Investors may position for Budget 2024

Market Review

Malaysia:. The FBM KLCI (+0.14%) closed higher, rebounding from a softer morning session, after DOSM announced lower MoM core inflation data. The Energy sector (+1.69%) gained momentum, while the Technology sector (-0.19%) dropped marginally amid selling pressure from Wall Street overnight.

Global markets:. Wall Street continued its losing streak as investors are still cautious of the potential rate hike in future FOMC meetings and the possibility of the US government shutting down. The European market dropped, while Asian markets were mixed after Bank of Japan kept its interest rates unchanged.

The Day Ahead

The FBM KLCI rebounded from the intraday low and closed above the 1,450 level last Friday. However, Wall Street continues to stay in the negative region for the fourth session with the expectation of slightly hawkish tone from the Fed, coupled with the concern over a government shutdown in the US. We believe the selling pressure may spillover to stocks on the local front. Nevertheless, we opine that the downside risk should be limited as investors may focus on the NETR and NIMP blueprints, as well as the Budget 2024 in the upcoming month. Commodities wise, the Brent crude oil has continued retraced from the recent high and traded below the USD93/bbl level, while the CPO prices extended its pullback formation below the RM3,700/MT level.

Sector focus:. Again, we expect the overall local bourse to trade on a negative tone taking cues from Wall Street overnight. Meanwhile, we expect trading activities to revolve around the Property and Construction sectors ahead of the Budget 2024, where traders may position for mega infrastructure projects to be announced. Also, we favour industrial products, renewable energy as well as building materials which are related to NETR and NIMP blueprints.

FBMKLCI Technical Outlook

The FBM KLCI ended higher marginally surpassing the 1,450 psychological level. Also, the technical readings on the key index were negative with the MACD Histogram forming the first negative bar and the RSI dropped below 50. The resistance is located around 1,465-1,470 and the support is envisaged around 1,430- 1,440.

Company Brief

Chin Hin Group Bhd said it will be making a mandatory general offer for the remaining shares in Ajiya Bhd at RM1.53 per share, but intends to maintain Ajiya's listing status. This comes after the building material specialist on Friday entered into share sale agreements with How Lian Yeong and Ong Hang Ping for the proposed acquisition of a 2.11% stake or 6.22m shares in Ajiya for RM9.51m or RM1.53 per share. (The Edge)

ITMAX System Bhd, which is primarily involved in the business of supply, installation and provision of public space networked systems, has bagged a RM111.2m contract from the Iskandar Puteri City Council to provide video surveillance and smart traffic light system services in Iskandar Puteri, Johor. ITMAX said its 65%-owned subsidiary Southmax Sdn Bhd has secured a letter of award for the project. (The Edge)

Plantation group United Malacca Bhd saw its net profit for the first financial quarter ended July 31, 2023 fall 89% to RM2.68m from RM24.3m a year earlier on lower contribution from its Malaysian operations. Quarterly revenue declined 19% to RM135.95m from RM167.44m, mainly due to lower average crude palm oil and palm kernel prices. (The Edge)

The cut-off date for the proposed disposal of a 33% stake in Boustead Plantations Bhd (BPlant) by the Armed Forces Fund Board (LTAT) has been extended for the second time. Kuala Lumpur Kepong Bhd (KLK), which is acquiring the 33% stake from LTAT and Boustead Holdings Bhd, said the three parties have agreed for the cut-off date for the strategic collaboration agreement to be extended for another two weeks to Oct 6. The previous extension, ended on Friday. (The Edge)

CTOS Digital Bhd’s wholly-owned subsidiaries, CTOS Data Systems Sdn Bhd, CTOS Basis Sdn Bhd and CTOS IDS Sdn Bhd, have entered into recurrent related party transactions (RRPTs) of a revenue or trading nature for an aggregated value of RM4.06m. CTOS Digital said the RRPTs were entered into with CIBI Holdings Pte Ltd, Credisense Ltd, Creador Sdn Bhd and CIBI Information Inc. According to the group, the aggregate value transacted for the RRPTs from Jan 1 to Aug 31 has exceeded the Main Market Listing Requirements percentage ratio of 1%. (The Edge)

