Key Focus: Budget 2025

Market Review

Malaysia: Following the overnight rebound on Wall Street, the FBM KLCI has also closed higher at 1641.44, buoyed by heavyweights like PBBANK (+8.0 sen) and TENAGA (+20.0 sen). The market is optimistic ahead of today's Budget announcement, with 10 out of the 13 sectors closed in the positive territory.

Global markets: Wall Street ended mixed following a stronger than expected September retail sales data, signalling a resilience in consumer spending. The European market closed higher while Asian market ended mostly lower after the housing ministry briefing in China.

The Day Ahead

The Bursa exchange ended on a positive note, with the FBM KLCI trading higher above 1,640, while the FBM Small Cap Index rebounded ahead of the Budget 2025. In the US, Wall Street recorded another positive session after TSMC reported better- than-expected earnings and an optimistic outlook, driven by AI-led growth, which contributed to a rally in most technology heavyweights. The Dow also closed at fresh highs. Additionally, US retail sales exceeded expectations, and unemployment claims were in line with consensus estimates. In the commodities markets, Brent crude oil rebounded from its intraday low and ended flat after US inventories saw an unexpected drop last week, while gold prices surged closer to USD2,700. CPO prices remained sideways in the uptrend phase, ranging between RM4,250-4,300, as the market could be awaiting a breakout.

Sector Focus: Given the tech rally in the US, along with a stronger USD, bargain- hunting may emerge locally within the Technology sector. We also expect cautious trading ahead of the tabling of Budget 2025, with sectors like Construction, Property, Building Materials, and Utilities expected to benefit from the budget. Additionally, selected Plantation and O&G stocks with attractive dividend yields could appeal to long-term investors.

FBMKLCI Technical Outlook

The FBM KLCI index closed lower at the 1,641.44 level. Meanwhile, the technical readings on the key index are improving, with the MACD histogram extended another positive histogram, but the RSI is still below 50. The resistance is envisaged around 1,656-1,661, and the support is set at 1,621-1,626.

Company Brief

Genting Malaysia Bhd (GENM) said the lawsuit filed by RAV Bahamas Ltd, seeking over US$600m (RM2.57bn) in damages related to Resorts World Bimini's operations, will not materially impact the group's financial results or operations. The complaint, lodged on Oct 7 in the US District Court for the Southern District of Florida, was served on GAI, Genting’s indirect subsidiary, on Oct 11. The casino operator said the group is currently preparing a comprehensive legal response, which will be filed with the court in the coming weeks. (The Edge)

Varia Bhd (VARIA) has secured a contract worth RM571.8m from the Social Security Organisation (Socso) to build a rehabilitation centre in Setiu, Terengganu. Its wholly- owned subsidiary, Pembinaan Teguh Maju Sdn Bhd, accepted the 30-month contract on Thursday. The date of site possession is set for Oct 29, 2024, with expected completion on April 28, 2027. The latest contract wins lifted Varia’s current orderbook to RM3.08bn from RM2.24bn as of Aug 27. (The Edge)

Salcon Bhd’s (SALCON) wholly-owned subsidiary, Salcon Engineering Bhd, has won an external water reticulation work package for RM18.5m. The contract was awarded by LTE Engineers Sdn Bhd on behalf of F&N AgriValley Sdn Bhd in Gemas, Negeri Sembilan. The work packages are split into two sections and are related to Fraser & Neave Holdings Bhd’s (F&N) integrated dairy farm. (The Edge)

SC Estate Builder Bhd (SCBUILD) and consortium partner JK Spark Sdn Bhd plan to bid for Sabah’s large-scale solar power plant projects, initiated by the Energy Commission of Sabah (ECoS). The inaugural bidding process seeks to secure the development of LSS PV power plants with a total capacity of 100MW. The target is for the plants to begin operations in 2026. SC Estate said the consortium aims to bid for solar power projects with capacities ranging from 1 MWac to 15 MWac. (The Edge)

AME Real Estate Investment Trust's (AMEREIT) proposed acquisition of four single- storey detached factories in Johor for RM119.45m has been deemed fair and reasonable, according to independent adviser MainStreet Adviser Sdn Bhd. The independent adviser noted the RM119.45m price tag represents a 2.1% discount, or RM2.55m, to the properties' fair value of RM122m. The terms of the sale and lease agreements are also deemed fair and not detrimental to non-interested unitholders. AME REIT is buying the four industrial properties from its 49.62% parent AME Elite Consortium Bhd (AME) in an effort by the latter to realign its property investments. (The Edge)

Ancom Nylex Bhd (ANCOMNY) reported a 36.5% decline in its net profit for 1QFY2025, as its agricultural chemicals business was affected by higher freight costs arising from geopolitical conflicts. Net profit for the quarter fell to RM13.21m or 1.41 sen per share, compared with RM20.80m or 2.20 sen per share over the same period last year. This came despite revenue rising 5.8% year-on-year to RM515.54m from RM487.36m. The company declared a first interim dividend in the form of a distribution of treasury shares, offering four treasury shares for every 100 shares held. (The Edge)

Mechanical and electrical engineering services provider Bintai Kinden Corp Bhd (BINTAI) has joined forces with a China-based company to bid for construction projects in Malaysia. The firm has entered into a MOU with Henan Province Installation Group (M) Sdn Bhd, a subsidiary of China's Henan Province Installation Group Co Ltd, which specialises in machinery installation and construction projects. The collaboration will target high-rise commercial and residential buildings, industrial facilities, data centres, as well as sub-stations and power distribution networks. (The Edge)

Malaysia Airports Holdings Bhd (AIRPORT) reported passenger growth of 36.1m for the third quarter of 2024, representing a 10% y-o-y increase and coming close to pre- pandemic levels. Passenger traffic in 3Q2024 was driven by international passenger movement, which exceeded 3Q2019 levels by 7.4%, amounting to 18.9m passengers. This contrasts with the more modest recovery in domestic travel, which reached 88.9% of pre-pandemic levels, at 17.2m passengers. (The Edge)

Packaging company HPP Holdings Bhd (HPPHB) reported a 54.5% decrease in its net profit to RM1.04m for the 1QFY2025, from RM2.29m a year ago, hurt by lower sales and foreign exchange loss due to a strengthening ringgit. Revenue for the quarter fell 12.4% to RM16.65m from RM19.01m in the previous year’s corresponding period, as the company saw lower sales from the electronic and electrical (E&E) and sheath contraceptive industries. No dividend declared during the quarter. (The Edge)

Medical equipment and furniture manufacturer LKL International Bhd (LKL) has announced a proposed JV with PT Fasilitas Teknologi Nusantara (Fastech) to expand into the Indonesian healthcare market. The JV will primarily engage in the business of manufacturing, selling, trading and distribution of medical equipment, medical devices and medical furniture in Indonesia. Fastech is principally engaged in the business of providing workforce solutions in Indonesia that specialises in providing high quality labour resources. (The Edge)

Source: Mplus Research - 18 Oct 2024