Corporate Earnings Season May Provide Clarity

Market Review

Malaysia: The FBM KLCI (-0.36%) ended lower as selling pressure were noticed within Banking and Utilities heavyweights namely MAYBANK (-8.0 sen) and YTLPOWR (-11.0 sen) as investors traded cautiously ahead of the Jackson Hole meeting this Friday, coupled with the weaker regional markets' performance.

Global markets: Wall Street ended higher despite the downward revision of US payrolls as investors took positive cues from the Fed meeting minutes, where majority of the Fed policymakers pointed to a more dovish tone. Meanwhile, European stock markets also closed higher, while Asian markets ended mixed.

The Day Ahead

The local stock exchange ended on a mixed note as we head into a busy corporate earnings season. Profit-taking activities remained prevalent, in line with the regional markets’ performance. In the US, the nonfarm payroll saw a significant downward revision of 818k, the largest since 2009. However, market sentiment remained positive as the Fed minutes suggested a potential rate cut of at least 25 basis points in the upcoming FOMC meeting. Traders will continue to monitor key economic data, including unemployment claims, Flash Manufacturing PMI, and the Jackson Hole symposium on Friday. In the commodity markets, Brent oil declined further due to the payroll revision and softer demand from China, while gold prices held above USD2,500. CPO prices mildly rebounded, trading above RM3,700.

Sector Focus: With the positive performance on Wall Street, we may see spillover buying support in the local Technology sector. YTL-related stocks could also trade actively higher, driven by strong QoQ earnings growth. Additionally, the Monkeypox situation may provide a slight boost to Healthcare stocks. We also favour Consumer and Financial stocks due to the stronger ringgit environment.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower towards the 1,635 level. However, the technical readings on the key index were still positive with the MACD histogram forming another positive bar and the RSI trended above 50. The resistance is envisaged around 1,650-1,655 and the support is set at 1,620-1,615.

Company Brief

YTL Corp Bhd's (YTL) net profit for 4QFY2024 fell 2.5% to RM534.48m from RM548.03m a year earlier, with revenue dropping 10.2% to RM8.27bn from RM9.21bn, due to reduced construction activity, lower cement and building materials sales, and the lack of a one-off project revenue. The company declared an interim dividend of 4.5 sen per share, payable on November 29. In contrast, its indirect unit, Malayan Cement Bhd (MCEMENT) saw a 38.5% increase in net profit to RM110.18m from RM79.55m, with revenue rising 3.1% to RM1.04bn from RM1.01bn, driven by stable selling prices and improved operational efficiencies. Malayan Cement declared a second interim dividend of six sen per share to be paid on November 15. (The Edge)

Maxis Bhd (MAXIS) posted a 7.88% rise in its second-quarter net profit thanks to higher consumer service revenue and its enterprise business. Its net profit for 2QFY2024 was RM356m, compared with RM330m a year earlier, as revenue rose 4.7% to RM2.59bn from RM2.47bn. The group declared a second interim single-tier tax exempt dividend of 4 sen per share, to be paid on September 23. (The Edge)

Cape EMS Bhd’s (CEB) net profit shrank 42.6% to RM8.7m in 2QFY2024 from RM15.16m a year ago, despite higher revenue of RM166.57m versus RM121.78m previously. The group attributed the large earnings contraction to narrower gross profit margin, due to the exclusion of sales from thermal energy devices and an increase in freight costs. The sharp fall in quarterly profit was also dragged by higher administrative expenses. It did not declare any dividend for the quarter under review. (The Edge)

Healthcare group TMC Life Sciences Bhd (TMCLIFE) saw its net profit for 4QFY2024 drop 92.3% to RM1.02m from RM13.25m a year ago. Quarterly revenue also fell 12.4% to RM74.12m from RM84.65m a year earlier due to reduced patient volume, case intensity and contract terminations. The group proposed a final dividend of 0.4898 sen per share and a special dividend of 1.7271 sen per share for FY2024, both payable on January 3, 2025. (The Edge)

YTL Power International Bhd's (YTLPOWR) net profit for 4QFY2024 fell 5.6% to RM1.07bn from RM1.14bn a year earlier, due to lower contributions from its power generation and investment holding segments. Quarterly revenue declined 10.5% to RM6.34bn from RM7.09bn. The company declared a second interim dividend of 4 sen per share, payable on November 29. (The Edge)

SD Guthrie Bhd (SDG) reported a 9% increase in its net profit for 2QFY2024, reaching RM415m, up from RM380m a year earlier. The rise was attributed to higher prices, increased output and improved downstream margins. Revenue also grew 15.33% to RM4.97bn from RM4.31bn. The company declared an interim dividend of 4.65 sen per share, payable on November 15. (The Edge)