LFE Corp Bhd has entered into a conditional share agreement with Patrick Heng Jin Wei to buy 100,000 shares representing the remaining 40% equity of LFE Development Sdn Bhd (LDSB) for RM3.5m cash. LFE, which currently owns a 60% stake in LDSB, said that the purchase consideration was arrived at on a willing-buyer willing-seller basis between the parties, and LDSB will be a wholly-owned subsidiary under LFE after the exercise. (The Edge)

Tanco Holdings Bhd's group managing director Datuk Seri Andrew Tan Jun Suan has raised his indirect shareholding in the group to 785.06m shares or a 39.59% stake after acquiring five million shares on Friday. Tan bought the stake in the open market via TJN Capital Sdn Bhd on Friday at 56 sen per share, according to the group's bourse filing. This values the purchase at RM2.8m. (The Edge)

Compugates Holdings Bhd said its 70%-owned unit, Compugates Development and Mining Sdn Bhd (CDMSB), will apply for leave to appeal against the Court of Appeal order requiring CDMSB to refund RM3m from the initial deposit paid by its jointventure (JV) partner for a proposed mixed development project. The JV partner, Main Uptown Sdn Bhd, had appealed to the Court of Appeal against the decision made earlier by High Court relating to the proposed project, and the Appeals Court had on Aug 28 allowed the appeal in part. (The Edge)

Symphony Life Bhd has proposed a renounceable rights issue of warrants for the basis of one warrant for every two existing shares, to raise up to RM35.8m. The actual amount depends on the final issue price of the warrants, but the company plans to utilise this for its bank borrowing repayments amounting to RM34.97m in a maximum scenario, according to its filing on Friday (Sept 22). As at end-June, Symphony Life had non-current borrowings of RM124.04m and current borrowings of RM45.57m. Cash balance stood at RM107.63m. (The Edge)

Petroliam Nasional Bhd’s (Petronas) wholly-owned subsidiary Petronas CCS Ventures Sdn Bhd has signed a term sheet with Mitsui OSK Lines Ltd (MOL) and MISC Bhd for the potential incorporation of a joint-venture entity to invest in developing and monetising liquefied carbon dioxide (LCO2) carriers for carbon capture and storage (CCS) projects in Malaysia. (The Edge)

MNRB Holdings Bhd announced a single-tier final dividend of 4.45 sen for the financial year ended March 31, 2023 (FY2023). It noted in a statement on Friday that the dividend amount rose significantly by 78%, versus the previous financial year, underpinned by a commendable performance across its reinsurance and takaful subsidiaries. (The Edge)

Sedania Innovator Bhd’s major shareholder Sedania Corp Sdn Bhd (SCSB) has been ordered by the High Court to compensate RM14.52m to two individuals claiming to own a 49% stake in Sedania’s consumer healthcare products business. The company involved is Offspring Inc Sdn Bhd. Sedania acquired 51% of Offspring for RM15.12m cash from its 31.31% shareholder SCSB, which is owned by the listed company’s managing director Datuk Noor Azrin Mohd Noor and his wife Datin Noraida Saludin, in November 2020.

Offspring has been ordered along with SCSB to pay the RM14.52m in damages. Both are also required to bear the cost of arbitration at the Asian International Arbitration Centre amounting to RM416,358 and legal-related costs of RM365,937. Sedania estimated that the financial impact on its 51%-owned Offspring could be totalling RM17.46m. However, Sedania said SCSB will continue to indemnify the company from any potential claims relating to the above. (The Edge)

The High Court on Friday dismissed an application by Enersafe Resources Sdn Bhd to intervene and set aside the ex-parte restraining orders imposed by Sapura Energy Bhd (SEB), and its 22 wholly-owned subsidiaries, on its creditors. Judge Atan Mustaffa Yussof Ahmad ruled that although Enersafe Resources, a creditor of SEB’s wholly-owned Sapura Pinewell Sdn Bhd, had already started an arbitration process against Sapura Pinewell, this does not automatically elevate the company to the status of a creditor or even a contingent creditor. (The Edge)

Source: Mplus Research - 25 Sept 2023