Weaker Sentiment Emerged

Market Review

Malaysia: The FBM KLCI (-0.52%) ended lower dragged by selling pressure in Industrial Products & Services heavyweights. Investors adopted a cautious stance amid a lack of fresh news and tracked the weaker US markets performance overnight. The REIT and Transportation & Logistics was the best performing sectors.

Global markets: Wall Street closed lower, following the disappointing earnings from Alphabet and Tesla. This eroded investor confidence in tech heavyweight stocks, despite expectations of future interest rate cuts. Meanwhile, both the European and Asia stock markets ended lower ahead of US earnings and economic data.

The Day Ahead

After one day of rebound, selling pressure re-emerged, causing the FBMKLCI, FBM70, and FBM Small Cap indices to end in negative territory, dragged down by industrial products and construction-related stocks. Meanwhile, led by a tech-driven sell-off, the US stock markets had their worst day since December 2022, with the S&P 500 and Nasdaq plunging 2.32% and 3.64%, respectively, following the earnings releases of Alphabet and Tesla. Additionally, traders were locking in profits after an AI-led rally that might be overheated, and a rotation into small-cap stocks was observed. On the economic data front, investors will be watching the US GDP data and unemployment claims that will be releasing tonight. In the commodity markets, Brent oil traded near the USD 81 level, while the gold price remained around USD 2,400. The CPO has slightly retraced below RM 4,000.

Sectors Focus: With the AI-driven rally pausing and correcting in the US, we believe more profit-taking activities may emerge on our local front. Nevertheless, we believe this could be an opportunity to buy the dip going forward, especially in relation to the data center theme in our local market. We favour the Construction, Property, Utilities, and Building Materials segments. Additionally, we like selected stocks within the Shipping and Technology sectors, as we observe the upward trend remains intact.

FBMKLCI Technical Outlook

The FBM KLCI index closed lower around the 1,621 level. The technical readings on the key index were mixed with the MACD histogram turned negative, but the RSI continues to stay above 50. The resistance is envisaged around 1,636-1,641 and the support is set at 1,606-1,620.

Company Brief

AME Elite Consortium Bhd (AME) is selling four industrial properties in Johor to its 49.62%-owned unit AME Real Estate Investment Trust (AMEREIT) for RM119.5m to realign its property investments into a REIT. Its subsidiary Pentagon Land Sdn Bhd and its 80%-owned subsidiary Ipark Development Sdn Bhd had inked separate sale and purchase agreements with AME REIT for the disposal. AME REIT said it will finance the deal via financing facilities. (The Edge)

Nationgate Holdings Bhd (NATGATE) plans to issue new shares to raise RM429.3m at a price that is nearly six times its initial public offering of 38 sen per share achieved barely 19 months ago. It has proposed a private placement of 207.39m new shares or 10% of its enlarged share base to raise fresh working capital. The assumed issue price of RM2.07 per share represents a discount of about 9.61% to the five-day volume-weighted average market price of RM2.29 as of July 23. (The Edge)

MN Holdings Bhd (MNHLDG) has secured a contract worth RM136.24m to undertake power landing station works for a data centre service provider. It is unable to disclose the customer’s identity due to a non-disclosure agreement. The data centre project is located in the southern region of Malaysia. With the latest job win, the underground utilities and substation engineering specialist’s outstanding order book rose to RM568.5m. (The Edge)

SC Estate Builder Bhd (SCBUILD) is forming a consortium to bid for projects with a total capacity of 2,000 megawatts under the fifth large-scale solar programme. It has signed a joint venture agreement with Anjung Meriah Sdn Bhd, a 100% Bumiputera firm involved in the engineering, procurement, construction and commissioning of solar renewable energy projects. Under the agreement, SC Estate will hold a 40% stake, while Anjung Meriah will have a 60% stake. (The Edge)

Property developer UEM Sunrise Bhd's (UEMS) disposal of its 80.4% stake in South Africa’s Roc-Union Proprietary Ltd has fallen through again, as the buyer Azishe Properties Proprietary Ltd failed to fulfil its payment obligations within the stipulated time frame. This is the second attempt by UEM Sunrise to sell its stake in Roc-Union. The 80.4% stake in Roc-Union is held by UEM Sunrise’s indirect wholly-owned subsidiary UEM Sunrise South Africa. (The Edge)

Property developer Axteria Group Bhd (AXTERIA), formerly known as Acoustech Bhd, has scrapped plans to jointly undertake a mixed development project with Alpha Astral Properties Sdn Bhd on land measuring 83,037 square metres in Johor Bahru. The mutual termination of the joint venture agreement is due to a condition precedent not being met prior to the end of the extended condition period. (The Edge)

CapitaLand Malaysia Trust (CLMT) posted a 15.2% jump in its second quarter net property income from the same quarter a year ago, as most of the malls within its portfolio recorded higher revenue as a result of positive rental reversions and higher occupancies. Net property income for the second quarter ended June 30, 2024 (2QFY2024) rose to RM65.47m from RM56.83m in 2QFY2023, while gross revenue rose 8.5% to RM113.65m from RM104.76m. It announced a distribution per unit of 1.17 sen. (The Edge)

Following the result announcement, CapitaLand said it is positive on its earnings outlook for this year, supported by sustained domestic earnings, an uptick in tourist arrivals and better occupancy rates for its retail malls. It is also eyeing more industrial and logistic assets in Johor, given the robust demand and positive economic sentiments there. (The Edge)

British American Tobacco (Malaysia) Bhd (BAT) reported that its second quarter net profit dropped 23.66% amid the group's increased investment into growing its vaping brand, Vuse, in Malaysia. Net profit for the three months ended June 30, 2024 (2QFY2024) fell to RM36.28m from RM47.53m in 2QFY2023, as revenue dropped 5.55% to RM640.46m from RM678.12m. The cigarette company declared a second interim dividend of 12 sen per share or a total of RM34.2m, payable on Aug 22 to its shareholders. (The Edge)

United Plantations Bhd's (UTDPLT) net profit rose 17% to RM185.94m in the second quarter ended June 30, 2024 (2QFY2024) from RM159.02m a year earlier on higher profits from its plantation and refinery segments. Quarterly revenue came in 16% higher at RM546.08m from RM470.07m a year earlier, due to the increase in revenue for the plantation and refinery segments in the current quarter, mainly as a result of higher crude palm oil and palm kernel prices. No dividend was proposed for 2QFY2024. (The Edge)

Gadang Holdings Bhd’s (GADANG) net loss narrowed to RM9.37m for its fourth quarter ended May 31, 2024 (4QFY2024) from RM27.7m a year ago, as revenue expanded due to higher contributions from its construction division. Revenue rose 32% to RM150.5m from RM114m. No dividend was declared during the quarter under review. (The Edge)

AirAsia X Bhd (AAX) reported a 42% jump in passenger traffic to 880,265 in the second quarter of 2024 (2Q2024) from 621,984 in 2Q2023, driven by peak spring travel seasons and the Eid holiday during the period. Its available seat per kilometre capacity for 2Q2024 rose by 25% YoY to 4.4b from 3.51b in the same period last year. The passenger load factor increased by seven percentage points y-o-y to 83%. (The Edge)

Source: Mplus Research - 25 Jul 2024