Turning positive after Jackson Hole

Market Review

Malaysia:. The FBM KLCI ended flat on Friday as investors were trading cautiously prior to the Jackson Hold Symposium despite both the deals from SIME-UMW and KLK-BPLANT were positive on the broader market’s tone. Meanwhile, we noticed the Construction, Properties and Utilities sectors traded firmly higher.

Global markets:. The US stock markets traded mostly higher snapping 3-week losing streek as the market shakes off rate hike concerns, cheering the comments from Chairman Jerome Powell during the Jackson Hole symposium. Similarly, the European markets ended positively, but the Asia markets closed in the red.

The Day Ahead

The stocks on the local front were relatively stronger as compared to the regional benchmark indices. Given the positive trading tone from Wall Street overnight, we expect the buying interest to spillover towards stock on the local front within the technology stocks. Meanwhile, with the announcement of a special financial zone to be created in Forest City last Friday after market hours, it should provide further catalysts on the stock markets, providing trading opportunities to the broader market. Also, since the market is focusing on the brighter economic outlook in the US, brushing off the interest rate hike concerns, downside risk may be limited. Commodities wise, the Brent crude oil rose above USD84/bbl, while the CPO prices remained above RM3,800/MT.

Sector focus:. Overall sentiment should be positive with the trading focus revolving around the properties and construction sector amid the announcement of a special financial zone to be seen in Forest City. It may translate to trading interest within the building material as well. Besides, we like the energy sector with the promising results since last week.

FBMKLCI Technical Outlook

The FBM KLCI formed a small hammer candle above the SMA200 zone and it should perform some positive bias trading tone in the near term as the technical readings are turning more positive. The MACD Histogram forming a rounding bottom in the negative territory, while the RSI is hovering above 50. The FBM KLCI’s resistance is located around 1,450-1,460. Support is set around 1,430-1,435.

Company Brief

IHH Healthcare Bhd has upped its stake in Ravindranath GE Medical Associates Private Ltd (RGE) to 98.17% from 73.64%, following shares acquisition for a cash consideration of INR 7,400m (RM415m). The acquisition was done through IHH’s wholly-owned subsidiary Gleneagles Development Private Ltd (GDPL), which had on Friday entered into an agreement to buy out the entire remaining 24.53% stake held by Dr Ravindranath Kancherla and his affiliates (collectively known as Dr Ravi Group) in RGE.

Petronas Gas Bhd's (PetGas) net profit jumped 22% to RM485.37m for 2QFY2023 from RM396.5m posted in the same period a year ago, lifted by higher gross profit coupled with higher share of profit from joint venture companies. The stronger profit was also attributed to higher interest income from fund investments and lower exposure from foreign exchange movement following early settlement of USD lease liabilities for floating storage units at liquefied natural gas (LNG) regasification terminal in Sungai Udang, Melaka. The group also declared a second interim dividend of 16 sen per share amounting to RM316.6m, payable on Sept 22.

Tenaga Nasional Bhd’s (TNB) net profit slumped 62.41% to RM327.9m for 2QFY2023 from RM872.2m a year ago. This was mainly contributed by negative fuel margins and foreign exchange translation losses, said the utility giant. Quarterly revenue rose marginally by 3.78% to RM13.32bn, from RM12.84bn in 2QFY2022, on the back of a 3.4% increase in electricity sales to RM842.1m, with a demand growth of 2%. The group has approved an interim dividend of 18 sen per share for FY2023.

Telekom Malaysia Bhd’s (TM) net profit climbed 50.43% to RM568.74m for 2QFY2023 against RM378.06m a year ago, its highest quarterly earnings since 4QFY2011. In 4QFY2011, TM registered RM598.3m in net profit. The higher earnings for the quarter under review was due to lower net finance cost and the recognition of tax credits from the utilisation of previously unrecognised tax losses. Revenue growth was also contributed by higher demand for domestic and international data services. The company declared a dividend of 9.5 sen per share, to be paid on Sept 29.

Affin Bank Bhd registered a net profit of RM113.23m or 4.98 sen for 2QFY2023, a 22.93% decline from RM146.91m or 6.92 sen a year prior. The lower earnings was due to lower net interest income and Islamic banking income amounting to RM76.2m, higher allowances for impairment losses of RM11.9m, and higher overhead expenses of RM7.3m. Quarterly revenue fell by 12.83% to RM504.86m from RM579.19m a year ago.

Lower contribution from the Armada Kraken floating production storage and offloading (FPSO) pushed Bumi Armada Bhd's net profit down 36.23% to RM118.77m in 2QFY2023 from RM186.25m a year earlier. This was partially offset by gains from the sale of the Armada Claire FPSO and the last remaining offshore support vessels during the quarter, said the offshore energy facility and service provider.

LPI Capital Group Bhd’s net profit rose 19.42% to RM63.94m in 2QFY2023, from RM53.52m a year ago, driven by higher earnings contribution from the general insurance segment amid higher investment return. Revenue came in at RM462.36m, 14.39% higher than the RM404.22m reported for 2QFY2022, on the back of higher insurance revenue. The insurer, founded by the late banking magnate Tan Sri Teh Hong Piow, declared a first interim dividend of 26 sen per share, compared to 25 sen last year.

Sarawak Oil Palms Bhd's net profit fell 68.8% to RM48.12m in 2QFY2023 from RM154.46m a year ago, due to lower prices of palm products coupled with higher production costs. Revenue dropped 16% to RM1.18bn from RM1.4bn in 2QFY2022.

Padini Holdings Bhd, which posted a 26% YoY decline in net profit for 4QFY2023, expects retail business to remain challenging as inflation takes a toll on consumers’ spending power. The group’s net profit dropped 26.02% to RM57.31m in 4QFY2023 from RM77.46m a year earlier, due to higher expenses as a result of rising salary and incidental expenses, as well as higher finance costs. The group declared a first interim dividend of 2.5 sen per share, payable on Sept 29.
 

Source: Mplus Research - 28 Aug 2023