Mild Profit Taking Activities Across The Board

Market Review

Malaysia: The FBM KLCI (+0.20%) closed higher as the index was lifted by buying pressure in the Banking and Utilities heavyweights, namely MAYBANK (+20.0 sen) and TENAGA (+3.0 sen), despite mixed regional markets' performance following the Fed's dovish tone.

Global markets: Bond yields rose, and Wall Street saw mixed performance as traders repositioned ahead of NVIDIA’s earnings later this week. Meanwhile, both the European and Asian stock markets ended mixed amid escalating tensions in the Middle East.

The Day Ahead

Trading activity on the local front was positive, with most sub-indices closing higher. Despite the Fed's dovish stance at the recent Jackson Hole Symposium, sentiment on Wall Street was mixed, with profit-taking observed in the Technology sector. Investors will be closely monitoring key economic data this week, including (i) consumer confidence (today), (ii) preliminary US GDP (Thu), (iii) unemployment claims (Thu), and (iv) core PCE data (Fri). In the commodity market, Brent oil rebounded further, rising above USD81 amid increasing geopolitical tensions and expectations of lower interest rates boosting economic activity. Gold prices remained stable above USD2,500, while CPO prices surged past RM3,900 as Indonesia aims to implement 50% palm-based biodiesel blending by 2025.

Sector Focus: With the slight pullback in Wall Street’s tech sector, we anticipate selling pressure could emerge locally, particularly in tech companies, as the ringgit strengthens. However, the stronger ringgit may positively impact the Consumer, Construction, and Financial sectors. Additionally, the Property sector could benefit from the news of Tropicana’s land sale to a data center provider.

FBMKLCI Technical Outlook

The FBM KLCI index ended higher towards the 1,638 level. However, 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 1,653- 1,658 and the support is set at 1,618-1,623.

Company Brief

Tropicana Corp Bhd (TROP) has inked a sale and purchase agreement (SPA) with NTT Global Data Centers Holding Asia Pte Ltd to dispose of a parcel of land in Gelang Patah, Johor — measuring 68.457 acres — for RM383.13m, marking the fourth major disposal by the property developer in the past nine months. The SPA was entered between Tropicana Corp’s wholly-owned subsidiary Tropicana Firstwide Sdn Bhd (TFSB) and seven indirect subsidiaries of NTT Data Group, a Japanese multinational information technology service and consulting company. The original cost of investment in the land stood at approximately RM143.19m. (The Edge)

KUB Malaysia Bhd (KUB) is disposing of a 70% stake in its indirect wholly owned subsidiary KUB Sepadu Sdn Bhd (KUBS), the sole contributor to the group's agro division, for RM103.37m in cash. The 70% stake will be sold to Sinong Enterprise Sdn Bhd, which has subsidiaries principally involved in oil palm plantation and swiftlet ranching. The expected pro forma gain on the proposed disposal is RM19.65m, and that the proceeds will be allocated for its other core businesses, namely the liquefied petroleum gas division, as well as the power division. (The Edge)

Construction company Infraharta Holdings Bhd (IHB) is refuting the allegations and reliefs sought by Consortium Zenith Construction Sdn Bhd (CZC) in a suit against its unit pertaining to issues related to the major roads and Penang third link (PMRT) project. CZC alleged that its payments amounting to RM13.12m made to IHB's wholly-owned subsidiary Infraharta Sdn Bhd (ISB) were tainted with fraud and deceit and that ISB is liable to return the same amount to CZC. CZC also made similar allegations against Vizione Construction Sdn Bhd, a subsidiary of Vizione Holdings Bhd (VIZIONE) and the second defendant in the suit, with regards to payments amounting to RM15.5m. (The Edge)

Texchem Resources Bhd (TEXCHEM) has redesignated its executive director Dr Yuma Konishi as group chief executive officer (CEO) following the retirement of Yap Kee Keong from the post. Yuma, who is the son of executive chairman Tan Sri Dr Fumihiko Konishi, joined the group back in 2005. (The Edge)

