Expecting Stronger Earnings Season Ahead

Market Review

Malaysia: The FBM KLCI (+1.53%) closed notably higher as buying support were noticed in Banking heavyweights, namely PBBANK (+25.0 sen) and MAYBANK (+34.0 sen) as investors tracked the US overnight performance, coupled with the release of GDP data last Friday, rising at 5.9% YoY.

Global markets: Wall Street ended higher led by Nasdaq with buying support emerged within selected tech heavyweights like NVIDIA (+ 4.35%), awaiting more clues in the upcoming Jackson Hole meeting this Friday. Meanwhile, the European stock market ended higher and Asia stock markets ended mixed.

The Day Ahead

The Bursa Exchange ended on a positive note, driven by banking heavyweights following Malaysia's strong GDP data last Friday. We anticipate that buying support may extend in anticipation of a stronger earnings season this month. Meanwhile, US stock markets recorded their longest recovery streak in 2024, with the three major indices gaining between 0.58%-1.39%, driven by economic data indicating declining inflationary pressure and improved retail sales and consumer sentiment. Traders are now focused on the upcoming Jackson Hole meeting, where the Fed may offer clues on the timing of the next rate cut. In the commodity markets, Brent oil continued to retrace amid ongoing concerns over weak demand from China, while gold remained above USD2,500 in anticipation of a potential rate cut. CPO prices, meanwhile, trended sideways aroundRM3,700.

Sector Focus: Given the positive overnight performance on Wall Street, we expect buying interest to emerge on the local front. IJM’s win of a data center project could boost sentiment in the Construction, Property, Building Materials, and Utilities sectors. Banking stocks may continue their upward trend due to stronger earnings, while the stronger ringgit should benefit Consumer and Shipping stocks in general.

FBMKLCI Technical Outlook

The FBM KLCI index ended vehemently higher towards the 1,648 level. The technical readings on the key index were positive with the MACD histogram forming another positive bar and the RSI continues to trend above 50. The resistance is envisaged around 1,663-1,668 and the support is set at 1,628-1,633.

Company Brief

Lagenda Properties Bhd's (LAGENDA) net profit for the second quarter ended June 30, 2024 rose by 45.8% to RM48.4m from RM33.2m a year earlier, driven by higher contributions from its property development and construction divisions. Revenue increased by 25.2% to RM245.8m from RM196.4m. The company declared a 3 sen interim dividend, payable on October 25. (The Edge)

Oil and gas support services provider Perdana Petroleum Bhd (PERDANA) posted a net profit of RM34.7m for the second quarter ended June 30, 2024, a fourfold increase from RM8.65m a year earlier, marking its highest quarterly profit in 16 years. The rise was driven by higher vessel utilisation rates, better margins and a slight net foreign exchange gain. Revenue grew by 52.6% to RM124.59m from RM81.64m. The company did not declare a dividend for the quarter. (The Edge)

Property developer EcoFirst Consolidated Bhd (ECOFIRS) is acquiring a 4.51-acre piece of freehold land in Kajang for RM35m to develop a mixed-use project, with an estimated gross development value of RM380.9m. The purchase will be funded through internal funds and bank borrowings. The group plans to start the project in early 2025, with development expected to take three to four years. (The Edge)

Kotra Industries Bhd's (KOTRA) net profit for the fourth quarter ended June 30, 2024 (4QFY2024) declined 4.5% to RM12.49m from RM13.09ma year earlier, primarily due to higher tax expenses. Despite this, quarterly revenue rose 7.2% to RM59.82m from RM55.8m, driven by stronger sales of supplement products in both local and export markets, which offset a decline in local pharmaceutical sales. The company declared a second interim dividend of 13 sen per share, totalling RM19.28m, payable on October 10. (The Edge)

