All Eyes On The FOMC Meeting

Market Review

Malaysia: The FBM KLCI (+0.05%) ended flat, despite with the positive performance in the regional stock markets, boosted by selected Utilities and Banking heavyweights. On the broader market, the Utilities sector (+2.21%) was the leading sector, while the Telco & Media sector (-1.08%) declined.

Global markets: Wall Street ended higher led by the rebound in Technology stocks, meanwhile traders will be eyeing the upcoming FOMC meeting this week. The European stock markets ended lower, while Asia ended higher after China’s retail sales and industrial production data increased more than consensus expectations

The Day Ahead

The FBM KLCI traded flat for the session as Telco heavyweights were beaten down. Meanwhile, overall US stock markets headed higher as investors digested news from Nvidia’s AI conference and traded more positively ahead of the FOMC meeting that will be concluding this week. However, based on Bloomberg, the market is positioning for a delayed rate cut, probably by 2H2024. Given the more positive sentiment in the US, we believe buying support could spillover towards stocks on the local front. On the commodity markets, Brent oil rose strongly, near a 5-month high amid heightened geopolitical tensions after Ukraine attacks on Russian refineries, while China reported better-than-expected economic data.

Sectors focus: Still, we like the commodities sector like the O&G sector as Brent oil is trading firmly above the USD85/bbl level. Also, we noticed significant momentum building up within the construction sector, with the resurfacing of KL-SG HSR over the weekend. We expect smaller contractors that have positive QoQ growth in their recent earnings may be a more decent pick. Besides, we like selected Technology and Packaging stocks such as FPI and PPHB at least for the near term.

FBMKLCI Technical Outlook

The FBM KLCI index ended flat after a 2-day rebound. However, the technical readings on the key index were mixed, with the MACD Histogram hovering flattish along 0, while the RSI is above 50. The resistance is envisaged around 1,565-1,570 and the support is set at 1,535-1,540.

Company Brief

Malaysia Airports Holdings Bhd (MAHB) and the government on Monday signed new operating and land lease agreements that extend the airport operator’s concession to manage 39 airports in the country to Feb 11, 2069, from 2034 previously. The new OAs offer MAHB “flexibility” to pursue strategic investments needed, including partnering with any external parties to improve capacity, facilities and infrastructure of the airports, the company said. Under the new OAs, MAHB is allowed to undertake development capital expenditure (capex) apart from the government, and the capex recovery model can be done through various measures, including the airport development fund (ADF), project financing from the capital market, funds provided by the government or any other bankable financing model agreed between both parties. (The Edge)

Apollo Food Holdings Bhd’s net profit for its third quarter ended Jan 31, 2024 (3QFY2024) rose to RM30.24m from RM10.82m a year ago, lifted by gain on disposal, improved margins and higher domestic sales. It declared a dividend of 50 sen per share for the quarter, bringing its year-to-date dividend to 70 sen per share — up from 25 sen per share for the entirety of FY2023. For the nine months ended Jan 31 (9MFY2024), the one-off disposal gain helped Apollo book a net profit of RM47.83m, up 92.5% or RM22.99m from RM24.84m recorded in the same period last year. (The Edge)

Garment and packaging products maker Magni-Tech Industries Bhd’s net profit for the third quarter ended Jan 31, 2024 (3QFY2024) rose 91.88% to RM39.38m from RM20.52m a year earlier, as higher garment sales were slightly bolstered by a foreign exchange gain. Revenue for the quarter increased 39.16% to RM392.19m versus RM281.83m previously, on the back of the higher garment sales. For the nine months ended Jan 31, 2024 (9MFY2024), Magni-Tech posted a net profit of RM93.89m on the back of cumulative revenue that stood at RM1bn. (The Edge)

The mandatory general offer (MGO) by JAG Capital Holdings Bhd for KUB Malaysia Bhd, at 60 sen per share, has seen it obtain 163.82m shares, equivalent to a 29.44% stake, in KUB. This has bumped up JAG’s shareholding in KUB to 62.72% or 349m shares. JAG said in the circular to shareholders that it does not intend to keep KUB’s listing status if it secures 90% of all KUB shares, but would keep KUB listed if it secures between 75% and 90%. (The Edge)

Epicon Bhd, through a subsidiary, has secured a contract for main building works worth RM191.13m from Maju Teluk Batik Sdn Bhd. The contract comprises main building works of two apartments, one carpark building, ancillary building, mechanical and electrical services, and infrastructure and landscape works for a mixed-use development in Bandar Meru Raya, Perak. It is expected to commence on March 19 and be completed in 36 months. (The Edge)

ITMAX System Bhd, through its 65%-owned subsidiary Southmax Sdn Bhd, has secured a video surveillance and traffic light system services contract worth RM77.09m from the Kulai Municipal Council. The contract period spans from March 23, 2024 to March 25, 2039 and is expected to contribute positively towards the company's earnings until the end of the 15-year period. (The Edge)

Plastic injection moulding and metal stamping company Ge-Shen Corp Bhd has received an unusual market activity query from Bursa Malaysia on Monday, after its share price surged 24.3% or 78 sen to its highest on record of RM3.99. On the same day, Ge-Shen announced it was buying a 60% stake each in Amity Research & Development Sdn Bhd (ARD) and Amity Technical Services & Consultancy (M) Sdn Bhd (ATSCM), for RM13.5m cash, to strengthen its position in the electrical and electronics (E&E) sector and expand its income stream. (The Edge)

Globaltec Formation Bhd said its Australian-listed NuEnergy Gas Ltd has secured an extension until Sept 17, 2025 to undertake exploration of its Muara Enim production sharing contract (PSC) in South Sumatera, Indonesia. The additional exploration time for the onshore asset was granted by Indonesia’s Ministry of Energy and Mineral Resources. The extension will allow NuEnergy to carry out activities to determine the gas productivity of the PSC and to submit a plan of development. (The Edge)

Integrated facilities management group GFM Services Bhd has proposed a bonus issue of free warrants on the basis of one warrant for every two existing shares held. The exercise price of the warrants has been fixed at 21 sen per share. Assuming the full exercise of warrants, the company is expected to raise gross proceeds of up to RM79.74m for working capital. (The Edge)

Auto parts manufacturer New Hoong Fatt Holdings Bhd (NHF) has proposed to undertake a share split involving the subdivision of every one share into two shares in a move to improve trading liquidity. As at March 15, the issued share capital of NHF was RM82.67m which will remain unchanged upon completion of the share split. However, the total number of NHF shares of 82.67m will be subdivided and enlarged to 165.34m shares. (The Edge)

Frozen seafood company SBH Marine Holdings Bhd began taking orders from investors for its initial public offering (IPO) that would raise up to RM50.6m. The IPO, priced at 22 sen per share, involves a public issue of 180m new ordinary shares, and an offer for sale of 50m existing ordinary shares, according to its prospectus. All in all, the IPO involves sale of about 26% stake, and would value the company at RM195.36m. Applications for the IPO shares will close on March 25, with listing on the ACE Market scheduled for April 8. (The Edge)

Source: Mplus Research - 19 Mar 2024