Energy solutions provider T7 Global Bhd (T7GLOBAL) has secured a RM74.6m contract from the Ministry of Defence (Mindef) to supply, deliver, test, and commission airfield surveillance radar systems, communication systems and related air traffic management equipment to the Royal Malaysian Air Force. The contract, which spans five years from Aug 5, 2024 to Aug 4, 2029, was awarded to its subsidiary T7 Kemuncak Sdn Bhd on July 31. (The Edge)

Globaltec Formation Bhd’s (GLOTEC) Australian-listed unit NuEnergy Gas Ltd is making a cash call to raise gross proceeds up to A$8.17m (RM24.05m) to fund its early gas sales initiative in Indonesia. The funds will be raised via a renounceable pro-rata entitlement offer of up to 408.54m new shares in NuEnergy, on the basis of eight new shares for every 29 shares held by existing shareholders, at an issue price of A$0.02 per share. The offer is partially underwritten by NuEnergy, in which Globaltec has a 64.66% stake. (The Edge)

Hap Seng Plantations Holdings Bhd’s (HAPSENG) net profit almost tripled to RM27.67m for 2QFY2024 from RM9.42m a year ago, driven by higher average selling price of all palm products, higher sales volume of crude palm oil (CPO) and lower operating expenses. Revenue rose 8.31% to RM182.82m — its highest since 2QFY2022, when it recorded RM246.86m — from RM168.79m a year before. It announced a first interim dividend of 1.5 sen per share, payable on September 24. (The Edge)

Oil and gas services firm Velesto Energy Bhd (VELESTO) said it has completed the periodic inspection of its Naga 2 rig under what is called its Mandatory Five Yearly Special Periodical Survey (SPS) programme and that the rig will be heading to Sarawak soon. Naga 2 is currently dry-docked in Singapore, where it has been since June 24. On reaching Sarawak, it will start a development drilling campaign. Velesto also said it had received a letter of award for its Naga 3 rig from the Thang Long Joint Operating Company, and that the rig is expected to be working in Vietnam during the September-November months. It did not disclose the value of the new job, which the rig will be taking on before its SPS in the first quarter of next year. (The Edge)

Kitchen cabinet manufacturer Signature International Bhd (SIGN) announced plans to list two of its subsidiaries on the ACE Market of Bursa Malaysia, on the same day it revealed that its latest quarterly net profit halved. Signature plans to list its renovation subsidiary Space Alliance Contracts Sdn Bhd (SACSB) and its interior fit- out business that focuses on commercial projects, Zig Zag Builders (M) Sdn Bhd. M&A Securities has been appointed adviser and sponsor of the proposed listings. Separately, Signature announced that its net profit for the second quarter ended June 30, 2024 (2QFY2024) halved to RM10.5m from RM20.66m in 2QFY2023. While revenue rose 14.54% to RM203.37m from RM177.56m previously, it was not enough to offset the jump in operating expenses — which rose to RM177.22m from RM156.94m — lower share of profit of equity accounted associates (which dropped to RM2.5m from RM5.2m), lower other operating income (which dropped to RM2.37m from RM9.74m), and higher finance costs and tax expense. (The Edge)

Telekom Malaysia Bhd’s (TM) net profit for 2QFY2024 fell 30.3% to RM396.4m from RM568.7m a year ago, primarily due to a one-time recognition of tax losses in the previous year. Quarterly revenue slid 1.7% year-on-year to RM2.91bn from RM2.96bn, dragged down by declining voice services, despite steady growth in internet and data services revenue. It raised its dividend for the quarter to 12.5 sen per share, from 9.5 sen a year ago. (The Edge)

