Inflation Data On A Declining Trend

Market Review

Malaysia: The FBM KLCI (+0.18%) closed slightly higher as the index was lifted by buying pressure within the Consumer and Industrial Products services heavyweights, in tandem with the regional markets' performance following softer US PPI data, raising the likelihood of the Fed's rate cut in September.

Global markets: Wall Street ended higher as investors took a positive cue from the cooler-than-expect US PPI and CPI data, cementing the possibility that the Fed will be on track to start its easing interest rate cycle in September. Meanwhile, both the European and Asia stock markets ended higher.

The Day Ahead

The FBM KLCI and FBM70 managed to recover into the gap-down zone last week, while the FBM Small Cap remained in a sideways range as moderate attention was given to small caps after the market rout last Monday. Meanwhile, on Wall Street, all three major indices rose after official data showed that consumer inflation declined to 2.9% in July (vs. the consensus of 3%). With the cooling of inflationary pressures, we believe buying support will pick up on the local front. In the commodity markets, Brent oil retraced for the second session as Middle East tensions faded, while gold prices maintained above USD2,440 zone. The CPO prices managed to hold above the RM3,700.

Sectors Focus: Given the positive sentiment in the US, we believe buying interest may spill over into local stocks, specifically in the Technology sector. We also favour the Construction, Property, Building Materials, and Utilities sectors, as they should benefit from data center and AI themes. Additionally, the strong Ringgit situation may benefit the Consumer and REIT sectors.

FBMKLCI Technical Outlook

The FBM KLCI index ended higher towards 1,612 level. The technical readings on the key index were positive with the MACD histogram forming another positive bar and the RSI stayed above 50. The resistance is envisaged around 1,627-1,632 and the support is set at 1,592-1,597.

Company Brief

S P Setia Bhd (SPSETIA) reported its highest quarterly net profit in six years, reaching RM295m for the second quarter ended June 30, 2024, up almost seven times from RM43.1m a year ago, thanks largely to land sales. Revenue rose 58.5% year-on-year to RM1.5b from RM942.7m. No dividend was declared for the quarter. (The Edge)

Technology products distributor VSTECS Bhd's (VSTECS) net profit for the second quarter ended June 30, 2024, fell 2.58% to RM15.25m from RM15.65m a year earlier, due to higher operating expenses and a lower fair value gain. In a separate filing with Bursa Malaysia, the group announced it had secured the sole rights to distribute the Google Pixel 9 range of smartphones in Malaysia. (The Edge)

Ranhill Utilities Bhd (RANHILL) posted a 45.8% decline in net profit to RM6.53m in the second quarter ended June 30, 2024 (2QFY2024), from RM12.06m a year ago, due to an RM8m profit reversal by its O&G subsidiary Ranhill Worley Sdn Bhd. Revenue decreased 5.4% to RM561.44m from RM593.67m, impacted by lower income from the Bidor solar project and Ranhill Worley’s engineering services, despite increased sales from its water unit, RanhillSAJ. (The Edge)

Furniture company Synergy House Bhd (SYNERGY) reported a net loss of RM4.77m for the second quarter ended June 30, 2024, compared to a net profit of RM6.19m a year earlier. This is the company’s first loss since its listing in June last year, mainly due to a RM13.4m provision for bad debts, currency exchange losses, higher operating costs, and inventory loss from a warehouse fire. Despite this, revenue increased by 32.1% to RM77.35m, driven by higher sales in the business-to-business and business-to-consumer segments in the US and UK. (The Edge)

VS Industry Bhd's (VS) Philippine unit has secured a two-year contract to manufacture consumer electronics, expected to generate RM1.5b in revenue. The project will require RM100m in capital expenditure, funded through internal resources. The customer is an existing client of VS Industry Philippines Inc (VSIB), though its identity remains confidential due to a non-disclosure agreement. (The Edge)

Maxis Bhd (MAXIS) has teamed up with Singaporean telecommunications conglomerate Singtel to launch Malaysia's first all-in-one platform for 5G network, edge computing, cloud and services orchestration, built on Singtel’s Paragon for telco networks. The platform aims to enhance accessibility to 5G-advanced, 5G technology and multi-cloud computing for Malaysian businesses, boosting digital transformation in sectors like manufacturing, logistics, healthcare and public services. (The Edge)

Solarvest Holdings Bhd (SLVEST) and NCT Group have launched phase one of their solar-ready industrial park at the NCT Smart Industrial Park in Sepang. This phase will include over 270 factories, making it the region's first solar-ready industrial park. The factories are expected to install solar PV systems with a total capacity of 36 MWp, potentially offsetting around 25,515 tonnes of carbon emissions annually. (The Edge)

Semiconductor support services company Frontken Corp Bhd (FRONTKN) reported a 4.4% increase in net profit for the second quarter ended June 30, 2024 to RM33.33m, up from RM31.91m a year earlier, driven by gains from its Taiwan subsidiary. Revenue rose 11.37% year-on-year to RM134.93m from RM121.15m. The company declared a single-tier dividend of 1.7 sen per share for the quarter. (The Edge)

Paragon Globe Bhd (PGLOBE) has secured its first serviced apartment project in Johor Bahru, with an estimated gross development value of RM1.49b, after its subsidiary, PGB Desa Heights Sdn Bhd, signed a deal with Tropicana Danga Bay Sdn Bhd to develop two freehold land parcels in Danga Bay. (The Edge)

Varia Bhd (VARIA) has secured a RM61.45m construction subcontract for the Sultan Azlan Shah Campus project from Kemuncak Pesaka Sdn Bhd, through its subsidiary Pembinaan Teguh Maju Sdn Bhd. Notably, Kemuncak Pesaka’s directorship includes Varia's independent non-executive director Datuk Wira Roslan Ab Rahman. The project, involving main and external building works at the Sultan Idris Education University in Tanjong Malim, Perak, will run from August 19, 2024 to March 31, 2027. (The Edge)

Source: Mplus Research - 15 Aug 2024