Plantation Stocks Remain In Focus

Market Review

Malaysia: The FBMKLCI (-0.11%) retreated for the second consecutive day and closed lower at 1611.43 pts. The Plantation (+0.15%) sector was the only sector that ended on a positive note, as floods throughout the country are expected to reduce the supply of palm oil, leading to higher CPO prices.

Global markets: Wall Street pulled back from records high following NVIDIA's slide, as Chinese regulator investigates the chip giant for potential violation of the country's antimonopoly law. Both the European markets and Asian markets ended higher following China's pledge of a more proactive stimulus package.

The Day Ahead

The FBMKLCI extended its loss for the second consecutive day, with all sectors ended on a bearish tone except Plantation. Meanwhile, Wall Street has also ended on a negative note following a series of all-time-highs, with traders awaiting for key inflation data that will help shape the outlook for Federal Reserve rates. Traders will continue to monitor several key events this week, including (i) US CPI data, (ii) US PPI data, (iii) initial jobless claims and (iv) ECB rate decision. In the commodities market, Brent crude oil rose marginally and is still trading around the USD71 level. Gold traded sideways around the USD2,660 level while CPO prices trading above the RM5,100 level.

Sector Focus: Following the news that second wave of floods are expected to hit the country, we believe that there will be more trading volatilities ahead for the Plantation counters, as floods are expected to drive the sentiment for higher CPO prices. Meanwhile, traders can also find opportunities in the data centre midstream industries under the Technology sector, such as IT solutions, cybersecurity, HDD, EMS and OSAT, spurred by the commencement of data center construction earlier this year. Lastly, as we are approaching year-end, window dressing effect might also happen across certain blue-chip counters.

FBMKLCI Technical Outlook

The FBMKLCI retreated after hitting the 60-day MA line. Meanwhile, the MACD Histogram expanded positively, and the RSI hooked above 50, indicating that the momentum is positive at this juncture. Resistance is envisaged around 1,626-1,631, and support is set at 1,591-1,596.

Company Briefs

Malaysian wireless carrier Axiata Group Bhd (AXIATA) and Indonesian conglomerate PT Sinar Mas Group are nearing an agreement to merge their telecommunications operations in Southeast Asia's largest economy, people familiar with the matter said. The owners of PT XL Axiata and PT Smartfren Telecom are finalising details of a transaction that could be announced as soon as this week, the people said, asking not to be identified because the matter is private. The companies have been discussing the structure of a deal that may involve a mix of cash and shares, and that would create an entity with about 100m customers, Bloomberg News reported in April. (The Edge)

Datasonic Group Bhd (DSONIC), whose share price rose to its highest in more than a month, confirmed that it is in negotiations with the Home Ministry regarding a Malaysian passport contract. The integrated information and communications technology solution provider responded to Bursa Malaysia Securities Bhd's query after The Edge Malaysia weekly reported on Dec 9, quoting sources privy to the development, that the company had finally secured a new contract for Malaysian passports. Datasonic is also believed to have secured a new five-year contract to supply materials for 3m Malaysian passports annually, with the fee estimated to be between RM100 and RM115 per document. (The Edge)

Facility management firm GFM Services Bhd (GFM) has signed an agreement to explore a stake in oil and gas services firm Shapadu Energy Sdn Bhd for an indicative RM30m cash. Under the proposed acquisition, GFM will subscribe to shares equivalent to 15% in Shapadu Energy for RM10m, and purchase 30% directly from Shapadu Corporation for RM20m. GFM and Shapadu will also sign a put and call option agreement. The Edge Malaysia weekly has reported on Dec 9 that GFM's potential acquisition of Shapadu Energy, which provides downstream maintenance and turnaround services as well as upstream maintenance, hook-up and commissioning activities. (The Edge)

TMC Life Sciences Bhd (TMCLIFE) shareholders have voted to remove its suspended chief executive officer Wan Nadiah Wan Mohd Abdullah Yaakob as the director of the healthcare provider, effective immediately. In the extraordinary general meeting (EGM) held on Monday, 58.7% of present shareholders holding 99.98% voted in support, while 41.3% of shareholders who were present in the meeting holding 0.02% of voting shares rejected the resolution. In total, 54 shareholders holding 1.36bn shares supported the proposal, while 38 shareholders holding 280,800 shares rejected the motion in the EGM. (The Edge)

E-payment solutions provider Managepay Systems Bhd (MPAY) has proposed a rights issue of one new share for every two shares held, to raise up to RM51.6m to fund ongoing and future projects. A maximum of 516.04m new shares will be issued at 10 sen each, while the company also plans to issue up to 774.06m free warrants on the basis of one warrant for every two existing shares. Based on an assumed exercise price of 14 sen per warrant, the gross proceeds from the warrants could reach up to RM108.37m. (The Edge)

Construction and property group Gagasan Nadi Cergas Bhd (NADIBHD) plans to build affordable homes worth over RM1bn within the Kwasa Damansara township. Gagasan Nadi's indirect subsidiary, Nadi Emery (KKD2) Sdn Bhd (NESB), has signed a development rights agreement with Kwasa Land Sdn Bhd and its unit, Kwasa Development (15) Sdn Bhd (KD15) for the project. Under the agreement, NESB will pay RM35.6m to KD15 in exchange for the right to develop 4,183 units of affordable housing on a 34.9-acre parcel of land with Kwasa Land to act as the master developer for the project. (The Edge)

Johor-based construction outfit Haily Group Bhd (HAILY) has secured a contract to build 168 double-storey terrace houses in Taman Bestari Perdana in Johor Bahru worth RM38.20m. The contract was awarded to its wholly owned Haily Construction Sdn Bhd by Meridin East Sdn Bhd, a subsidiary of Mah Sing Group Bhd (MAHSING). The latest contract win, which is split into three phases and includes the construction of a power substation and two units of show houses, comes on the heels of the RM75.9m contract that Haily announced in September it got from Meridin East to build 393 double-storey terraced houses in Johor Bahru. (The Edge)

Trading in the securities of property developer SkyWorld Development Bhd (SKYWLD) will be suspended on Tuesday (Dec 10) pending the release of an announcement on a material transaction. The stock exchange had approved the company request for a trading suspension from 9am to 5pm, pursuant to Paragraph 3.1(b) of Practice Note 2 of the listing requirements. (The Edge)

Paragon Globe Bhd (PGLOBE) has mutually agreed to terminate its memorandum of understanding (MOU) with Solarvest Holdings Bhd (SLVEST) to explore a renewable energy-focused industrial development, following the group's sale of land to a data centre company. The MOU, which was signed on Feb 2 with Solarvest and focused on developing a green industrial township within DESA 100, is now considered irrelevant due to the land sale. The termination aligns with the group's strategic restructuring of the Desa Cemerlang project in Johor, which includes the disposal of 67.62 acres of freehold land within DESA 100 to Bridge Data Centres Malaysia IV Sdn Bhd (47.86 acres) and Bridge Data Centres Malaysia VI Sdn Bhd (19.76 acres), collectively known as Bridge Data Centres Malaysia. (The Edge)

Source: PublicInvest Research - 10 Dec 2024