policy rate were kept unchanged but the Hang Seng index declined.

The Day Ahead

The FBM KLCI added strength with the buying support observed within Genting and Banking heavyweights. Meanwhile, the US stock markets were closed for the President’s Day public holiday. This week, the market will be monitoring the (i) FOMC meeting minutes, (ii) unemployment claims and (iii) the US PMI data on Thursday. On the local front, we expect continuation of buying interest on the broader market ahead of the earnings season. On the commodity market, the Brent oil price traded firmer above the USD83/bbl mark as concerns over the tensions in the Middle East persisted, while the FCPO prices stayed above RM3,800 for the third session.

Sectors focus: With corporate earnings season around the corner, we believe traders will be looking for opportunities within the fundamentally solid companies. We noticed Consumer stocks may perform well with the normalising costs throughout last year and increasing demand during the final quarter of 2023. Meanwhile, we believe the Plantation sector could trend firmly higher with the momentum building up recently, in tandem with the FCPO prices. Besides, the Technology sector may turn attractive with the ongoing bidding for NIISe 2.0 project.

FBMKLCI Technical Outlook

The FBM KLCI ended higher, on an upward trend. The technical readings on the key index were positive, with the MACD Histogram extending another positive bar, while the RSI maintains above the 50 level. The resistance is envisaged around 1,540- 1,550 and the support is set at 1,500-1,510.

Company Brief

Dialog Group Bhd's net profit rose 16.6% to RM148.29m for its second quarter ended Dec 31, 2023 from RM127.15m a year earlier, as revenue rose 7.8% to RM859.21m from RM797m driven by better performances from both its Malaysian and international operations. The improvement in its Malaysian operation was mainly due to higher production from upstream activities while its international operation's better showing was attributed to activities at the Jubail Supply Base in Saudi Arabia. (The Edge)

Hup Seng Industries Bhd’s net profit in the fourth quarter ended Dec 31, 2023 (4QFY2023) climbed 10% to RM13.68m from RM12.44m a year earlier on the back of the lower cost of certain major input materials. Quarterly topline was up a marginal 0.23% year-on-year to RM95.15m versus RM94.93m previously as domestic sales increased while export sales declined. Net profit for the full year surged nearly 73% to a seven-year high of RM45.09m from RM26.08m a year earlier as sales rose and costs fell. Revenue increased 12.28% to RM357.27m from RM318.19m on higher volume. Hup Seng recommended a special dividend of 0.5 sen per share on top of a third interim dividend of 1.5 sen per share. (The Edge)

Hextar Global Bhd’s net profit jumped fivefold to RM23.39m in 4QFY2023 from RM4.64m a year ago, underpinned by the stellar performance of the newly diversified fruits segment and improved results from the agriculture and specialty chemicals segments. Quarterly revenue rose by 59.8% to RM214.28m from RM134.06m a year ago with the fruits segment contributing RM52.1m since its diversification into durian trading in November 2023. The group declared a first interim dividend of one sen per share, payable on April 5, 2024. For FY2023, net profit increased by 13.2% to RM56.1m from RM49.54m in FY2022, with revenue growing by 12.5% to RM669.44m from RM594.9m previously. (The Edge)

MGB Bhd’s net profit more than tripled in 4QFY2023 to RM12.48m from RM3.71m a year earlier, thanks to higher progressive billings and cost control. Revenue for the quarter doubled year-on-year to RM305.33m from RM145.58m. MGB declared a first interim single-tier dividend of 0.815 sen per share, payable on March 29. For FY2023, net profit totalled RM48.8m, more than three times higher than the RM15.1m recorded in FY2022, as revenue jumped 58.6% to RM971.83m from RM612.8m in the same period. (The Edge)

Tune Protect Group Bhd said that certain policies underwritten by its subsidiary, Tune Insurance Malaysia Bhd, as part of the Perlindungan Tenang Voucher initiative in 2022 have been deemed unacceptable by the government, potentially resulting in an adverse impact of RM30.8m on its earnings to be reflected in its results for 4QFY2023. Despite the setback, the group is currently considering an appeal. The group is expected to announce its upcoming results on Feb 22, according to Bloomberg. (The Edge)

