Focusing On The AI-Theme

Market Review

Malaysia: The FBM KLCI (+0.08%) ended marginally higher, in line with the positive performance in the regional stock markets, boosted by selected Banking and Utilities heavyweights. On the broader market, the Plantation sector (+1.00%) and the Construction sector (+1.00%) were the leading sectors.

Global markets: Wall Street ended lower dragged by the broader technology stocks despite the rally in NVIDIA, meanwhile traders will be eyeing the upcoming January job openings, manufacturing and nonfarm payroll data this week. The European stock markets ended lower, while Asian ended higher.

The Day Ahead

The FBM KLCI is trading within its sideways formation after the February earnings season. Despite the pullback on the US stock markets, investors were still chasing into the Technology stocks amid the AI-craze and SMCI is added to S&P500. The latest segment that got a boost is the memory chipmakers where high bandwidth memory solutions will be used in the latest Nvidia’s AI chips. Given this scenario, the upward tone will persist within the AI-related stocks for the near term. On the commodity market, the Brent traded sideways slightly below the USD83/bbl level as OPEC and its allies agreed to extend voluntary production cuts until end of June, while the Gold price has surged above USD2100 zone with the anticipation of interest rate cuts by the Fed in 2H2024.

Sectors focus: We expect the broader market could stay muted for the near term in the absence of fresh leads, but commodities sectors such as the O&G, Gold and Plantation sectors may stay stronger in the near term as their underlying commodities prices were traded firmer. Meanwhile, we like stocks with high net cash and decent dividend yield, within the Furniture, Metal and Technology sector.

FBMKLCI Technical Outlook

The FBM KLCI ended marginally higher, but still within the sideways consolidation phase. The technical readings on the key index were mixed, with the MACD Histogram extending another negative bar, while the RSI has declined below 70. The resistance is envisaged around 1,545-1,555 and the support is set at 1,520-1,530.

Company Brief

Tenaga Nasional Bhd (TNB) guided that the prolonged outage of Manjung 4 power plant may lead to capacity revenue loss of RM400m this year, prompting analysts to moderate their earnings growth forecasts. Further, its power generation unit may also experience reduction in the so-called capacity rate financing (CFR) — fixed payment to cover debt service — for some of its other power plants leading to lower revenue, Tenaga told analysts who attended its earnings briefing. (The Edge)

Oil and gas services outfit Deleum Bhd is seeking to acquire a 70% stake in valves company OSA Industries Indonesia (OSAII) for US$7m (RM33.1m) to fortify its power and machinery (P&M) business in Indonesia. The acquisition by its unit Deleum Services Sdn Bhd represents 70% of OSAII’s total valuation of US$10m, subject to due diligence and finalisation of definitive agreements. Deleum has entered the heads of agreement (HOA) with five parties, including OSAII and its shareholders Ong Siow Aik and OSA Industries Pte Ltd, to undertake due diligence on the acquisition target. (The Edge)

Tycoon Tan Sri Vincent Tan said that the boycott of the local Starbucks coffee chain is “unnecessary”, as the US brand does not own any share in the Malaysian operations. Starbucks Corp, based and listed in the US, has no shares in the coffee chain’s operations in Malaysia, Tan stressed. Starbucks in Malaysia is operated by Berjaya Food Bhd (BFood), controlled by Berjaya Corp Bhd (BCorp), which in turn was founded by Tan. BFood, which relies on Starbucks for some 90% of its revenue, has lost some 25% of its market value on Bursa Malaysia since Israel ramped up its deadly strikes in Palestine, following the Hamas attack on Oct 7. (The Edge)

Iskandar Waterfront City Bhd has unveiled its 10-year development plan comprising three projects in Johor Bahru, with an aggregate gross development value (GDV) of RM4.33bn. The 10-year development plan comprises the RM3.5bn waterfront township Tebrau Bay, RM500m mixed waterfront development Danga Rivera, and RM330m mixed-use development project Danga Heights. (The Edge)

Ge-Shen Corp Bhd, whose share price has climbed 144% year-to-date, has proposed to purchase a 40% stake in electronics manufacturing services (EMS) firm Local Assembly Sdn Bhd for RM48m cash, which is to be partially funded via proceeds from a private placement exercise. To fund the deal, Ge-Shen plans to raise RM91.2m via a private placement of 39.48m placement shares or 30% of its enlarged share base to independent investors to be determined later. (The Edge)

EcoFirst Consolidated Bhd has proposed to dispose of a piece of vacant land in Shah Alam at a loss to HCK Capital Group Bhd for RM34m cash, saying this will release the burden of monthly loan instalments of about RM1.35m to its financier. The proposed disposal, at RM34m, "would be a great stress relief to the group’s cash flow as compared to retaining the land for a potential loss-making development," it added. As at Nov 30, 2023, EcoFirst’s total borrowings stood at RM268.54m, while its cash and bank balances totalled RM9.52m. (The Edge)

Malaysia Steel Works (KL) Bhd (Masteel) has appointed Johor Corp Bhd (JCorp) president and CEO Datuk Syed Mohamed Syed Ibrahim as its independent and non- executive chairman. Syed Mohamed, 65, is replacing Datuk Ikhwan Salim Sujak, 67, who retired at the end of his one-year term on Feb 28. (The Edge)

ACE Market-listed SMRT Holdings Bhd has been awarded a project by Pito AxM Platform (PAPI) to deploy its managed ATM infrastructure solutions in the Philippines through its wholly owned subsidiary N’osairis Technology Solutions Inc (NTSI). SMRT did not disclose the value of the project, which will take place over three years, with NTSI deploying its solutions at the designated ATM sites by the end of 2024. (The Edge)

After failing to submit its regularisation plan, which led to the suspension of its shares on Feb 7, Nylex Malaysia Bhd has now been given another six-month extension by Bursa Malaysia Securities Bhd to address its Practice Note 17 (PN17) status. Nylex said Bursa Securities has pushed the regularisation submission deadline to July 26, after the company missed its Jan 26 deadline. Despite granting the extension, Bursa Securities, however, dismissed the company’s appeal against the suspension of its shares. — Nylex gets another six-month extension till end-July to submit regularisation plan. (The Edge)

Source: Mplus Research - 5 Mar 2024