Reshuffling Into Small Caps

Market Review

Malaysia: The FBM KLCI (-0.04%) ended marginally lower, dragged down by selling pressure in the Banking and Industrial Products & Services sectors; in line with the regional markets' performance as investors traded cautiously ahead of a few key economic data that will be released in the US.

Global markets: The US stock markets were closed for the Labor Day holiday. Meanwhile, both European and Asian stock markets ended mixed following the decline in China’s manufacturing PMI and investors stayed cautious ahead of US key economic data expected later this week.

The Day Ahead

The local market ended on a mixed note, with the FBM KLCI closing slightly lower, while the attention has shifted to small caps and lower liners. Meanwhile, the US stock markets were closed for a public holiday. With flat performances in European markets and several key economic data releases, such as ISM Manufacturing and jobs data, due this week, traders may remain cautious in the near term. Currently, the market expects a 25 bps rate cut in this FOMC meeting. In the commodity markets, Brent oil rebounded as oil exports at Libyan ports were halted on Monday, and production was reduced across the country. Gold prices continue to trade sideways around the USD 2,500 mark, while CPO prices remain above the RM 3,900 level.

Sector Focus: We expect the heavy selling in small caps seen in August to be overdone, with lower liners likely to recover in September while heavyweights may take a breather. Given the stronger ringgit performance over the past few months, sectors such as Consumer, Construction, Building Materials, and Property may benefit. We also favour stocks with strong fundamentals and growing earnings in their recent results.

FBMKLCI Technical Outlook

The FBM KLCI index ended flat at the 1,678 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 1,693-1,698 and the support is set at 1,658-1,663.

Company Brief

DRB-Hicom Bhd (DRBHCOM) said it has received a notice of assessment from the Inland Revenue Board (LHDN) amounting to RM246.25m for the year of assessment 2020. The notice came after LHDN decided “to treat the disposal of a long-term investment held in a subsidiary as income” in the assessment year, DRB-Hicom said. DRB-Hicom said the notice of assessment relates to the disposal of its 97.37% equity interest in Alam Flora Sdn Bhd, held by its wholly-owned DRB-Hicom Holdings Bhd for 24 years, which was completed in December 2019. The group intends to appeal and potentially initiate legal proceedings to challenge the notice. (The Edge)

Binastra Corp Bhd (BNASTRA), formerly known as Comintel Corp Bhd, has secured a RM235.5m contract from Mightyprop Sdn Bhd to undertake construction work for a 39-story serviced apartment in Petaling Jaya, Selangor. The latest contract win boosts Binastra's year-to-date new contract total to RM1.6bn, with the group’s outstanding order book valued at RM2.5bn as of Sept 2. (The Edge)

Econpile Holdings Bhd (ECONBHD) has secured a RM71.2m contract to undertake demolition, substructure and basement work for a 55-storey building located along Jalan Sultan Ismail, Kuala Lumpur. The contract was awarded to its wholly-owned Econpile (M) Sdn Bhd by Platinum Victory Property Sdn Bhd, according to the construction firm's filing. The work is expected to be completed within 28 months starting from Sept 2. (The Edge)

Pekat Group Bhd’s (PEKAT) indirectly-owned unit Solaroo RE (Maldives) Pvt Ltd has secured a 10-year contract worth US$6.9m (approximately RM30m) to supply solar- generated electricity to Maldives-based Sun Investments Pvt Ltd. Under the contract, Solaroo will design, build and operate a solar energy system with a 1,727-kilowatt peak (kWp) capacity, and a 1,398-kilowatt-hour (kWh) battery energy storage system at Sun Siyam Vilu Reef, Maldives. The project’s approximate value of US$6.9m is based on the expected generation of about 25.45m kWh of electricity over the 10- year contract period. (The Edge)

FGV Holdings Bhd (FGV) announced the departure of its group CEO, Datuk Mohd Nazrul Izam Mansor, effective Sept 1. This follows the conclusion of Mohd Nazrul Izam's three-year contract for the role, which he assumed in 2021. The company has appointed its group chief financial officer (CFO) Datuk Mohd Hairul Abdul Hamid as acting group CEO, effective immediately. Mohd Hairul has served as group CFO since January 2019. (The Edge)

Kenanga Investment Bank Bhd (KENANGA) or Kenanga IB has acquired an 8% stake in Singaporean fintech firm Helicap Pte Ltd at an undisclosed price, as part of a move to advance its own digitisation initiatives. Helicap owns and operates an investment platform specialising in private credit in Southeast Asia, and the company has a proprietary credit analytics engine. (The Edge)

Sarawak-based oil and gas company Ocean Vantage Bhd (OVH) saw 97.93m shares representing a 23.32% stake change hands on Monday afternoon in a direct business transaction. The block of shares was transacted at 20.4 sen a share, or RM19.98m in total. The transacted price was at a 16.57% or a 2.9 sen premium to the closing price of Ocean Vantage at 17.2 sen a share. It is not known who had purchased the block of shares of the upstream O&G service provider. Should the block be taken by a single party, this could mark an emergence of a new controlling shareholder in the loss-making company. (The Edge)

99 Speed Mart Retail Holdings Bhd, which is set to list on the Main Market of Bursa Malaysia on Sept 9, posted a 66.3% year-on-year jump in its second quarter net profit, driven by higher sales from an expanded number of outlets and higher other operating income. Its net profit for the March to June quarter (2QFY2024) rose to

RM125.53m from RM75.49m in 2QFY2023. Revenue for 2QFY2024 rose 8.2% to RM2.42bn from RM2.24bn in 2QFY2023, following positive contributions from 59 new outlets during the quarter, bringing the group's total outlet count to 2,646 as at June 30, 2024. No dividend was declared for the quarter. (The Edge)

Source: Mplus Research - 3 Sep 2024