Focusing On The Ongoing Corporate Earnings

Market Review

Malaysia: The FBM KLCI (+0.39%) closed higher as buying pressure were noticed within Utilities and Industrial Products & Services heavyweights, namely YTLPOWR (+45.0 sen) and PCHEM (+24.0 sen); the former posted a stellar result, translating to healthy buying interest.

Global markets: Bond yields rose, and Wall Street closed lower as concerns grew over the potential for a sharp 50 bps rate cut, suggesting the U.S. economy might be slowing more than anticipated. In contrast, European and Asian markets ended the day on a positive note.

The Day Ahead

Local stocks traded mixed, with investors favouring large-cap stocks (FBM KLCI up 0.4%) while avoiding smaller-cap companies (FBM Small Cap down 0.8%). In the U.S., markets declined as all three major indices formed bearish engulfing patterns, driven by a surge in US 10-year Treasury yields above 3.8%. Traders are now focused on Jerome Powell’s speech at the Jackson Hole Symposium, looking for hints on the size of the expected rate cut in September. Additionally, new home sales data is due later tonight. In the commodity markets, Brent oil rebounded after a 4-day losing streak, supported by a drop in U.S. inventories by 4.6 million barrels last week. Meanwhile, gold prices fell below the USD2,500 level, awaiting further cues from the Jackson Hole Symposium, and CPO prices edged closer to the RM3,800 mark.

Sector Focus: Given Wall Street's negative performance overnight, we expect selling pressure to spill over to local stocks. However, investors are likely to focus on corporate earnings, especially in the O&G sector, which has seen strong results from ARMADA, DAYANG, PERDANA, and DELEUM. Healthcare stocks may also be in the spotlight following KOSSAN’s results and Thailand’s confirmation of the first Monkeypox case in Asia. We continue to favour the Consumer sector amid the stronger ringgit environment.

FBMKLCI Technical Outlook

The FBM KLCI index ended higher towards the 1,641 level. The technical readings on the key index were positive with the MACD histogram forming another positive bar and the RSI trended above 50. The resistance is envisaged around 1,656-1,661 and the support is set at 1,621-1,626.

Company Brief

Capital A Bhd (CAPITALA) has secured a US$443m (RM1.9bn) revenue bond to refinance AirAsia Bhd's lease liabilities, cover aircraft and engine maintenance costs, and support its working capital. The bond will be issued in two tranches: US$200m from Ares Management Corp and Indies Capital Partners to reactivate pandemic- grounded aircraft, and US$243m from existing aircraft lessors to refinance lease liabilities. The notes, issued by subsidiary AirAsia RB 1 Ltd, are due in September 2026 and August 2028. (The Edge)

Oil and gas services firm Bumi Armada Bhd (ARMADA) logged a net profit of RM265.96m in 2QFY2024, more than double the RM118.77m it recorded in the same quarter a year earlier, thanks to higher margins and contributions from both floating production storage and offloading (FPSO) vessels Armada Kraken and Armada Olombendo. Revenue rose 31% year-on-year to RM578.86m from RM441.32m. The company did not declare any dividend for the quarter. (The Edge)

Matrix Concepts Holdings Bhd's (MATRIX) net profit stood at RM60.7m in 1QFY2025, down 6% from RM64.6m a year ago on the back of decreased revenue. Quarterly revenue fell nearly 16% to RM279.7m from RM331.4m a year ago, as revenue recognition from its flagship Sendayan Developments declined by 16.6% to RM250.3m from RM300m in the previous year. The property developer declared a first interim dividend of 2.5 sen per share, payable on October 10. (The Edge)

Sime Darby Property Bhd (SIMEPROP) saw its net profit more than double in 2QFY2024 to RM161.96m, compared to RM71.07m in the same period last year, driven by land sales and increased sales of industrial and high-rise homes. Revenue for the quarter surged year-on-year to RM1.2bn from RM688.92m. The company declared its first dividend of 1.5 sen per share for FY2024, payable on November 6. Following a strong performance in the first six months, the group is also raising its sales target for the year. (The Edge)

Kedah-based property developer Eupe Corp Bhd (EUPE) said that a recently acquired 2.46-acre land in Bangsar, Kuala Lumpur, is expected to generate gross development value (GDV) of RM300m. The property developer plans to launch a high-rise residential project in 2026 and complete it within three years, ahead of the official four-year timeline. The land was acquired in May for RM69.18m. (The Edge)

7-Eleven Malaysia Holdings Bhd (SEM) reported a 5.9% increase in net profit to RM20.49m for 2QFY2024, compared to RM19.35m a year ago. The increase was supported by higher revenue and lower administrative and operating expenses. Quarterly revenue rose by 3.3% to RM751.79m, up from RM727.98m, driven by the net addition of 94 new stores and the Hari Raya Aidilfitri festive season, which boosted consumer spending. No dividend was declared for the quarter. (The Edge)