CN Asia Corporation Bhd was publicly reprimanded by Bursa Malaysia, with the bourse operator fining its seven directors a total of RM225,000 for breaching listing rules. The breach concerned CN Asia’s failure to obtain its shareholders’ approval before diversifying its business to include money lending services by buying Southborn Capital Sdn Bhd on April 15, 2021. Among those penalised were deputy chairman Datuk Seri Tan Choon Hwa, who was fined RM25,000, and executive director Tengku Shamsulbhari Tengku Azman Shah (RM50,000) as well as independent directors Tania Scivetti and Nadanarajah Ramalingam, who were fined RM25,000 each. (The Edge)

The takeover offer for Rexit Bhd by its substantial shareholders is "not fair" and "not reasonable”, according to appointed independent adviser MainStreet Advisers Sdn Bhd. MainStreet said shareholders should reject the offer as the offer price of 85 sen per share is a discount to Rexit’s estimated valuations while the joint offerors also intend to maintain the listing status. (The Edge)

Public Bank Bhd’s wholly-owned subsidiary Public Bank Vietnam Ltd is buying RHB Bank Bhd’s indirect wholly-owned unit RHB Securities Vietnam Company Ltd for 374bn dong or RM72.55m, cash. The disposal will see RHB’s investment banking arm exit Vietnam's stockbroking and securities market, while Public Bank sees the proposed acquisition as a good opportunity to expand its financial services offerings in Vietnam to include securities trading and to participate in the immense growth potential of the country's capital market. (The Edge)

Dataprep Holdings Bhd has put on hold its proposed private placement of up to 30% of its enlarged share base to raise up to RM40.17m after its win of a 30-year concession agreement to develop a passive telecommunications infrastructure project in Bandung, Indonesia, as part of a consortium, with expected investments of around RM95.4m over three years. The private placement, proposed back in December last year, was mainly to fund working capital for its existing projects. With the introduction of the new telecommunication infrastructure project in Bandung, it is now contemplating other fundraising avenues to meet its funding requirements. (The Edge)

GFM Services Bhd is looking to raise RM14.78m via a private placement of 69.05m shares or 10% of its enlarged share base, with proceeds raised to go towards funding work capital and the purchase of machinery for the maintenance works, turnarounds and shutdowns of oil and gas (O&G) processing plants in Pengerang, Johor. The O&G service works come under an Integrated Turnaround Main Mechanical and Maintenance Mechanical Static (TA4MS) contract Petronas awarded to its whollyowned unit Highbase Strategic Sdn Bhd’s (HSSB) joint venture with Singapore-based O&G integrated solutions provider Mun Siong Engineering Ltd (MSEL). HSSB owns a 51% stake in the HSSB-MSEL joint venture. The five-year TA4MS contract, which holds an estimated value of RM247.5m, was awarded to the joint venture in 2019 and is equipped with options for Petronas to extend the job for up to another five years. (The Edge)

PA Resources Bhd’s wholly-owned PA Extrusion (M) Sdn Bhd is buying two parcels of adjoining industrial land — measuring a collective 72,840 sq ft — in Kuala Selangor from Niken Steel (M) Sdn Bhd for a total of RM21m to build a new factory that would increase its production capacity from 3,200 tonnes a month to 7,000 tonnes a month in phases. It will seek financing from financial institutions to satisfy up to 80% of the total purchase price of RM21m, while the remaining 20% will be financed using internal funds. (The Edge)

Former Employee Provident Fund chief executive officer Tunku Alizakri Raja Muhammad Alias has resigned from his role as non-independent non-executive director of United Plantations Bhd, due to a “perceived conflict of interest”. He departs the board eight months after he joined on June 1, 2023. (The Edge)

Jade Marvel Group Bhd’s managing director Eddie Chong Wei Chuan has resigned from his position due to “other personal commitments”, after heading the company for about a year. Meanwhile, the company also announced that it incurred a net loss of RM6.65m for its third financial quarter ended Dec 31, 2023, which is 87.9% more than the net loss of RM3.54m a year earlier. Quarterly revenue rose slightly by 4.1% to RM7.41m, from RM7.11m. (The Edge)

Source: Mplus Research - 20 Feb 2024