Bargain Hunting Activities May Extend

Market Review

Malaysia: Despite the negative US market sentiment, the FBM KLCI (+0.09%) closed slightly higher due to bargain-hunting activities with buying seen mainly in transportation and logistics stocks. On the broader market, the Transportation Sector (+0.63%) gained, while the Technology sector (-0.71%) declined.

Global markets: Wall Street ended mixed with only Nasdaq rising, supported by buying interest within the technology giants. Meanwhile, the US Treasury yields remains elevated as key data suggests that the US inflation is still at a high level. Both the European and Asian stock markets ended lower.

The Day Ahead

The FBM KLCI closed marginally higher, in tandem with the regional sentiment. Meanwhile, Wall Street traded mixed with the technology stocks rebounding, leading to a positive close on Nasdaq. This week, we will be having (i) China Manufacturing PMI, (ii) ISM Manufacturing PMI, and (iii) jobs data. Hence, the trading activities may turn slightly cautious in the US. Also, another main event to watch out for will be the FOMC meeting that will be held on 31-Oct to 1-Nov. Closer to home, we believe bargain hunting activities to extend on the FBM Small Cap and it is ripe for on FBM KLCI heading into the reporting season month. Given the widening of geopolitical tension, we believe the oil prices could remain elevated above USD86. Meanwhile, the FCPO prices turned higher last Friday nearing RM3800/tonne.

Sector focus: With the Nasdaq rebounding, the buying interest may be seen within the Technology sector. Meanwhile, the strengthening of USD against the ringgit could provide buying support for the export-related segment, where gloves, and furniture stocks may be under the limelight in the near term. Also, we expect the O&G sector to continue its uptrend tone with the elevated oil prices.

FBMKLCI Technical Outlook

The FBM KLCI ended slightly higher, forming a flag formation. The technical readings on the key index are slightly positive, with the MACD Histogram turning flat, while the RSI maintains above 50. The resistance is envisaged around 1,450-1,460 and the support is located around 1,420-1,430.

Company Brief

Cengild Medical Bhd said the information technology (IT) system used by its wholly-owned subsidiary Cengild Sdn Bhd was affected by a data breach that may have leaked patient data. The group said there was no impact on the provision of medical services and no disruption to patient care. Cengild Medical said its subsidiary will continue to closely monitor the situation, while conducting further assessments of the IT framework and security systems. (The Edge)

YNH Property Bhd’s external auditor has issued a qualified opinion on the group’s financial statements for the 18-month period ended June 30, 2023, in relation to its joint venture (JV) and turnkey contracts for property development work. Baker Tilly Monteiro Heng PLT expressed a “basis for qualified opinion” saying that an amount of RM1.1bn had been included in YNH’s inventories regarding the contracts entered into with the JV parties or landowners. (The Edge)

Hextar Global Bhd said it is acquiring the entire equity interest in Propel Chemicals Sdn Bhd (PCSB) for RM16.5m cash to further expand its oil and gas (O&G) specialty chemicals portfolio. The agrochemical company said its subsidiary Hextar Kimia Sdn Bhd is buying PCSB from Propel Global Bhd (with a 55% stake), Rancak Nikmat Sdn Bhd (36.9%), and Wiramas Baiduri Sdn Bhd (8.1%). The proposed acquisition, which is expected to be completed in the fourth quarter of 2023, will be funded through internally generated funds. (The Edge)

Meta Bright Group Bhd has proposed to diversify into the building materials trade through the acquisition of a 70% stake in a ready-mixed concrete manufacturing business in Sabah for RM28.04m. The purchase of the stake in Expogaya Sdn Bhd (Expo) will be settled via a cash consideration of RM5m and the issuance of 98m new shares in Meta Bright at 23.4 sen each. The Expo group of companies is primarily involved in the manufacturing, trading and supplying of ready-mixed concrete with Expo’s 16 batching facilities strategically located near major hubs of construction activity in Sabah. (The Edge)

