Positive Buying Interest From Foreign Trades

Market Review

Malaysia: The FBMKLCI (+0.59%) ended higher due to buying interest in the Utilities sector (+1.53%) which led the bourse, as investors could be pricing in further upside following the RM10bn local investment announcement from Microsoft on AI and cloud infrastructure; the Technology sector rose 1.24%.

Global markets: Wall Street ended higher as the sentiment was lifted by the April’s job report, which came in weaker-than-expectations; this has revived the hopes for an earlier interest rate cut this year. The European stock market ended higher, followed by Asia ending mostly higher.

The Day Ahead

With the sustained net buying interest from foreigners, the FBM KLCI managed to trade towards a fresh 52-week high, supported by the Utilities sector in view of stronger electricity demand. Meanwhile, the Wall Street regained interest with softer- than-expected jobs data, coupled with the positive boost from Apple’s results as well as biggest share buyback. However, Warren Buffett’s Berkshire Hathaway announced that it has reduced stake in Apple by 13% in its AGM and the group has cash, cash equivalent and short term Treasurys totalled to USD189bn. This week, the traders could be monitoring (i) unemployment claims and (ii) consumer sentiment. On the commodity markets, Brent oil further retraced and traded nearer to USD83, while the CPO continues to see base support near RM3,800.

Sectors focus: Given the positive rebound on Wall Street supported by the better- than-expected results from selected tech giants, the buying interest may sustain over the near term within the Technology sector. Also, we like the Utilities sector as the data centre investment should boost electricity demand going forward. Besides, we favour the Construction, Property, Solar and Building Material segments with the catalyst like the potential revival of mega infra projects and the ongoing execution of the NETR and NIMP masterplans.

FBMKLCI Technical Outlook

The FBM KLCI index ended higher to a 52-week high. The technical readings on the key index, were positive with the MACD Histogram extending another positive bar, while the RSI maintains above 50. The resistance is envisaged around 1,605-1,610 and the support is set at 1,570-1,575.

Company Brief

Boustead Heavy Industries Corp Bhd’s (BHIC) planned disposal of its 20.77% stake in Lumut Naval Shipyard Sdn Bhd (Lunas) to the Ministry of Finance (Inc)-owned Ocean Sunshine Bhd has turned unconditional after shareholders of BHIC endorsed the RM1 deal. An intercompany trade receivables settlement agreement (ITRSA) has also been executed on April 30, its filing showed. Under the ITRSA, BHIC received a repayment sum of RM49.7m, as a result of Lunas’ RM384.43m net debt write- off. (The Edge)

Naza Corp Holdings Sdn Bhd has completed the acquisition of a 100% stake in Berjaya Enviro Holdings Sdn Bhd (BEnviro) from Berjaya Corp Bhd for RM700m in cash. The acquisition also sees Naza taking over seven entities under BEnviro. “Through this acquisition, Naza will be able to offer comprehensive solutions to meet Malaysia's waste management needs, leveraging on the extensive operational infrastructure, technological advancements, and talented workforce of BEnviro and its seven subsidiaries," the company said. (The Edge)

Fraser & Neave Holding Bhd (F&N) said on Friday that the company will focus on fixed asset optimisation over the next three years, after having allocated more than RM3bn in capital expenditure (capex) and development of its integrated farm in Gemas. “Currently, we are in a position where we can enhance our FAT (fixed assets turnover) by 50% to 60% without significant capex. This will be the most profitable avenue for revenue growth,” F&N chief executive officer Lim Yew Hoe. He also anticipates that the Gemas dairy farm will reach its breakeven point within the next three years. (The Edge)

Pestech International Bhd’s unit Pestech Sdn Bhd has lost an appeal to stop the tampering of machinery used in the Gemas-Johor electrified double track project by main contractor Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (SPYTL). The company filed the appeal against an earlier High Court decision to dismiss its interim injunction application against SPYTL on the matter. However, the application was dismissed by the Court of Appeal, with costs of RM15,000. Pestech did not elaborate on the value of the machinery involved, and whether it would appeal the decision. (The Edge)

The Energy Commission (EC) has raised the tariff to transport gas via Peninsular Malaysia’s gas pipeline, owned and operated by Petronas Gas Bhd (PetGas), to RM1.096 per gigajoule per day (GJ/day) for 2024 versus a base of RM1.063 GJ/day under Regulatory Period 2 (2023-2025). The tariff for the supply of high-pressure gas to Singapore has also been raised to RM1.701 GJ/day, compared with the base RP2 tariff of RM1.614 GJ/day. (The Edge)

XOX Bhd plans to undertake a share capital reduction to wipe out RM303m of the virtual mobile network operator’s accumulated losses. The company, which had been in the red for five straight years, had racked up losses totalling RM307.48m by the end of 2023. XOX raised nearly RM300m in the three financial years of 2020, 2021 and 2022 in the equity market, including through share issuance, private placements, four-for-two rights issue of preference shares, and employee share option scheme. (The Edge)

Penang-based automated test equipment (ATE) maker TT Vision Holdings Bhd is looking to raise RM25.27m via a private placement of up to 23.4m shares or 5% of its enlarged share base, based on an illustrative price of RM1.08. The issue price will be determined at a later date. The proceeds will be mainly used to fund its 15% stake in a joint venture company with Autowell (Singapore) Pte Ltd (ASPL), which plans to set up a manufacturing base in Malaysia for the research and development, production and sales of automation equipment and related hardware and software products particularly in the field of solar energy. (The Edge)

Uzma Bhd has secured a contract from Sarawak Shell Bhd (SSB) and Sabah Shell Petroleum Company Ltd (SSPC) to provide integrated production and integrity chemical and associated services. Uzma said its subsidiary Malaysian Energy Chemical & Services Sdn Bhd had accepted the contract from both SSB and SSPC, but did not disclose its value. The contract will be in force for five years from April 15, 2024, until April 14, 2029. (The Edge)

SLP Resources Bhd’s net profit surged 63% year-on-year to RM4.94m from RM3.03m for the financial quarter ended March 31, 2024 (1QFY2024), bolstered by better product mix and higher output. Earnings per share came in at 1.56 sen in 1QFY2024, higher than 0.96 sen in 1QFY2023. Revenue for the quarter inched up 1.32% to RM40.8m from RM40.27m. It declared a first interim dividend of 1 sen per share payable on July 4, 2024. (The Edge)

WTK Holdings Bhd is raising its stake in Sarawak-based rival Durafarm Sdn Bhd by another 15% for RM28.33m. The company has signed share sale agreements with Datuk Robert Lawson Chuat to acquire his 11.25% stake for RM21.45m, and Edwin Ak Banta for his 3.75% stake for RM7.08m. “The proposed acquisitions are expected to allow WTK to account for additional profitability and cash flow,” the company said. (The Edge)

Ranhill Utilities Bhd has declared a share dividend distribution on a basis of 0.5 share for every 100 shares held in the utility group. The dividends ex-date is on May 20, with payout on June 13. Ranhill last paid dividends of 1.5 sen in FY2023, representing a trailing dividend yield of 1.29%. (The Edge)

Practice Note 17 (PN17) outfit Sarawak Cable Bhd announced that Datuk Seri Fong Joo Chung has stepped down as non-independent non-executive deputy chairman, effective immediately. Fong, 75, resigned due to personal reasons, prevailing circumstances and recent developments concerning the company. (The Edge)

Source: Mplus Research - 6 May 2024