Rate Cut Optimism Boost Sentiment In Stocks

Market Review

Malaysia: The FBM KLCI (+0.37%) ended higher, in line the positive performance in the regional stock markets, led by selected Telco, Banking and Plantation heavyweights. On the broader market, the Property sector (+1.49%) was the leading sector, while the Healthcare sector (-0.57%) declined.

Global markets: Wall Street ended higher as investors were still bullish after the Fed insisted on the expectation for rate cuts this year while chip stocks rose after Micron’s stronger forecast. Both the European and Asian stock markets ended higher, the latter with Nikkei and Topix hitting new all-time highs.

The Day Ahead

The FBM KLCI rose after a two-day pullback lifted by selected heavyweights within Telco, Banking and Plantation. Again, in the US stock markets, the sentiment was positive following the dovish statements from the Fed’s FOMC meeting and contributed to an extended rally within the Technology sector; dot plot expects 3 rate cuts. With this positive trading activity in the US, we opine that the buying support should spillover to stocks on the local front. On the commodity markets, Brent oil retreated for the second day, but still hovering above the USD84/bbl, while the crude palm oil traded sideways within RM4,200-4,300. Besides, the Gold prices surged towards USD2,222 before closing below USD2,200 level.

Sectors focus: We think the buying interest may continue to emerge within the Technology sector, taking cue from the US stock markets; we like INARI, UNISEM and MPI. Meanwhile, we favour the commodity-related sectors such as O&G, Plantation and Gold with the anticipation of a softer interest rates environment going forward. Besides, on the local catalysts, we expect Johor-theme, KL-SG HSR as well as NETR will provide upside opportunities within Construction, Property and Renewable Energy.

FBMKLCI Technical Outlook

The FBM KLCI index ended higher. The technical readings on the key index were mixed, with the MACD Histogram hovering flattish along 0, while the RSI is above 50. The resistance is envisaged around 1,555-1,560 and the support is set at 1,525- 1,530.

Company Brief

Sunway Construction Group Bhd (SunCon), through its wholly-owned Sunway Construction Sdn Bhd, has secured a RM747.8m job with a US-headquartered multinational technology corporation for the job to construct a data centre in Selangor. The group did not provide the name and other details of the multinational corporation. Works are scheduled to commence not later than May 15 and expected to be completed by the second quarter of 2027. (The Edge)

Property developer Eco World Development Group Bhd (EcoWorld) reported a 22.15% rise in net profit for its first quarter, mainly due to higher interest income from the placement of excess funds by the group’s Malaysian operations. Net profit for its three months ended Jan 31, 2024 (1QFY2023) rose to RM69.63m from RM57m a year earlier, as revenue grew 10.95% to RM537.79m from RM484.73m on higher contributions from active phases as well as newly launched ones. (The Edge)

Astro Malaysia Holdings Bhd saw its fourth quarter net profit drop 18.95% year-on- year amid lower revenue, while it recorded higher net financing costs, dragged by unfavourable unrealised foreign exchange losses from unhedged lease liabilities. Earnings for the quarter ended Jan 31, 2024 (4QFY2024) fell to RM44.38m from RM54.75m in 4QFY2023, with earnings per share sliding to 0.85 sen from 1.05 sen. Quarterly revenue fell 13.63% to RM819.85m from RM949.26m, primarily due to lower subscription revenue, advertising revenue, sales of programming rights and rental income, and the ceasing of its Go Shop operations, which closed on Oct 11, 2023. For its full FY2024, net profit fell 85.76% to RM36.88m — its lowest since the group's listing in 2012 — from RM259.04m a year ago, mainly due to lower earnings before interest, taxation, depreciation and amortisation or Ebitda. (The Edge)

Top Glove Corp Bhd, the world’s biggest glovemaker by volume, will likely stay in the red in the year ending Aug 31, 2024 (FY2024) and investors should avoid buying into the stock for now, analysts said. The company reported a narrower net loss at RM51.19m for the December 2023-February 2024 quarter (2QFY2024), bringing total net loss to RM108.91m for its first six months. Still, that was worse than the consensus estimates, which called for a full-year net loss of RM69m, amid lower- than-expected margins. (The Edge)

Malaysia Aviation Group (MAG) has, for the first time since 2014, recorded an annual net profit. Earnings stood at RM766m in 2023, compared with a net loss of RM344m in 2022, driven by robust traffic in the premium segment, active capacity management and stronger yield for the group's passenger segment. MAG also attributed the improved performance to its intensified international network flow and deep partnership collaborations. (The Edge)

Telecommunication support services provider Binasat Communications Bhd has bagged a RM58.26m contract to supply and install cable systems from Tenaga Nasional Bhd (TNB). Binasat said the contract is for the double-circuit underground cable from Pencawang Masuk Utama (PMU or substation) Titiwangsa to PMU Genting Kelang, and from PMU Genting Kelang to PMU Kampung Lanjut. The job is expected to take about 910 days or nearly two-and-a-half years to complete. (The Edge)

PTT Synergy Group Bhd, through its wholly owned Pembinaan Tetap Teguh Sdn Bhd, has secured a RM299m contract to build the Palekbang-Kota Bharu bridge and connecting roads at Jajahan Tumpat and Jajahan Kota Bharu, Kelantan. Works start next Monday and should be completed by Sept 15, 2026. It has also entered into a collaboration agreement with Prima Wahyu to explore the possibility of collaborating to secure construction works in Peninsula Malaysia’s East Coast region. (The Edge)

Construction firm MGB Bhd has secured a contract worth RM207.03m to undertake the development of two blocks of service apartments in Sepang, Selangor. MGB accepted the project from Anuar Aziz Architect on behalf of Astana Modal Sdn Bhd. Astana Modal is an indirect subsidiary of LBS Bina Group Bhd, which is a major shareholder of MGB with a 58.65% stake, thus making the new contract a related party transaction. The group’s current outstanding order book, including the latest win, stands at about RM1.27bn. (The Edge)

Energy services firm T7 Global Bhd is planning to raise up to RM41.56m via a private placement of a maximum of 90.5m shares or 10% of its enlarged share base. The proceeds to be raised will go mainly towards funding work capital for the contracts awarded by Carigali Hess Operating Company Sdn Bhd as well as Hibiscus Oil & Gas Malaysia Ltd to its wholly-owned unit Tanjung Offshore Services Sdn Bhd. For illustrative purposes, the issue price is assumed at 45.92 sen, a 10% discount to the five-day volume-weighted average price of T7 Global shares up to March 8 of 51.02 sen. (The Edge)

Epicon Bhd‘s total outstanding order book has currently risen to RM929m, from RM840m as at March 18, 2024, after it secured a letter of award (LOA) for a construction contract worth RM89.1m. Epicon said its unit Transnational Builder Sdn Bhd received the LOA from Syarikat Majuperak Bhd for the main building works of 601 units of single-storey terrace houses and four units of electrical substations in Sungai Terap, Perak. The contract period is for thirty months from March 27, 2014 until Sept 26, 2026. (The Edge)

Master Tec Group Bhd said it was not able to explain the recent surge in its share price that reached new record highs. The electric cable maker, listed less than two months ago, said it was not aware of any corporate development that had not been previously announced in response to Bursa Malaysia’s unusual market activity (UMA) query. Shares in Master Tec hit another new all-time high on Thursday at RM1.15, after racking up a 74% gain so far this month and adding to February's 96% surge. (The Edge)

Source: Mplus Research - 22 Mar 2024