Slight Uptick In Core CPI

Market Review

Malaysia: The FBM KLCI (-1.24%) closed lower as profit-taking emerged within banking heavyweights, namely CIMB (-22.0 sen) and PBBANK (-11.0 sen). Additionally, a hawkish tone from the BoJ dampened sentiment across the Asian stock markets.

Global markets: The treasury yield rose, and Wall Street extended its gains as selected technology stocks boosted sentiment for the Nasdaq as worries of a hard landing faded despite the slight uptick in key inflation data. Meanwhile, both European and Asian stock markets ended the session on a mixed note.

The Day Ahead

Selling pressure was observed across the broader market, driven by the Petronas and Petros developments and weak Brent oil prices, causing small-cap stocks to dip further. In the U.S., Wall Street managed to trade off its lows despite a slight uptick in core CPI data, which came in at 0.3% compared to the 0.2% consensus. Although the CPI was largely in line with expectations, investors are now shifting their focus to the upcoming PPI data and the Federal Reserve's FOMC meeting next week. In the commodities market, Brent oil recovered above USD70 after inventories rose by 0.8 million barrels, slightly below the consensus of 0.9 million. Gold prices remained steady above USD2,500 as traders look ahead to the FOMC meeting. Meanwhile, crude palm oil continues to trade below RM3,900.

Sector Focus: With the strong rebound in the US and a modest recovery in Brent oil prices, we expect bargain hunting to emerge on the local market. However, the upside for local technology stocks may be limited due to the stronger ringgit. On the other hand, we favour domestic-driven sectors such as Consumer, Construction, Financials, Building Materials, and Utilities, which are likely to benefit from the stable ringgit environment.

FBMKLCI Technical Outlook

The FBM KLCI index closed lower towards the 1,639 level. Additionally, the technical readings on the key index were negative, with the MACD histogram forming another negative bar and the RSI dipping below 50. The resistance is envisaged around 1,654-1,659 and the support is set at 1,619-1,624.

Company Brief

Genting Malaysia Bhd's (GENM) indirect subsidiaries, Genting New York LLC (Genny) and Genny Capital Inc, are offering US$525m (RM2.28bn) in 7.25% senior unsecured notes due 2029 to refinance existing debt. Concurrently, Genny plans to secure a new senior secured credit facility with a US$775m delayed draw term loan and a US$150m revolving credit facility. The notes are expected to be listed on the Singapore Exchange. (The Edge)

EP Manufacturing Bhd (EPMB) is issuing shares representing 30% of its capital, with 15% allocated each to its largest shareholder, Mutual Concept Sdn Bhd, and Bermaz Auto Bhd’s (BAUTO) subsidiary, Bermaz Capital Sdn Bhd. The placement aims to raise RM39.65m for constructing a manufacturing hub in Melaka. The deal involves issuing 66.08m shares at 60 sen each. After the placement, Mutual Concept’s stake will rise to 19.01%, while Bermaz Capital will hold 11.54%. This move raises speculation about potential collaboration with Bermaz Auto for vehicle assembly. (The Edge)

Hospital operator IHH Healthcare Bhd’s (IHH) subsidiary, Pantai Holdings Sdn Bhd, has filed with the Securities Commission Malaysia to establish Sukuk Wakalah programmes of up to RM15bn. This includes Islamic Commercial Papers (ICP) and Islamic Medium Term Notes (IMTN). The first issuance is expected within 90 business days. The ICP programme has a seven-year term with maturities from one to 12 months, while the IMTN programme is perpetual with a minimum term of one year. Proceeds will be used for shariah-compliant purposes such as financing investments, capital expenditures, working capital, debt repayment, and refinancing. (The Edge)

Bermaz Auto Bhd (BAUTO) has reported a 29.94% fall in first quarter net profit to RM70.22m, from RM100.22m a year earlier, dragged by lower sales amid competition. Quarterly revenue dropped 22.32% year-on-year to RM846.18m from RM1.09bn due to lower sales volume from domestic operations. The group declared a first interim dividend of 3.5 sen per share, payable on Nov 6. (The Edge)

LEAP market-listed ICT Zone Asia Bhd’s (ICTZONE) net profit for the first half ended July 31, 2024 (1HFY2024) more than doubled to RM4.37m from RM2.02m a year earlier, thanks to higher contributions from its technology financing and cloud solutions and services segments. This is despite revenue slipping marginally to RM57.65m from RM58.24m, due to weaker contributions from its trading of ICT hardware and software segment amid subdued demand. The company declared a preference dividend of 2 sen per irredeemable convertible preference share (ICPS), payable on Oct 16. (The Edge)

Mikro MSC Bhd (MIKROMB) plans to enter the signage and interior fit-out industry by acquiring Singapore’s TES Productions & Projects Pte Ltd for RM30m. The purchase will be made through the issuance of 134.83m new Mikro MSC shares at 22.25 sen each, resulting in a 12.6% dilution of its existing shares. The acquisition price reflects a price-to-earnings multiple of 12.24 based on TES's audited profit of S$730,000 (RM2.45m) for FY2023. (The Edge)

Citaglobal Bhd (CITAGLB) has secured two construction contracts totaling RM50.95m. The first is a 20-month project to build a riverwall in Kuching, Sarawak, subcontracted by NL Builder Sdn Bhd. The second is a RM31.6m contract for infrastructure work on the Kuching Urban Transportation System’s redline, awarded by Avos (Malaysia) Sdn Bhd. These projects are expected to positively impact Citaglobal’s earnings and net assets per share from FY2024 to FY2026. (The Edge)

Suria Capital Holdings Bhd (SURIA) has signed a joint development agreement for the "Jesselton Docklands 2" project, a mixed commercial development covering 11.54 hectares in the Kota Kinabalu port area. This project will be developed in partnership with BEDI Development, a subsidiary of EXSIM Development Sdn Bhd. It is part of the larger Jesselton Waterfront City plan, linking to notable landmarks like Jesselton Quay and the Sabah International Convention Centre. (The Edge)

Kerjaya Prospek Group Bhd (KERJAYA) has secured a RM292.8m contract to build a 57-storey serviced apartment in Kuala Lumpur, featuring 1,126 units, podium parking, and a sub-basement. The project, awarded by Mega Legacy (M) Sdn Bhd, will start on Sept 17 and is set for completion in 38 months. This contract, the group's eighth this year, is expected to positively impact earnings and net assets per share from FY2025 to FY2027. (The Edge)

Southern Steel Bhd (SSTEEL) plans to issue new shares to Green Esteel Pte Ltd, potentially giving the Singapore company control with at least 50.1% of the enlarged share capital. Green Esteel will buy these shares at 42 sen each, a 16% discount from Southern Steel's closing price of 50 sen. This issuance aims to raise funds efficiently compared to bank loans or debt instruments, while also creating synergies between the two companies in the steel industry. The funds will be used to enhance Southern Steel’s manufacturing and operational capabilities. (The Edge)

Hextar Technologies Solutions Bhd (HEXTECH) is negotiating exclusively with Widad Group Bhd(WIDAD) to sell five industrial plots in Negeri Sembilan. If the deal proceeds, Widad will pay by issuing new shares to Hextar. The plots, totalling 56,231 sq m and intended for industrial use, require state authority consent for transfer. Hextar aims to unlock the property's value and use the proceeds for its technology business expansion, while Widad seeks to enhance its cash flow and shareholder value through this acquisition. (The Edge)

Source: Mplus Research - 12 Sep 2024