Traders May Look For Fundamentally Solid Stocks

Market Review

Malaysia: The FBM KLCI (+1.11%) extended the rebound as the index was lifted by buying pressure in YTL-related stocks as investors gained confidence after BOJ sent a less hawkish tone by pledging to refrain from hiking rates in the volatile market environment. The Energy sector (+3.14%) was the best-performing sector.

Global markets: Wall Street ended lower dragged by Nasdaq following a weaker demand in a 10-year Treasury auction. Also, selected tech stocks like SMCI fell as their results came in below expectations. Meanwhile, both the European and Asia stock markets ended higher.

The Day Ahead

The local market extended its rebound as the BOJ commented that they will only increase the interest rate in a less volatile market. Most sectors rallied further except for the Plantation sector amid falling CPO prices. Meanwhile, Wall Street snapped a 2-day rebound as profit-taking activities emerged amid softer earnings from tech- related stocks. Although the market remains concerned over the Yen reverse carry trade incident, we expect buying interest to build up in view of the less hawkish BOJ statement. Additionally, traders will be monitoring the unemployment claims to be released tonight for more clarity on economic activities. In the commodity markets, Brent oil spiked amid rising geopolitical tension in the Middle East, while gold prices hovered below USD2400. The CPO price is still below RM3800.

Sectors Focus: Despite the negative overnight Wall Street performance, we believe the accumulation zone is near if there is another selling pressure on the local front. We still like stocks within the Construction, Property, and Technology sectors, which are benefiting from the data center secular theme amid oversold conditions. Additionally, we like the Finance sector as it provides a decent dividend yield during the current sell-off phase. In view of the stronger ringgit environment, we also favour the Consumer sector.

FBMKLCI Technical Outlook

The FBM KLCI index extended the rebound towards 1,591 level. The technical readings on the key index were negative with the MACD histogram forming another negative histogram bar and the RSI dropped 50. The resistance is envisaged around 1,606-1,611 and the support is set at 1,571-1,576.

Company Brief

Cape EMS Bhd (CEB) managing director and chief executive officer Christina Tee Kim Chin continued her divestment of company shares, selling 112.74m shares for RM53.56m on Tuesday. The shares were sold in 30 transactions at an average price of 47.5 sen each. Following the latest sale, Tee's stake in Cape EMS decreased from 38.05% to 25.6%, a reduction of 12.45%. Over the past six trading days, she has sold nearly 130m shares. (The Edge)

Businessman Tan Sri Robert Tan Hua Choon is no longer a substantial shareholder of Paragon Globe Bhd (PGLOBE) after selling half of his stake. Tan, known as the "Casio King", offloaded 37m shares in an off-market deal last Friday. However, the transaction's value and buyer were not disclosed. Tan's remaining shareholding now stands at 4.87% or 36.33m shares. (The Edge)

Upstream oil and gas services provider Uzma Bhd (UZMA) has secured a contract to supply a hydraulic workover unit for two offshore platforms in East Malaysia, granted by PTTEP Sarawak Oil Ltd to its unit Uzma Engineering Sdn Bhd. The contract, effective July 4, will last until the completion of six firm wells. While the contract's value was not disclosed, it is expected to positively impact Uzma's earnings and net assets for the financial year ending June 30, 2025, and beyond. (The Edge)

Heineken Malaysia Bhd's (HEIM) net profit for second quarter ended June 30, 2024 rose 0.72% to RM91.13m from RM90.47m earlier, thanks to lower operating expenses. This is despite a slight revenue dip to RM565.49m from RM569.24m. It proposed a dividend of 40 sen per share. (The Edge)

Biscuit maker Hup Seng Industries Bhd (HUPSENG) reported a net profit increase of 3.53% to RM9.03m, or 1.13 sen per share, for the second quarter ended June 30. Revenue fell marginally by 1.61% to RM80.24m from RM81.55m a year earlier, facing headwinds in the export market with sales declining 4% or RM800,000, primarily due to weaker sales in Thailand and Saudi Arabia. Domestic sales also dipped 1%, impacted by lower demand in East Malaysia. The company declared a dividend of 2 sen per share. (The Edge)

Sentral Real Estate Investment Trust (SENTRAL), or Sentral REIT, saw a 30% increase in net property income to RM76.06m for the first half of FY2024, from RM58.49m a year ago, driven by contributions from Menara CelcomDigi and key properties like Building 4 and Platinum Sentral. Gross revenue rose 26.5% to RM96.24m from RM76.09m. However, net income grew at a slower pace of 14.5% to RM40.42m from RM35.29m due to higher finance costs and fees. Earnings per unit after manager’s fees increased slightly to 3.38 sen from 3.29 sen, impacted by dilution from a December 2023 placement exercise. (The Edge)

Kawan Renergy Bhd’s (KENERGY) subsidiary, Kawan Engineering Sdn Bhd (KESB), secured a RM58m contract from KAB Energy Holdings Sdn Bhd for mechanical, firefighting, and electrical works at a 52-megawatt power plant in Sipitang, Sabah. KESB is required to provide a performance bond and corporate guarantee within 20 days from the receipt of the letter of award dated April 8, 2024. (The Edge)

Source: Mplus Research - 8 Aug 2024