Separately, the group’s managing director/group CEO Amar Huzaimi Md Deris at a media briefing said that TM is still keen to be involved in the development of the country’s 5G network, despite the collapse of its deal with Digital Nasional Bhd. The group, which has submitted its proposal for the setting up of Malaysia's second 5G network infrastructure, aims to be a key partner in the country’s 5G network, either by participating in the 5G second network or by just being a part of the 5G ecosystem. (The Edge)

Hong Leong Industries Bhd’s (HLIND) net profit for its fourth financial quarter ended June 30, 2024 (4QFY2024) rose 41.9% to RM98.33m from RM69.29m a year ago, thanks to higher sales of motorcycles and improved performance of its associated company. Revenue for the quarter inched up 1% to RM773.66m from RM767m in 4QFY2023, with the higher motorcycle sales offset by the absence of revenue from the fibre cement board business which the group disposed of in November 2023. For the full year, its net profit rose 33.5% to RM387.89m from RM290.61m in FY2023, underpinned by favourable sales mix that led to better profit margin, a RM25m insurance compensation related to flood damages in FY2022 as well as an RM18.7m disposal gain in the fibre cement board business. Full-year revenue fell 8.9% year-on- year to RM3.11bn from RM3.42bn, amid the slowdown in the motorcycle business in the first three quarters of the financial year. (The Edge)

TIME dotCom Bhd’s (TIMECOM) net profit in 2QFY2024 fell to RM99.05m from RM2.26bn a year ago, in the absence of gains from the divestment of its stake in AIMS data centre business last year. Quarterly revenue rose 7.53% to RM418.49m, from RM389.2m on data product revenue boost, mainly contributed by retail customers. The group declared a special interim dividend of 18.93 sen per share, up from 16.25 sen in the same quarter last year. (The Edge)

Guan Chong Bhd’s (GCB) net profit for 2QFY2024 surged more than twofold to RM67m from RM28.13m a year earlier, driven by higher selling price for cocoa products and increased sales volume for cocoa solids. The cocoa manufacturer also reported a 91.56% rise in revenue to RM2.22bn from RM1.16bn, reflecting the impact of these factors. (The Edge)

Bank Islam Malaysia Bhd (BIMB), Malaysia's largest full-fledged Islamic bank, made a net profit of RM137.17m for 2QFY2024, little changed from the RM136.14m it made in the same quarter last year. The flattish net profit was achieved as revenue rose to RM1.15bn from RM1.12bn. (The Edge)

Berjaya Land Bhd (BJLAND) reported a net loss of RM79.91m for 4QFY2024, compared to a net profit of RM51.91m a year earlier, amid higher operating costs incurred by its business segments and associated companies. Quarterly revenue edged up 0.72% to RM1.96bn from RM1.94bn in 4QFY2023, on the back of higher sales per draw reported by the group's subsidiary STM Lottery Sdn Bhd, coupled with an additional draw conducted in the quarter (41 draws versus 40 previously). For the full FY2024, Berjaya Land posted a net loss of RM90.20m, a reversal from FY2023’s net profit of RM147.30m, despite a 4.63% increase in revenue to RM7.61bn from RM7.27bn. (The Edge)

Electronic manufacturing services firm SKP Resources Bhd (SKPRES) reported 31.3% increase in its net profit to RM28.34m for the first quarter ended June 30, 2024 (1QFY2025), from RM21.59m a year ago, due to better cost optimisation and higher sales performance. Revenue for the quarter surged 17.1% to RM505.53m from RM431.61m in the previous year’s corresponding period. (The Edge)

Ajinomoto (Malaysia) Bhd's (AJI) net profit jumped 54.99% to RM18.93m in 1QFY2025 from RM12.21m a year before, as revenue and finance income climbed. The food and seasoning company's quarterly revenue rose 15.42% to RM171.44m in 1QFY2025 from RM148.53m in 1QFY2024, on better contributions across consumer business and industrial business segments. (The Edge)

Source: Mplus Research - 27 Aug 2024