Positive Momentum Should Return

Market Review

Malaysia: The FBMKLCI (-0.03%) ended flat as investors may believe the index is overbought and diverted buying interest into small and mid-cap stocks instead while waiting for the next catalyst. On the broader market, the Healthcare sector (+1.71%) was the leading sector, while the Utilities sector (-0.60%) declined.

Global markets: Wall Street ended marginally higher as investors were still riding on the positive sentiment from the higher jobless claims data, however the momentum is tamed by the elevated consumer sentiment data suggesting lingering inflationary pressure. Both the European and Asian stock markets ended higher.

The Day Ahead

The FBMKLCI pulled back for the third session in a row as profit taking activities emerged within the selected heavyweights, but the FBM Small Cap managed to change towards a fresh 52 week high. Over in the US, Wall Street ended mixed on Friday, but closed significantly higher for the week as weaker consumer sentiment has re-ignited the expectations of earlier interest rate cuts by the Fed in 2024. This week, inflation data like CPI, PPI, jobs data, industrial production and retail sales will be focused. On the commodity markets, Brent oil has traded below USD83 amid demand concerns, while the gold price trended positively due to interest rate cut hopes. Meanwhile, the FCPO still trades within the range of RM3,800-3,900.

Sectors focus: With the market sentiment remaining bullish last week, we expect buying interest will continue this week. We expect the Technology sector to remain attractive on the back of relatively positive earnings guidance from the US corporates, while the domestic catalysts will include the KL20 summit, higher demand and investments into data centers and AI-related activities in Malaysia. Besides, we believe the Construction, Property, Utilities, Building Material and Consumer will be decent for trading in the near term.

FBMKLCI Technical Outlook

The FBM KLCI index ended mildly lower consolidating around the 1600 level. The technical readings on the key index were still positive with the MACD Histogram extending another positive bar, while the RSI maintains above 50. The resistance is envisaged around 1,615-1,620 and the support is set at 1,580-1,585.

Company Brief

Paramount Corp Bhd (PARAMON) has bought a 21.54% stake in Eco World International Bhd (EWINT) for RM170.61m in cash. Paramount’s wholly-owned subsidiary Flexsis Sdn Bhd bought 517m EWI shares at 33 sen per share from GLL EWI (HK) Ltd — a unit of GuocoLand Ltd that is controlled by Tan Sri Quek Leng Chan — via a direct business transaction. The rationale for the acquisition is to accelerate its overseas expansion and diversification plan, said Paramount. The acquisition makes Flexsis the second largest shareholder in EWI, after Eco World Capital (International) Sdn Bhd with a 27% stake, while GLL’s stake in the company will be reduced to about 5.46%. (The Edge)

Mi Technovation Bhd (MI) saw its net profit more than quadruple to RM26.79m in the first quarter ended March 31, 2024 (1QFY2024), from RM6.4m in the same period last year. This jump was driven by higher revenue, which climbed by 39.4% year-on- year to RM107.13m on stronger demand from customers, as well as foreign exchange gains. About 57.2% of total revenue for the quarter was contributed by its semiconductor equipment business, while 42.8% came from its semiconductor material business. (The Edge)

MAA Group Bhd (MAA) has bought an additional 4.98% stake in troubled Practice Note 17 (PN17) company KNM Group Bhd (KNM) for RM33.24m, at an average price of 16.5 sen per share. The shares were bought between February 8 and May 10, 2024. The acquisition raised MAA’s direct and indirect stake in KNM to 13.54%. The 4.98% stake was bought via a direct business transaction. MAA said the investment will provide an opportunity for MAA to participate in any future potential capital appreciation in the value of its investment in KNM. (The Edge)

Pharmaniaga Bhd (PHARMA), whose weak financials have just been flagged by its independent auditor for a second consecutive year, assures shareholders that it is committed to financial recovery and has made “strong and steady progress” on this. This is backed by resilient fundamentals and clear strategies to exit its Practice Note 17 (PN17) status via the regularisation plan it had submitted to Bursa Malaysia in February this year, the group said. The statement came after PricewaterhouseCoopers PLT raised doubts about the group’s ability to continue as a going concern, as it flagged its continued losses in the financial year ended Dec 31, 2023 (FY2023), its current liabilities that exceeded its current assets and its capital deficiency. (The Edge)

Jiankun International Bhd (JIANKUN) has redesignated its president Datuk Saiful Nizam Mohd Yusoff as non-independent and non-executive chairman, effective Friday. Saiful Nizam's redesignation comes shortly after Tan Sri Mohamed Apandi Ali's resignation as chairman of the loss-making property development and construction group on April 30. Mohamed Apandi, the former attorney general, had led Jiankun since December 2020. Saiful Nizam, son-in-law of deputy prime minister Datuk Seri Dr Ahmad Zahid Hamidi, holds 2.5m shares or a 0.51% stake in Jiankun. (The Edge)

Two subsidiaries of software company Nova MSC Bhd (NOVAMSC) have attracted the interest of another Singapore-based family office Mark Investment Group VCC, which is considering investing about RM41m in the companies. Mark Investment is interested in investing S$5m (RM17.5m) into Nova MSC's 60%-owned Dex-Lab Pte Ltd, which is involved in so-called social robots. It also would like to invest US$5m into Nova MSC's 42%-owned EyRIS Pte Ltd, which is involved in the development of artificial intelligence for automated image analysis for eye diseases. Mark Investment has signed term sheets with the two subsidiaries for the potential investments, which are subject to due diligence and negotiations. The term sheets are non-binding and independent of each other, Nova MSC said. (The Edge)

Sarawak Cable Bhd (SCABLE) has identified "a strong alternative party" who is interested in spearheading a resuscitation plan for the group, after its plan to regularise its financials with the help of UK-based Serendib Capital Ltd fell through. The loss-making cables maker further said that it had been unable to reach an agreement with Serendib Capital on their working relationship, given a delay in proposing and implementing any debt settlement with the company's creditors within the agreed-upon period under the memorandum of agreement (MOA) inked in December last year. It further said the termination of the MOA with Serendib would not impact the group's regularisation plan to exit its Practice Note 17 (PN17) status. (The Edge)

InNature Bhd (INNATURE) is acquiring the operator of Burger & Lobster restaurants for RM21.25m in a related-party deal as part of a diversification plan. InNature will pay RM14.6m to buy Blu Restaurant Sdn Bhd with proceeds from its 2020 initial public offering. The remainder of the price will be paid with internal cash, it noted. “The proposed acquisition provides an avenue for the group to expand into the food- and-beverage business,” InNature said. (The Edge)

Bursa Malaysia Securities Bhd (Bursa Securities) has lifted AwanBiru Technology Bhd (AWANTEC), formerly Prestariang Bhd, from its status as an affected listed issuer, after three years. Awantec said Bursa Securities has granted the company a waiver from being classified as an affected listed issuer, as it had complied with the criteria for the upliftment. The exchange regulator has also lifted the trading suspension of Awantec shares, which will take effect next Monday (May 13). (The Edge)

Source: Mplus Research - 13 May 2024