Batu Kawan Bhd (BKAWAN)and its 47.9%-owned subsidiary, Kuala Lumpur Kepong Bhd (KLK), reported higher earnings for the third quarter ended June 30, 2024, driven by strong performance in the plantation segment. KLK's net profit surged 185.6% year-on-year to RM240.2m from RM84.1m, while revenue increased by 7.6% to RM5.5bn from RM5.12bn. Batu Kawan's net profit increased by 58.2% to RM131m from RM82.8m, with revenue growing by 6.2% to RM5.7bn from RM5.35bn. The growth was attributed to higher selling prices and sales volumes of palm oil products, lower production costs and reduced fair value loss on unharvested fruit. No dividend was declared for the quarter by either company. (The Edge)

Carlsberg Brewery Malaysia Bhd (CARLSBG) reported a 10% decline in net profit for the second quarter ended June 30, 2024 to RM79.40m, compared to RM88.24m a year earlier. The decrease was attributed to higher marketing expenses, inflationary cost increases and the rebalancing of trade purchases before a product price hike. Revenue remained relatively flat at RM507.48m. The company declared a second interim dividend of 20 sen per share, down from 22 sen per share in the same period last year. (The Edge)

YX Precious Metals Bhd (YXPM), a gold jewellery manufacturer and 70%-owned subsidiary of Tomei Consolidated Bhd (TOMEI), has received approval from Bursa Securities to transfer its listing from the ACE Market to the Main Market. The transfer will occur on Thursday with no changes to its stock short name, stock code or ISIN code. (The Edge)

Conglomerate IJM Corp Bhd (IJM) has secured two contracts worth a total RM561m to construct data centres in Johor and an industrial manufacturing facility in Penang. The RM508m data centre project in Johor is a joint venture with Woh Hup Malaysia, while the RM307m Penang project is an electrical and electronics manufacturing facility for a US-based company. These contracts bring IJM Construction's total secured jobs for the year to RM1.9bn, with a total order book of RM7.9bn. (The Edge)

LEAP Market-listed Sunmow Holding Bhd's (SUNMOW) joint-venture company has secured a RM1.02bn contract for road construction under the Sarawak-Sabah Link Road project. Sunmow holds a 70% stake in the JV, with Kemena Holding Sdn Bhd owning 30%. The project, covering the Bukit Pagon to Long Luping section, is set to be completed in 48 months, with a 24-month defects liability period. (The Edge)

Pengurusan Air Selangor Sdn Bhd (Air Selangor) has raised RM1.2bn through its sixth and largest tranche of Sustainable and Responsible Investment Sukuk Kelestarian. This issuance, which includes four series with maturities of 10 to 25 years, completes its seventh issuance under a RM10bn sukuk murabahah programme. (The Edge)

Hextar Global Bhd (HEXTAR) reported a net profit of RM19.16m for 2QFY2024, more than double the RM8.67m from the same period last year. Revenue surged 59.5% to RM213m, up from RM133.5m, driven by increased earnings from specialty chemicals and new durian trading contracts. The company proposed an interim dividend of 0.5 sen per share, payable on October 4. (The Edge)

Kerjaya Prospek Group Bhd (KERJAYA) has secured a RM275.29m contract for a 50-storey building in Bandar Tanjung Pinang, Penang. The contract, awarded to its subsidiary Kerjaya Prospek (M) Sdn Bhd by Persada Mentari Sdn Bhd, will see construction of 261 serviced apartment units with parking and facilities. The project is set to be completed in 38 months. (The Edge)

Malaysia Airports Holdings Bhd (AIRPORT) reported a record 12.4m in passenger movements in July, up 7.3% from the previous month. Local airports saw 8.5mpassengers, with international movements up 11% and domestic movements rising 5%. (The Edge)

Prolintas Infra Business Trust (PLINTAS) reported a net profit of RM4.03m for the second quarter ended June 30, 2024, down from RM14.64m a year earlier due to higher finance costs and tax expenses. Revenue more than doubled to RM79.33m from RM34.34m, driven by increased toll collections from higher traffic volumes. The trust declared its first interim distribution of 3.18 sen per unit, totalling RM35m, payable on September 18. (The Edge)

Source: Mplus Research - 20 Aug 2024