Focus Point Holdings Bhd (FOCUSP) posted a 16.5% increase in 2QFY2024 net profit to RM8.43m from RM7.24m a year ago, underpinned by higher revenue in its optical business and profitability turnaround in its food & beverage segment. Revenue rose 12.1% year-on-year to RM70.61m from RM62.99m. No dividend was declared for the quarter. (The Edge)

Gold and jewellery retailer Tomei Consolidated Bhd’s (TOMEI) net profit increased by 16.8% to RM19.9m in 2QFY2024, up from RM17m a year earlier, on the back of higher revenue. Revenue for the quarter climbed 19.5% year-on-year to RM266.9m from RM223.4m, thanks to higher contributions from its retail segment. No dividend was declared for the quarter under review. (The Edge)

Kerjaya Prospek Group Bhd's (KERJAYA) subsidiary is suing Apple 99 Development Sdn Bhd, a unit of Yong Tai Bhd, for failing to pay an outstanding contract sum of RM105.14m. The suit seeks payment of the residual sum, a declaration that Apple 99 breached a settlement agreement, and an order for specific performance of the settlement and hotel sales agreements. (The Edge)

Kossan Rubber Industries Bhd (KOSSAN) reported a net profit of RM31.34m for 2QFY2024, a significant turnaround from a net loss of RM3.29m a year ago, driven by higher contributions across all business segments. However, its net profit slightly declined from the previous quarter due to lower glove sales and increased costs. Revenue for the quarter rose 10.93% year-on-year to RM429.91m. No dividend was declared for the quarter. (The Edge)

AEON Credit Service (M) Bhd (AEONCR) has launched its sixth senior sukuk under its RM2bn sukuk wakalah programme. The RM350m issuance, split into two tranches (RM130m for five years and RM220m for six years), will be used to fund financing and refinance existing loans or sukuk. (The Edge)

Pan Malaysia Holdings Bhd (PMHLDG) plans to diversify into interior design and fit- out services and change its name to Exsim Hospitality Bhd. The diversification aims to improve quality and cost control in hospitality operations. Meanwhile, the name change will reflect its new focus and leverage the established "Exsim" brand. Shareholder approval for both moves will be sought at an upcoming extraordinary general meeting. (The Edge)

Mega First Corp Bhd’s (MFCB) 2QFY2024 net profit grew 18.9% to RM150.36m from RM88.61m a year earlier, underpinned by better performances from all its operating segments. Revenue for 2QFY2024 rose 1.9% to RM331.95m from RM325.65m last year. The company declared a dividend of 4.5 sen per share, up from 4 sen per share a year ago. (The Edge)

MSM Malaysia Holdings Bhd (MSM) reported a net loss of RM32.40m for the second quarter ended June 30, 2024, reversing two previous quarters of profit. The loss was 55.6% higher than the RM20.82m loss recorded a year earlier, due to increased raw sugar prices, higher operating costs and lower non-operational gains. Revenue rose 11.6% to RM833.08m from RM746.23m, driven by higher average selling prices and incentives, despite reduced sales volume. No dividend was declared for the quarter. (The Edge)

UEM Sunrise Bhd (UEMS) reported a 23.71% decline in net profit for 2QFY2024 totalling RM18.84m, compared to RM24.7m a year ago. This decrease was attributed to higher operating expenses and a lower share of net results from joint ventures and associates. Revenue also fell by 43.61%, dropping to RM205.22m from RM363.96m last year. No dividend was declared for the quarter. (The Edge)

Construction firm Sunway Construction Group Bhd (SUNCON) saw its net profit rise 17.8% to RM38.87m for 2QFY2024 from RM33m a year ago, on improved contributions from all segments. Overall revenue for the quarter also increased 7.8% to RM651.25m from RM604.1m on better performance in its construction segment. The group declared a first interim dividend of 3.5 sen per share for FY2024, payable on September 26. (The Edge)

REDtone Digital Bhd’s (REDTONE) net profit more than doubled to RM29.5m in 4QFY2024, up from RM11.8m a year ago, driven by increased fair value gains from investments. This marks the company's strongest profit since its Bursa Malaysia debut over 20 years ago. Quarterly revenue surged 62% year-on-year to RM114.8m from RM70.9m, boosted by growth in managed telecommunication network services as well as cloud and IoT segments. An interim dividend of 3 sen per share was declared and will be payable on October 18. (The Edge)

Source: Mplus Research - 23 Aug 2024