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Mplus Market Pulse - 11 Sept 2023

Publish date: Mon, 11 Sep 2023, 08:59 AM
An official blog in I3investor to publish research reports provided by Malacca Securities research team.

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Likely to turn higher after by-election mood

Market Review

Malaysia: The FBM KLCI (-0.35%) ended lower due to uncertain sentiment prior to the by-elections in Johor and weaker regional market sentiment. On the broader market, the Technology sector (-1.53%) fell as China banned the usage of iPhones in government agencies, while the leading sector was the Utilities sector (+1.23%).

Global markets: Wall Street ended mixed and logged a losing week amid renewed worries that interest rates may rise further in second half of 2023. European stock markets rose from strong buying interest in media stocks, while Asia ended lower as Japan revised 2nd quarter GDP figures lower.

The Day Ahead

The FBM KLCI ended lower last week prior to the by-election over the weekend, coupled with weaker regional stock markets performance. Since both the Johor byelections have concluded, we expect the market to perform better in the near term. Also, we expect the positive rebound on Wall Street may spillover to stocks on the local front. However, given the fluid developments in the political scene, it may limit the upside potential of the stock markets and we believe traders may turn their attention to value stocks during uncertainty periods. Commodities wise, the Brent crude oil traded slightly above the USD90/bbl level, while the CPO prices were mildly lower but formed a hammer candle above the RM3,800/MT level.

Sector focus: With the news that China extends the iPhone ban to local government and state-owned firms may contribute to the weaker sentiment across the technology sector. Meanwhile, we still favour the O&G sector on the back of healthy price movements on Brent oil prices. We think investors will re-assess the recent quarterly results to position themselves for solid fundamental companies into 4Q23.

FBMKLCI Technical Outlook

The FBM KLCI traded lower and formed a bearish candlestick. Meanwhile, the technical readings on the key index were mixed with the MACD Histogram forming a negative bar, but the RSI is still hovering above 50. The resistance is located around 1,465-1,470, while the support is set around 1,430-1,440.

Company Brief

Serba Dinamik Holdings Bhd narrowed its net loss to RM105.02m or 2.82 sen per share in the fourth quarter ended June 30, 2023 from RM327.76m or 8.84 sen per share in the previous year’s corresponding quarter, on higher operating income and lower administrative expenses. Revenue fell 96.39% y-o-y to RM6.15m from RM170.25m, as contributions from the operations and maintenance segment fell to RM5.69m from RM159.8m previously. For FY2023, Serba Dinamik’s net loss increased to RM1.3bn or 34.88 sen per share versus RM1.09bn or 29.34 sen a share a year earlier. Full-year revenue fell 70% to RM403.23m from RM1.35bn. (The Edge)

KNM Group Bhd is selling its loss-making unit FBM Hudson Italiana SpA for €22m cash (RM110.09m) to United Arab Emirates-based Petro MAT FZCO. A €12m deal was previously announced between KNM and British Midland FZE, but British Midland had appointed Petro MAT to replace it as the buyer in the transaction. KNM did not disclose the reason behind the change in buyer. (The Edge)

Eastern & Oriental Bhd (E&O) saw its executive chairman and executive director increase their stake in the group with the conversion of irredeemable convertible unsecured loan stocks (ICULS) to ordinary shares. Kerjaya Prospek Development (M) Sdn Bhd, a wholly-owned subsidiary of Kerjaya Prospek Group Bhd, saw its shares in E&O rise by 100m to 114.93m shares on Sept 6. Subsequently, E&O executive chairman Datuk Tee Eng Ho and executive director Tee Eng Seng saw their indirect stake rise to 837.59m indirect shares or a 50.21% stake in the company, company filings showed. Meanwhile, E&O former deputy chairman Datuk Seri Tham Ka Hon has ceased to be the substantial shareholder due to the dilution of shareholding from the enlarged share capital arising from the ICULS. (The Edge)

Pan Malaysia Corporation Bhd (PMC) has proposed to acquire the remaining 49% equity interest in fast-food chain operator A&W (Malaysia) Sdn Bhd from Inter Mark Resources Sdn Bhd, comprising 30.38m ordinary shares, for RM69.45m. The exercise is to be satisfied via a combination of cash payment of RM41.67m and the issuance of 111.13m ordinary shares in PMC at an issue price of 25 sen per consideration share. (The Edge)