It is also collaborating with TH Properties Sdn Bhd to develop Malaysia’s first halal- certified managed industrial park in Negeri Sembilan. The park, located on SD Guthrie’s 464-acre estate in Bukit Pelandok, will have a land development value exceeding RM220m. This new park will expand TH Properties’ international halal hub, techpark @ enstek, and is expected to attract local and international companies interested in Malaysia's halal certification. (The Edge)

Powerwell Holdings Bhd (PWRWELL) has secured a RM14.75m contract to supply electrical low-voltage switchboards for a data centre in Malaysia. The contract, with a "leading international contractor", is expected to be completed by 3Q2024 and is anticipated to positively impact its earnings and net assets for FY2025. (The Edge)

LPI Capital Bhd (LPI) reported a 23% increase in its net profit for 2QFY2024, reaching RM78m, up from RM63.4m a year earlier. This growth was driven by higher earnings from its general insurance segment. Revenue inched up 1.5% to RM469.4m from RM462.36m. The company declared a first interim dividend of 30 sen per share, payable on September 13. (The Edge)

Pos Malaysia Bhd (POS) reported a wider net loss of RM55.92m for 2QFY2024, a 107% increase from RM27.01m a year earlier due to lower revenue from its postal and logistics segments. Revenue declined 4.7% to RM443.43m from RM465.2m. No interim dividend was declared. (The Edge)

Dairy manufacturer Dutch Lady Milk Industries Bhd (DLADY) saw its net profit fall 9.1% to RM22.04m in 2QFY2024 from RM24.25m a year earlier due to accelerated asset depreciation and transition costs related to its new facility. Revenue rose 2.8% to RM360.87m, driven by higher sales volume and price increases. No dividend was declared. (The Edge)

Amway (Malaysia) Holdings Bhd (AMWAY) said its second quarter net profit increased 38.3% year-on-year to RM24.55m from RM17.74m despite lower sales, attributable to price increases and a lower provision of sales incentives. Quarterly revenue declined 13.7% to RM296.45m from RM343.69m, due to softer consumer demand, coupled with higher comparison in the previous year’s quarter resulting from a pre-price increase buy up. The group declared a second interim dividend of 5 sen, payable September 20. (The Edge)

Apex Healthcare Bhd’s (AHEALTH) net profit for 2QFY2024 declined 92.82% to RM23.64m, compared with RM329.48m a year earlier, due to lower share of earnings from its 40% associate Straits Apex Group Sdn Bhd (SAG). Revenue rose 11.02% to RM238.74m, from RM215.03m, amid robust sales of pharmaceuticals, consumer healthcare products and medical devices to both private- and public-sector customers. The group declared an interim single-tier dividend of three sen per share for 2QFY2024 to be paid on September 18. (The Edge)

Thong Guan Industries Bhd's (TGUAN) net profit for 2QFY2024 dropped slightly by 3.2% to RM20.9m from RM21.58m a year ago, despite a 4.32% increase in revenue to RM303.24m from RM290.69m. The decline in profit was due to higher selling and distribution expenses, as well as increased administrative costs. The company declared a 2.5 sen per share interim dividend, payable on October 18. (The Edge)

Tan Sri Hamdan Mohamad, founder of Ranhill Utilities Bhd (RANHILL), has resigned as the group's chief executive officer, following his earlier departure as executive chairman and director on August 2. However, the company has not yet announced successors for both CEO and chairman roles. (The Edge)

Oil and gas services provider Deleum Bhd (DELEUM) reported a 130% increase in its second-quarter net profit to RM22.4m from RM9.73m, driven by strong performances in its power and machinery and oilfield integrated services segments, along with forex gains and a reversal of trade receivable impairments. Revenue grew 20.1% to RM225.9m from RM188.1m, with the power and machinery segment contributing 78.2% of total revenue. Deleum also declared a higher interim dividend of 4 sen per share. (The Edge)

Pharmaniaga Bhd (PHARMA) saw its net profit rise 42.6% to RM2.79m for 2QFY2024, up from RM1.96m a year earlier, as it recorded tax refunds and lower operating costs to offset weaker revenue and higher finance costs. Quarterly revenue fell 1.2% to RM838.26m from RM848.73m a year ago on weaker non- concession segment, offset by increased demand in Indonesia. The group did not announce any dividend for the quarter. (The Edge)

Source: Mplus Research - 22 Aug 2024