Broad Market Cheered The Rate Cut

Market Review

Malaysia: Despite heightened concerns of recession fears in the US economy amid the aggressive rate cuts by the Fed, the FBM KLCI (+0.30%) closed higher after hitting an intraday low of around 1,657, as YTL-related stocks boosted sentiment on the local front.

Global markets: As traders reassessed the Fed's rate cut, Wall Street rebounded strongly, led by tech giants like NVIDIA (+3.97%); lower-than-expected unemployment claims supported the view of a soft landing for the economy. Meanwhile, both European and Asian stock markets also closed on a positive note.

The Day Ahead

Overall, the local market reacted positively, cheering the Fed's interest rate cut in the recent FOMC meeting. In the US, Wall Street also rebounded sharply after cautious trading in the previous session, as weekly unemployment claims came in below expectations at 219k vs consensus estimates of 230k. Besides, traders reassessed the rate cut, shifting the narrative from recession concerns to extending economic expansion by the Fed. In the commodities market, Brent oil continued to rebound due to lower US inventories and rising tensions in the Middle East. Gold prices edged closer to USD2,600 following the US rate cut. Meanwhile, crude palm oil traded near RM3,900 amid production concerns in Malaysia.

Sector Focus: As Wall Street surged to new highs following the rate cut, we expect the local Technology sector to follow suit. Meanwhile, with the stronger ringgit persisting, sectors such as Consumer, Utilities, Financial, and Automotive are likely to benefit. Additionally, we believe earnings from data center projects will start materializing in the next few quarters, so Construction, Building Materials, and Property sectors could perform well heading into 2025.

FBMKLCI Technical Outlook

The FBM KLCI index closed higher towards the 1,665 level. Also, the technical readings on the key index were positive, with the MACD histogram turned into the positive territory, and the RSI stayed above 50. The resistance is envisaged around 1,680-1,685, and the support is set at 1,645-1,650.

Company Brief

Pharmaniaga Bhd’s (PHARMA) newly launched biopharmaceutical plant is expected to lift its gross profit margin to about 30% to 35% for the financial year ending Dec 31, 2026 (FY2026). The plant, located in Puchong and operated by Pharmaniaga Life Sciences Bhd, has an annual production capacity of up to 30m doses of human insulin. It will also produce other essential biopharmaceuticals, including vaccines and biosimilars. “For (human) insulin alone, we are looking for RM100m per annum and we are also looking over about RM300m per annum for vaccines. This is in terms of revenue. This new facility, which is the country’s first locally owned biopharmaceutical plant, will automatically lift up our revenue (going forward),” said its managing director Zulkifli Jafar. (The Edge)

Country Heights Holdings Bhd (CHHB) said it will request a contractor for the group's residential project in Kedah to withdraw its legal action against the group's subsidiary, Country Heights Smart Living Sdn Bhd, over alleged unpaid payments. If the contractor, Lean Xing Construction Sdn Bhd, refuses to withdraw the petition that has been filed against the subsidiary, CHHB will proceed to inform Bursa Malaysia of the potential reputational harm caused by the legal action. The dispute revolves around alleged unpaid sums related to the construction of 90 "super-linked modern contemporary houses" in its development project in Kolej Heights Utara in Jitra, Kedah. However, it did not clarify the value of the alleged unpaid sums. (The Edge)

Eco World Development Group Bhd (ECOWLD) reported a 21.26% year-on-year increase in its third quarter net profit, driven by improved earnings contributions from its Malaysian operations. Its net profit for the three months ended July 31, 2024 rose to RM80.44m from RM66.34m a year earlier, as revenue grew 10.35% to RM526.22m from RM476.85m, supported by higher contributions from active phases and newly launched developments. Gross profit margin improved to 31.3% from 27.2%, largely due to the realisation of cost savings from certain completed and near-completion phases. The group declared a second interim dividend of 2 sen per share, payable Oct 23. (The Edge)

Softer consumer demand in the first quarter ended July 31, 2024 (1QFY2025) sent SSF Home Group Bhd’s (SSF) net profit down by more than half compared to a year ago. In 1QFY2025, it recorded a net profit of RM1.25m, compared to RM2.65m in the previous year’s corresponding quarter. Its revenue dropped by 18.5% to RM32.03m from RM39.31m in the same period last year. (The Edge)

United Malacca Bhd’s (UMCCA) net profit rose by nearly 5 times to RM13.29m for its first quarter ended July 31, 2024 (1QFY2025) from RM2.68m a year earlier, thanks to higher contributions from its Malaysian operations. The surge in net profit came on the back of higher crude palm oil and palm kernel average prices. Revenue rose 20.54% year-on-year to RM163.88m from RM135.95m. It did not declare any dividend for the latest quarter. (The Edge)

Agricultural and industrial chemicals manufacturer Ancom Nylex Bhd (ANCOMNY) is acquiring a 70% stake in Colorex Sdn Bhd for RM14m, cash. Colorex is principally involved in the business of blending and trading of chemicals, colours and related products. Colorex is one of the top three speciality chemical suppliers to the local automotive sector. It also serves other industries such as furniture, appliances and construction. The proposed acquisition comes with a profit guarantee that Colorex shall achieve a profit after tax of no less than RM2.5m for two consecutive years. (The Edge)

Source: Mplus Research - 20 Sep 2024