Iqzan Holding Bhd said it plans to submit an appeal to Bursa Securities on the bourse regulator’s decision to delist the company on Sept 19. Upon submission of the appeal and pending Bursa Securities’ decision, the company’s delisting will be deferred. However, Bursa Securities shall proceed to suspend the trading of the company’s securities on Sept 15. Iqzan will have to submit an appeal by Sept 14 for it to be considered by Bursa Securities. (The Edge)

Khazanah Nasional Bhd has disposed of a 4.62% stake in ACE Market-listed TT Vision Holdings Bhd for RM25.92m. This pared Khazanah Nasional's stake in the automated test equipment (ATE) maker to 18.86% or 88.26m shares. Bloomberg data showed that the shares were sold at RM1.20 per share — RM25.92m for the 21.6m shares or a 4.62% stake. The RM1.20 disposal price is 252.94% higher than TT Vision’s initial public offering price of 34 sen in January. (The Edge)

ECM Libra Group Bhd is to acquire two pieces of beachfront land in Johor for an aggregate RM36.86m for future hospitality developments. The plots of land are located in Desaru Coast, which is expected to benefit from tourist market catchments. Its wholly-owned unit ECM Libra Desaru Sdn Bhd is acquiring the entire equity interest of Desaru Beachfront 2 Sdn Bhd, owner of a 36,831 square metre plot, for RM17.05m from Desaru Development Holdings One Sdn Bhd. Another whollyowned subsidiary, ECM Libra Beachfront Sdn Bhd, is to acquire a 44,427-sq metre plot for RM19.81m from Desaru Beach Parks Sdn Bhd. (The Edge)

AirAsia X Bhd (AAX) has promoted its non-independent non-executive director Datuk Fam Lee Lee as deputy chairman effective Sept 9. Fam, 61, has served on the board of AirAsia X since March 2008. The lawyer by profession also serves as nonexecutive director of AAX’s sister company Capital A Bhd. (The Edge)

Construction outfit GDB Holdings Bhd’s legal actions against Damai City Sdn Bhd (DCSB) over the Conlay 8 project disputes are to be put on hold for three months after the High Court granted DCSB a three-month restraining order against its creditors. In a bourse filing on Friday, GDB said the restraining order accompanied a court order granting DCSB leave to hold a meeting with its creditors for the purpose of considering a scheme of arrangement and compromise. The group said that in view of the court order, its subsidiary Grand Dynamic Builders Sdn Bhd will seek advice from its solicitors concerning the court, arbitration and adjudication proceedings between DCSB and Grand Dynamic Builders. GDB shares ended unchanged at 21 sen, with a market capitalisation of RM196.87m. (The Edge)

Mercury Securities Group Bhd said its shares offered to the public under its initial public offering (IPO) has been oversubscribed by 45.45 times. Mercury Securities’ IPO comprised a public issue of 157.1m new shares (17.59% of the enlarged issued shares of the company) and an offer for sale of 71.51m existing shares (8.01% of the enlarged issued shares), at an offer price of 25 sen per share. The public issue was expected to raise RM39.27m. Upon its listing on the ACE Market of Bursa Securities on Sept 19, Mercury Securities said it would have a market capitalisation of RM223.25m, based on the IPO price and an enlarged issued share capital of 893m shares. (The Edge)

Inari Amertron Bhd was among the top losers on Bursa Malaysia on Friday amid news reports that China has banned the use of foreign-branded devices, including iPhones, for work purposes. Inari currently trades at a price-to-earnings ratio of 33.08 times, with a dividend yield of 2.86%. Inari is heavily dependent on US fabless chip designer Broadcom, which is a key component supplier to Apple. Inari’s exposure on Broadcom is more on radio frequency chips.

But it does not rule out the possibility that the recovery will be protracted as concerns grow about the slowing Chinese economy and continued headwinds from uncertain interest rate outlook. There are 12 ‘buy’, seven ‘hold’ and one ‘sell’ calls for Inari with a consensus TP of RM4.05. Kenanga Research has the highest TP of RM4.17 while the lowest TP of RM2.25 was issued by BIMB Securities Sdn Bhd. (The Edge)

Inta Bina Group Bhd has secured a RM43.65m contract from Eco Majestic Development Sdn Bhd to undertake the main building works at a gated and guarded community development in Hulu Langat, Selangor. The construction group said its wholly owned subsidiary Inta Bina Sdn Bhd would construct 162 double-storey terraced houses and an electrical substation under Phase 4 of Cheerywood. The contract will start on Nov 1, 2023, and the houses are to be completed within 20 months, it said in a filing with Bursa Malaysia on Friday. The group intends to fund the contract via internally generated funds and/or external borrowings. (The Edge)

Source: Mplus Research - 11 Sept 2023

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