Small Cap Segment To Pick Up Going Forward

Market Review

Malaysia: The FBMKLCI (-0.31%) ended lower, in line the negative performance in the regional stock markets, dragged by losses in Telco and Utilities heavyweights. On the broader market, the Transportation & Logistics sector (+1.63%) gained, while the Healthcare sector (-0.40%) declined.

Global markets: Wall Street ended lower as investors are awaiting the release of inflation data due later this week, meanwhile the gains in chip stocks buoyed losses in the NASDAQ. The European stock market ended higher, while Asia ended lower led by Nikkei as investors digested the rise in inflation data.

The Day Ahead

The FBM KLCI ended lower as profit taking activities emerged within selected heavyweights, but focus was seen in Small Cap stocks as FBMSCAP rose 0.11%. In the US, profit taking appeared across the board offsetting gains in NVDA. We believe the market will continue to monitor the upcoming economic data such as the (i) US GDP, (ii) unemployment claims, (iii) pending home sales as well as (iv) core PCE price index. Despite the weaker sentiment abroad, we expect buying support to continue on the local front, especially in the small cap segment. On the commodity markets, Brent oil rebounded and closed above USD86/bbl, underpinned by ongoing supply cuts by the OPEC+ members and persisting geopolitical tension in the Middle East.

Sectors focus: Still, we think buying interest may build within the Technology sector with the recovery in the earnings in the recent quarterly results. Meanwhile, we like the Construction as the potential revival of the KL-SG HSR coupled with the data center investments that is expected to increase going forward will provide support to the sector. Besides, we favour Consumer, Solar, Chemical, Finance and O&G; the latter is likely to stay firm amid the stronger underlying crude oil price.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower consolidating around the 1535 level. The technical readings on the key index were negative, with the MACD Histogram extending a negative bar, and the RSI dipping below 50. The resistance is envisaged around 1,550-1,555 and the support is set at 1,520-1,525.

Company Brief

MyNews Holdings Bhd remains confident that "the worst is over" after posting its second consecutive profitable quarter for the financial quarter ended Jan 31, 2024 (1QFY2024) on the back of higher sales. The convenience store operator posted a net profit of RM1.27m for 1QFY2024 compared to a net loss of RM3.21m in the previous year’s corresponding quarter. Quarterly revenue increased year-on-year by 6% to RM195.52m from RM184.09m. Looking ahead, the company said it aims to expand its five retail brands — myNEWS, CU, WHSmith, SUPERVALUE minimart and MARU Coffee — “at a faster rate”. MyNews currently operates 619 outlets, including 468 myNEWS outlets, 132 CU outlets, and 19 WHSmith outlets. (The Edge)

Sapura Energy Bhd said that it is “not out of the woods” yet despite net loss narrowing to RM728.44m in the fourth quarter ended Jan 31, 2024 (4QFY2024) from RM3.26bn a year earlier. Quarterly revenue dropped 13.01% to RM1.06bn from RM1.22bn in 4QFY2023, due to lower revenue recognised from the engineering and construction, and drilling business segments. For the full year FY2024, its net loss also narrowed to RM508.66m from RM3.16bn in FY2023, while its annual revenue fell 6.45% to RM4.36bn from RM4.55bn previously. (The Edge)

Binastra Corp Bhd posted a record-high net profit of RM15.38m for its fourth quarter ended Jan 31, 2024 (4QFY2024), a jump of 176.32% compared with RM5.57m a year earlier, on the back of higher revenue driven by its construction segment. Revenue more than doubled to RM155.37m from RM73.78m in 4QFY2023. For the full year, the group's net profit surged to a record of RM40.77m from RM16.52m in the previous year. Revenue rose 130.03% to RM425.2m from RM184.85m in FY2023. (The Edge)

Building and infrastructure construction company TCS Group Holdings Bhd has secured a contract worth RM140.27m to undertake building works for a proposed commercial complex known as Bandar Seri Coalfields Retail Park in Sungai Buloh, Selangor. TCS accepted the project through its wholly-owned subsidiary, TCS Construction Sdn Bhd, which received the letter of award from KLK Retail Centres Sdn Bhd — a wholly-owned subsidiary of Kuala Lumpur Kepong Bhd. TCS stated that the contract period will be 19 months, commencing from March 2024 with the expected completion by October 2025. (The Edge)

Energy-related services provider Reservoir Link Bhd will form a joint venture company to undertake a 29.99 MWac ground mounted solar photovoltaic project in Kedah. The group via its wholly-owned unit Reservoir Link Renewable Sdn Bhd (RLR) had on March 20 inked a shareholders’ agreement with Japan-based Sumitomo Corporation, MAQO Engineering Sdn Bhd (MESB) and SRM Utama Selambau Sdn Bhd (SUS) to undertake the project. Sumitomo will hold 49% equity interest in the JV company, with RLR holding 29% and MESB the remaining 22% stake. (The Edge)

Projek Lintasan Kota Holdings Sdn Bhd (PLKH), the major shareholder of newly- listed Prolintas Infra Business Trust, has yet to decide whether to inject two more highways under its belt into the listed business trust. Both the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) and Damansara-Shah Alam Elevated Expressway (DASH) are still in early stages of their operations, PLKH chief executive officer Datuk Mohammad Azlan Abdullah said at a press conference following the listing of Prolintas. "It's a bit too early for now. They have to meet certain criteria before either one or those two can be injected into the trust. It is [about] timing and also the performance of the two highways, and how it is going to move forward into the future," he said. (The Edge)

Source: Mplus Research - 26 Mar 2024