Optimism On AI Theme Persisted

Market Review

Malaysia: The FBMKLCI (+0.06%) ended flat, in line the mostly negative performance in the regional stock markets, as gains in Telco and Banking heavyweights were offset by losses in Industrial Products heavyweights. On the broader market, the Property sector (+1.25%) gained, while the Plantation sector (-0.22%) declined.

Global markets: Wall Street ended mixed but logging a winning week overall, as the sentiment was boosted after the Fed remained dovish and looking at 3 rate cuts despite concerns on the high inflation data. The European stock market ended higher, while Asia ended lower with the exception of Nikkei being the sole gainer.

The Day Ahead

Last week, the FBM KLCI rebounded marginally for 2 consecutive days, but closing the week lower by 0.67%; as attention was shifted to FBM Small Cap, rallying by 1.69%. In the US, Nasdaq traded at all-time-high position, while DJI and S&P500 closed higher for the week as the market could be pricing in dovish statements from the Fed as 3 rate cuts are anticipated, while persisted optimism over AI theme supported the overall market’s movements. Hence, given this setup, we believe buying support will extend to the local exchange. On the commodity markets, Brent oil pulled back but hovering above US85, while the crude palm oil has hit resistance along RM4,300 and traded lower for the near term. Besides, the gold price maintained above USD2,160 zone.

Sectors focus: Given the ongoing optimism on the AI theme and Technology sector continues to stay elevated, we believe the buying interest will spillover towards stocks on the local front; we like INARI, UNISEM, FRONTKN, FPI and MPI. Meanwhile, YINSON registered a good set of earnings, while VELESTO won a contract extension of about RM1.26bn, hence we expect more robust trading activities within the O&G sector. Besides, we like Utilities, Construction, Consumer, Packaging and Solar.

FBMKLCI Technical Outlook

The FBM KLCI index ended flat. The technical readings on the key index were mixed, with the MACD Histogram hovering marginally below 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

Yinson Holdings Bhd's net profit for the financial year ended Jan 31, 2024 (FY2024) jumped 63% to RM964m, from RM589m a year earlier, on the back of a surge in revenue to RM11.65bn versus RM6.32bn. For 4QFY2024, net profit rose 62.5% to RM278m from RM171m, mainly due to the effect of charter day rate escalation, partially offset by lower contributions from engineering, procurement, construction, installation and commissioning business activities and an increase in finance costs. Revenue for the quarter increased to RM2.70bn, from RM1.96bn YoY. (The Edge)

Flat steel product manufacturer Astino Bhd reported a fourfold surge in its net profit for the second quarter ended Jan 31, 2024 from a year earlier, on stronger sales and profit margin. Net profit for the three months jumped to RM11.78m from RM2.95m previously, while revenue grew 18% to RM169.22m from RM143.29m. Moving forward, Astino said it is cautiously optimistic of achieving a more sustainable performance as market demand for its product continues to remain firm, though it flagged escalating input costs and the weakening ringgit versus the US dollar. (The Edge)

Paper and personal care product manufacturer NTPM Holdings Bhd reported a turnaround in its net profit for the third quarter ended Jan 31, 2024 (3QFY2024) from a year earlier, on the back of higher sales and decreased materials cost. Net profit stood at RM6.3m or 0.56 sen per share, compared to a net loss of RM7.32m or 0.65 sen per share in 3QFY2023. Quarterly revenue rose 11.75% to RM241.06m from RM215.72m. Moving ahead, NTPM aims to remain profitable in the coming quarter, amid the positive results recorded, driven by the adjustment in its market strategy. (The Edge)

Health supplement firm DXN Holdings Bhd expects its Brazil operations to turn profitable by 2025, with potential to become its main market by revenue in the next five years. It said Brazil’s large population and the size of its economy makes it competitive when compared to other markets in South America. DXN added it is committed to its dividend policy and aims to distribute at least 50% of its annual net profit, adding that it has a strong cash generation from operating activities which can support the payment of dividends. (The Edge)

EcoFirst Consolidated Bhd is alleging that its former directors had conspired with Kerjaya Prospek Group Bhd in the award of a RM404.35m residential development project in June last year, which was subsequently terminated in November. After the termination, Kerjaya Prospek filed a lawsuit against EcoFirst’s wholly-owned unit, BCM Holdings Sdn Bhd, claiming RM20m in termination damages. BCM subsequently filed a counterclaim against Kerjaya Prospek, while including its former chief executive officer and executive director Datuk Tiong Kwing Hee, as well as substantial shareholder Tan You Tiong as defendants. (The Edge)

Velesto Energy Bhd has secured a two-year contract extension for the provision of three jack-up rigs to Petronas Carigali Sdn Bhd, for US$265m (about RM1.26bn). The group announced that the notice of assignment for the jack-up rigs, being Naga 2, Naga 4 and Naga 6, began on Feb 7, 2024 and will continue until Feb 6, 2026, inclusive of the continuation from the current drilling campaign. Individually, the contract value is worth US$73.04m for Naga 2, US$94.88m for Naga 4 and US$97.08m for Naga 6. (The Edge)

Construction and renewable energy firm Nestcon Bhd said it has bagged a RM79.5m contract under phase one of the Wawari township development in Johor Bahru.The contract involves earthworks and main infrastructure works at the proposed township development located in the Pulai district. It is expected to begin March 28 and be completed by Nov 27, 2025, and has a 24-month defect liability period after the certificate of practical completion has been issued. (The Edge)

Loss-making Maxim Global Bhd said its 51%-owned unit is acquiring a parcel of land near the Johor-Singapore Rapid Transit System (RTS) station in Johor Bahru to raise its landbank for property development projects and construction business expansion. The 26,329 sq m freehold land in Taman Maju Jaya is owned by Pelangi Sdn Bhd, a wholly-owned subsidiary of I&P Group Sdn Bhd, which in turn is fully- owned by S P Setia Bhd. Its 51%-owned subsidiary, Maxim Pelangi Sdn Bhd (MPSB), has inked a conditional sale and purchase agreement with Pelangi to buy the land for RM167m in cash. (The Edge)

Melaka-based property developer Teladan Group Bhd has teamed up with the Melaka state government development agency, Melaka Corp (MCorp), to develop a 341.2-acre German Technology Park at Ayer Panas in Jasin. Teladan entered into a memorandum of understanding with MCorp to collaborate on feasibility studies and development planning for the proposed German Technology Park project. The agreement seeks to leverage on the construction expertise of Teladan and its landbank located along Jalan Gapam, Melaka. At the same time, MCorp will lead the development and sales of the proposed project. (The Edge)

Steel Hawk Bhd, which has filed for an initial public offering as part of its listing transfer from the LEAP Market to the ACE Market, got a one-year extension each to the two contracts it secured last year to provide pig trap system maintenance for Petronas Carigali Sdn Bhd. The extension will run between Feb 27 this year to Feb 27, 2025, and applies to both the Peninsular Malaysia and Sarawak assets’ contracts it obtained in March 2023. Since these contracts are on a call-out basis, no fixed contract value was provided. (The Edge)

Source: Mplus Research - 25 Mar 2024