Timely Rebound In The Near Term

Market Review

Malaysia: The FBM KLCI (-0.09%) ended marginally lower as the index was dragged by the selling pressure with profit taking emerged within heavyweights like YTLPOWR (-14.0 sen) and PBBANK (-2.0 sen); tracking the overnight weakness in the regional markets performance as global uncertainties persisted.

Global markets: Wall Street ended higher lifted by Nasdaq, supported by the gains on the megacap tech stocks like NVIDIA (gained over 6.18%) following a softer jobs and mortgage rates cool recession fears. Meanwhile, both the European and Asia stock markets ended mixed.

The Day Ahead

After traders scooped up shares during the “Black Monday” sell-off, the broader market slipped marginally as profit-taking activities emerged. However, we believe this reaction is overdone, and it could be timely for the rebound to gain further momentum. In the US, stock markets rebounded significantly overnight following the release of softer-than-expected unemployment claims, suggesting that the job market is resilient at this juncture. Additionally, some corporate results posted after- market hours were decent, supporting overall sentiment. We expect buying interest to sustain and spill over to local stocks. In the commodity markets, Brent oil strengthened amid ongoing geopolitical tensions in the Middle East, while gold prices gained momentum, rising above USD2420. The CPO price is trading slightly above RM3700.

Sectors Focus: Given the positive rebound on Wall Street, we believe buying support should emerge on the local front within the Construction, Property, Utilities, and Technology sectors, which are beneficiaries of the data center catalyst and the AI theme. Meanwhile, we favour the Consumer and Shipping sectors due to the stronger RM environment, and the Financial sector may be worth accumulating for its decent dividend yield.

FBMKLCI Technical Outlook

The FBM KLCI index ended marginally lower towards 1,590 level. The technical readings on the key index were negative with the MACD histogram forming another negative bar and the RSI recovered above the oversold level. The resistance is envisaged around 1,605-1,6110 and the support is set at 1,570-1,575.

Company Brief

Ranhill Utilities Bhd (RANHILL) announced the appointment of five new directors, four of whom are linked to YTL Power International Bhd (YTLPOWR). This follows the successful takeover of Ranhill by YTL Power and its 70%-owned unit, SIPP Power Sdn Bhd, on July 9, when they completed their mandatory general offer (MGO) for the Johor-based utility company, securing a controlling stake of 53.19%. In a bourse filing, Ranhill named Yeoh Keong Yeen and Yeoh Keong Yuan as new executive directors, Faiz Ishak and Annuar Ahmed as non-independent directors, and Datuk Seri Yusof Ismail as an independent director. (The Edge)

TSH Resources Bhd’s (TSH) land sales, which would have fetched roughly 2.43 trillion Indonesian rupiah (RM731.09m), in North Kalimantan have been downsized to RM447.17m. The plantation group announced its plan to sell the remainder of three land plots in North Kalimantan did not materialise, due to the non-fulfilment of a condition precedent. According to TSH, the buyers, PT Kalimantan Industrial Park Indonesia (KIPI) and PT Kawasan Industri Kalimantan Indonesia (KIKI), failed to meet a key condition, which is signing the "minutes of clean and clear" by the agreed deadline with the seller. (The Edge)

Engineering and manufacturing solutions provider Ge-Shen Corp Bhd (GESHEN) said its net profit for the second quarter doubled to RM4.47m from RM2.19m a year earlier, on increased sales revenue from a higher utilisation rate across its factories in Penang, and Hanoi, Vietnam. The higher earnings were also due to cost optimisation efforts, as well as the de-consolidation of the group's loss-making subsidiary Demand Option Sdn Bhd, Ge-Shen said in a statement. Earnings per share for the quarter ended June 30, 2024 (2QFY2024) rose to 3.52 sen, from 1.98 sen previously. Revenue increased to RM75.13m, up 25% from RM60.08m in 2QFY2023. (The Edge)

Seal Inc Bhd (SEAL) said it is raising its shareholding in loss-making MSR Green Energy Sdn Bhd to 30% by acquiring an additional 10% for RM21m. Seal is acquiring a 7.1% stake in MSR from Ong Kah Hui for RM14.88m and another 2.9% stake from Qiang Xiao Yu for RM6.11m, according to the group's bourse filing on Thursday. (The Edge)

Analysts have trimmed their earnings forecasts for Sentral REIT (SENTRAL), following a lease expiry at Menara Shell in May, but see limited downside risk to occupancy rates in the medium term. Calls on the REIT’s units remained mixed following the latest quarterly results, although analysts flagged its appealing distribution yield as compared to the sector average. Maybank in a note on Thursday cut its earnings forecasts by 7% for the financial year ending Dec 31, 2024 (FY2024), 4% for FY2025 and 4% for FY2026, due to the non-renewal of a tenant. The house lowered its target price to 89 sen, from 98 sen, but maintained its 'buy' call on the counter. Maybank also flagged its FY2024 net dividend yield forecast of 7%, above the sector average of 5.6%. (The Edge)

EPB Group Bhd (EPB), which is en route to list on the ACE Market on Aug 23, said the public portion of its initial public offering (IPO) shares was oversubscribed by 61.08 times. The food processing and packaging machinery provider’s listing exercise offered a total of 111.57m shares, the bulk of which was for private placement. EPB’s IPO entailed a public issuance of 71.57m new shares, representing 19.24% of the enlarged share capital, at an issue price of 56 sen per share, to raise RM40.07m. (The Edge)

Source: Mplus Research - 9 Aug 2024