Malakoff Corp Bhd has proposed to acquire a 49% stake in a solid waste management company, E-Idaman Sdn Bhd, for RM133.2m cash. Malakoff said EIdaman's wholly-owned subsidiary, Environment Idaman Sdn Bhd, provides waste collection and disposal services for municipal waste under a 22-year concession granted by the federal government for the provision of solid waste collection and public cleansing management services for Kedah and Perlis. (The Edge)

Kossan Holdings (M) Sdn Bhd, the largest shareholder of Kossan Rubber Industries Bhd, has emerged as the substantial shareholder in Luxchem Corp Bhd, after acquiring 6.09m shares, or a 0.569% stake. Kossan Holdings bought the block of shares via direct business transaction on Wednesday. Based on the back-of-the envelope calculation, the cost of this purchase was RM2.86m, based on Luxchem’s closing price of 47 sen at the time. This raised Kossan’s shareholding in Luxchem to 5.168% or 55.29m shares. Prior to the transaction, Kossan Holdings held a 4.599% stake or 49.2m shares in the group. (The Edge)

Seremban Engineering Bhd (SEB) has secured a RM161.83m contract for the construction of two apartment blocks near Genting Highlands. The group said it has been appointed by IBN Highland Sdn Bhd to undertake the main building architectural works, mechanical and electrical works, and associated external works, for the two blocks of 29-storey apartments at Highland City, Genting Permai in Bentong, Pahang. The engineering services group informed Bursa Malaysia that the 12-month contract commenced on Friday. (The Edge)

Axis Real Estate Investment Trust's (Axis REIT) net property income (NPI) for the third quarter ended Sept 30, 2023 increased marginally by 0.67% to RM61.9m compared with RM61.49m, on the back of higher property income. Quarterly revenue edged slightly higher by 0.14% higher to RM71.81m from RM71.71m. Axis REIT declared a third interim income distribution of 2.15 sen per unit, payable on Dec 15. (The Edge)

Practice Note 17 (PN17) company Khee San Bhd has reported that its auditor has expressed doubts about the ability of the loss-making candy and sweets manufacturer to continue its operations as a going concern in its audited financial statements for the financial year ended June 30, 2023 (FY2023). Khee San revealed that its external auditor, Messrs Kreston John & Gan, noted that Khee San incurred net losses of RM204.81m at the group level and RM113.67m at the company level during FY2023. Furthermore, current liabilities exceed current assets by RM128.49m at the group level and RM4.98m at the company level. (The Edge)

Southern Steel Bhd said that it is not aware of any agreement that its major shareholder Hong Leong Group — a conglomerate helmed bybnaire Tan Sri Quek Leng Chan — had entered into that would need to be disclosed to Bursa Malaysia. Hong Leong Manufacturing Group Sdn Bhd and HLMG Capital Sdn Bhd — both controlled by Quek — are the top two major shareholders of Southern Steel, collectively holding a 69.97% stake in the company, according to its annual report. The company said this in a Friday bourse filing while responding to a query by Bursa Malaysia in relation to a report on Wednesday about the group's plan to divest its majority stake in the steel products manufacturer. It is seeking a valuation of as much as US$200m (RM957.2m) for the unit. (The Edge)

Ekovest Bhd has entered into binding heads of merger agreement (HOA) with its major shareholders, Tan Sri Lim Kang Hoo and another sister company, Knusford Bhd, as part of a proposed consolidation exercise to streamline the tycoon’s shareholdings in a group of companies. Ekovest told Bursa Malaysia on Friday that it is disposing of its entire stake in Ekovest Construction Sdn Bhd (ECSB) to Knusford Bhd for RM450m. Knusford, on the other hand, will fund the ECSB acquisition through the issuance of new ordinary shares in Knusford at the proposed issue price of 60 sen per new Knusford share. (The Edge)

ACE Market-bound Plytec Holding Bhd has secured a 42-month contract to set up a digital ecosystem in Sarawak. In a statement, the construction engineering solution and services group of companies said its wholly-owned subsidiary BIM Engineering Solution & Technology Sdn Bhd secured the contract from PPES Consults Sdn Bhd to facilitate the digital transformation of the state into a smart city. PPES Consults is a wholly-owned subsidiary of Sarawak Economic Development Corp. (The Star)

Source: Mplus Research - 30 Oct 2023