Rebound May Be Seen In Small Cap

Market Review

Malaysia: The FBM KLCI (-0.12%) closed lower after a volatile intraday session, as profit-taking emerged in plantation heavyweights, particularly SDG (-13.0 sen), dragging down sentiment on the local index. Despite this, the healthcare sector was the best performer.

Global markets: The Wall Street rebounded supported by gains in Micron Technology, coupled with the upbeat US GDP data that was released. Meanwhile, both the European and Asian stock markets also closed on a positive tone; supported by the recent released of stimulus packages by China.

The Day Ahead

The FBMKLCI closed slightly lower as profit-taking emerged in selected index heavyweights, a key factor to watch will be the strength of the ringgit. Meanwhile, US stock markets ended positive, with both the Dow and S&P 500 charged to record highs as (i) Micron leading the tech sector higher, and (ii) US GDP growth exceeding expectations at 3.0% for 2Q. Traders will be closely monitoring the PCE index tonight and the non-farm payroll report next week. In the commodities market, Brent crude fell below USD74 as Saudi Arabia shifted its focus toward regaining market share, abandoning its previous USD100 price target. Meanwhile, gold surged above USD2,670 on expectations of a rate-cut environment. CPO prices traded near RM4,200 before closing lower at RM4,150.

Sector Focus: The ringgit has slightly weakened to RM4.14/USD from RM4.115/USD, offering some relief to export-related sectors such as Gloves and Technology. However, traders could also focus on Consumer stocks in view of elevated RM tone. In addition, sectors such as Construction, Building Materials, Property, and Utilities could be worth positioning for ahead of Budget 2025, especially with potential announcements on the KL-SG HSR project. Following the Invest Malaysia event in Johor, it should boost trading activity in Johor-themed counters.

FBMKLCI Technical Outlook

The FBM KLCI index closed slightly lower towards the 1,671 level. However, the technical readings on the key index were mixed, with the MACD histogram turned into negative territory, but the RSI stayed above 50. The resistance is envisaged around 1,686-1,691, and the support is set at 1,651-1,656.

Company Brief

AirAsia Bhd, the short-haul airline business of Capital A Bhd (CAPITALA), is planning to introduce mandatory carbon fees on air travel across all AirAsia operations starting January 2025, said its chief executive officer Tan Sri Tony Fernandes. The process of seeking approval from all the authorities is ongoing for the countries where it has operations, including Thailand, Indonesia, the Philippines and Cambodia. The carbon fee, which will be added to the airline's fares, is to contribute to the government's efforts to reduce greenhouse gas emissions from the aviation sector. (The Edge)

Gamuda Bhd (GAMUDA), whose share price has gained 74.5% year to date, proposed a one-for-one bonus issue, involving an issuance of up to RM2.98bn bonus shares. Separately, it reported an 8.2% increase in net profit to RM272.49m for the fourth quarter ended July 31, 2024 (4QFY2024) against RM251.75m in the same quarter a year ago. Quarterly revenue expanded 38.7% to RM4.72bn from RM3.4bn previously. While it did not declare any dividend for the quarter under review, its FY2024 payout amounted to 16 sen per share. For FY2024, its net earnings (continuing operations) rose 12% to a record-breaking RM912.13m from RM814.73m in FY2023, while revenue jumped 62.4% to RM13.35bn against RM8.22bn previously. (The Edge)

Sapura Energy Bhd (SAPNRG), which posted a net loss of RM5.23m in its second quarter ended July 31, 2024 (2QFY2025), said that its ability to win new jobs is crippled by financial constraints, while expecting more foreign exchange (forex) losses. The Practice Note 17 company said its order book growth was constrained by limited access to working capital and bank guarantee facilities, “impacting its ability to secure two major contracts worth around RM4.5bn”. It sustained an order book of RM5.9bn, with its joint ventures holding an additional RM6.1bn. For the second quarter ended July 31, 2024 (2QFY2025), it incurred a net loss of RM5.23m versus a net profit of RM42.81m a year ago, despite higher revenue generated in the quarter at RM1.21bn from RM1.14bn previously. For the first half of FY2025, its net profit fell almost two-thirds to RM76.9m, from RM188.89m a year before, while revenue expanded by 13.85% to RM2.38bn, from RM2.09bn. It did not recommend any dividend for 2QFY2025. It last paid a dividend of half a sen per share in 2019. (The Edge)

AEON Credit Service (M) Bhd (AEONCR) saw its net profit decline 40.8% to RM71.16m for the second quarter ended Aug 31, 2024 (2QFY2025) from RM120.19m a year ago, owing to higher impairment losses on financing receivables. Quarterly revenue expanded 14.8% to RM541.43m from RM471.73m. It declared an interim dividend of 14.25 sen per share for the quarter under review. For the first half ended Aug 31, 2024 (1HFY2025), AEON Credit’s net profit also slipped 19.1% to RM177.57m against RM219.55m in the same period a year ago, while revenue increased by 15.1% to RM1.06bn from RM924.4m previously. (The Edge)

Citaglobal Bhd (CITAGLB) has secured a RM47.56m road construction project in Terengganu. The contract for Package 8 of the Jalan Raya Simpang Pulai–Gua Musang–Kuala Berang project covers the stretch from Kampung Jeneris to Kuala Telemong (Phases 2 & 3) in Hulu Terengganu. (The Edge)

HCK Capital Group Bhd (HCK) is issuing new shares to settle the bulk of an outstanding RM113.35m debt that its subsidiary owes its executive chairman Tan Sri Clement Hii Chii Kok @ Hii Chee Kok. It, together with indirect unit Global Activate Sdn Bhd, entered into an agreement with Hii to issue 47.26m new shares at RM2.1161 apiece as a settlement for RM100m of the debt owed. On completion of the share issuance, Hii's shareholding in HCK will increase to 59.75% from 56.28% as at Sept 4, 2024. GASB's debt to Hii will then be trimmed to RM13.35m. (The Edge)

Hiap Teck Venture Bhd’s (HIAPTEK) net profit for the financial year ended July 31, 2024 (FY2024) more than tripled to RM106.3m from RM30.91m a year ago, driven by stable steel prices, improved margins and sales volume. Annual revenue rose 6.2% to RM1.68bn from RM1.59bn. Quarterly net profit was up 11.5% to RM47.5m against RM42.6m in the same quarter a year ago, largely due to a substantial increase in the share of profit from a joint venture entity resulting from favourable foreign exchange translation effects and higher capacity. This was on the back of an 8.2% decline in revenue to RM416.6m from RM453.8m previously, mainly due to lower average selling prices. (The Edge)

MSR Green Energy Sdn Bhd (MSR-GE), an associate company of Seal Incorporated Bhd (SEAL), has roped in Sungrow, a China-based solar photovoltaic inverter and energy storage system provider, to develop a RM645m battery energy storage system (BESS) project in Sabah. The initiative involves the engineering, procurement and construction of a BESS with a capacity of 100 megawatts and an energy storage capacity of 400 megawatt-hours in Lahad Datu, Sabah. (The Edge)

Censof Holdings Bhd (CENSOF) has secured a RM5.44m contract from Pertubuhan Keselamatan Sosial (Perkeso) to provide maintenance services for an accounting system. The contract involves maintaining the Standard Accounting System for Government Agencies (SAGA) — Century Financials version 8.4 — and migrating the SAGA server to Perkeso's infrastructure. (The Edge)

Yenher Holdings Bhd (YENHER) is purchasing a fish mill and pet food and silos (machinery) — for US$4.42m (RM18.56m), cash. The acquisition is aimed at supporting Yenher’s venture into the downstream feedmill business while expanding its product offerings. The equipment will be supplied by Famsun Co Ltd, a Chinese firm that is involved in the manufacturing of special equipment for feed, agricultural and sideline foods. (The Edge)

Trading in the shares of Lambo Group Bhd (LAMBO) will be suspended from Oct 4, following Bursa Malaysia’s rejection of the company’s application for a further extension of time to submit its regularisation plan. The counter will be delisted on Oct 8, unless an appeal is submitted to the regulator by Oct 3, the information technology service provider said in a filing. (The Edge)

Source: Mplus Research - 27 Sep 2024