Turning The Focus Towards Malaysia Budget 2025

Market Review

Malaysia: The FBM KLCI (-0.67%) ended the day on a negative note, as Banking heavyweights namely MAYBANK (-16.0 sen) and PBBANK (-8.0 sen) dragged down the sentiment on the local front, in spite of a healthy ringgit environment and robust foreign inflows into the Malaysian market on the YTD basis.

Global markets: The US Treasury climbed, but Wall Street closed mixed as US inflation and household spending rose modestly in August, indicating a cooling economic environment. Meanwhile, both the European and Asian stock markets closed on a positive tone; supported by the new China’s QE measures.

The Day Ahead

The FBMKLCI and FBM Small Cap indices ended lower last Friday as selling pressure persisted amid a stronger ringgit environment. Following mixed US inflation data, where PCE declined 2.2% YoY while core PCE rose 2.7% YoY, Wall Street closed on a mixed note. The Dow advanced to new highs, but both the S&P 500 and Nasdaq declined. This week, traders will be closely watching the (i) ISM manufacturing PMI, (ii) non-farm payroll, and (iii) unemployment claims. Additionally, we expect the impact of China’s stimulus packages to offer limited upside, following last week’s strong surge. In the commodities market, Brent crude traded around USD72 as China's stimulus measures offset planned OPEC+ supply increases. Meanwhile, gold hovered around USD2,660, supported by dovish signals from central banks. CPO prices retraced but still above RM4,000 as the stronger ringgit kept the rally in check.

Sector Focus: Given the stronger ringgit, export-oriented sectors such as Gloves and Technology may see limited upside. However, the stronger ringgit is expected to benefit domestically-driven sectors like Consumer. The Construction, Property, Building Materials, and Utilities sectors are likely to gain momentum from data center developments and Johor-themed catalysts in the near term. We believe investors may begin positioning within these sectors ahead of Budget 2025.

FBMKLCI Technical Outlook

The FBM KLCI index closed lower towards the 1,660 level. However, the technical readings on the key index were mixed, with the MACD histogram turned into negative territory, but the RSI stayed above 50. The resistance is envisaged around 1,675- 1,680, and the support is set at 1,640-1,645.

Company Brief

Sarawak now controls 31.25% of Affin Bank Bhd (AFFIN), making it the largest shareholder of the bank. The state government, via its unit SG Assetfin Holdings Sdn Bhd, on Friday signed a share purchase agreement with two Affin Bank shareholders — Lembaga Tabung Angkatan Tentera (LTAT) and Boustead Holdings Bhd — to raise its stake in the bank to 31.25% from 4.8%. (The Edge)

Gamuda Bhd (GAMUDA) has secured a A$243m (RM702m) construction contract to deliver the Boulder Creek Wind Farm in Queensland, Australia. The project will comprise 38 turbines with a generating capacity of 228 megawatts when the wind farm begins operations in 2027, Gamuda said in a statement. Site preparatory works are expected to begin before the end of 2024, with activity ramping up from early to mid-2025. The project was awarded to Gamuda’s Australian subsidiary DT Infrastructure Pty Ltd by Aula Energy Holdings Pty Ltd and CS Energy Ltd. (The Edge)

HeiTech Padu Bhd (HTPADU) is acquiring a 30% stake in a privately held company, Souqa Fintech Sdn Bhd, for RM16.17m. Its unit Synergy Grid Sdn Bhd has signed a share subscription agreement to acquire 10.78m new ordinary shares in Souqa Fintech Sdn Bhd at RM1.50 apiece. Souqa Fintech is an integrated online payment platform company that owns the Islamic payment gateway PayHalal. HeiTech Padu plans to fund the investment with RM11m in cash, while the remaining RM5.17m will be realised via invoice detailing the scope of services required by Souqa Fintech. Souqa Fintech is currently 58.29% owned by Asad Capital Sdn Bhd. Crescent Capital Sdn Bhd holds 16.7% of Souqa Fintech. (The Edge)

Mechanical and electrical (M&E) services specialist Bintai Kinden Corp Bhd (BINTAI) is doubling down on its construction division as part of its proposed regularisation plan to uplift the company from its Practice Note 17 status. It anticipates to divert 25% or more of its net assets into the division in a proposed diversification, and said the division is expected to contribute 25% or more to its net profit moving forward. It intends to focus on M&E engineering as well as the construction business to turn around its business performance. It is also planning a share capital reduction to cancel up to RM160m to reduce its accumulated losses and improve its financial position, and a private placement involving up to 244m new shares or 20% of its current issued shares to raise up to RM19.5m to repay borrowings and for working capital. (The Edge)

Plantation company Kim Loong Resources Bhd (KMLOONG) reported an 8.9% decline in its second quarter net profit from a year earlier, no thanks to lower earnings contribution by its palm oil milling operations due to lower crude palm oil extraction rates. Net profit for the three months ended July 31, 2024 (2QFY2025) fell to RM39.5m or 4.05 sen per share, compared to RM43.35m or 4.48 sen per share in the same quarter last year. In contrast, revenue rose 5.3% to RM405.94m from RM385.61m. It declared an interim single-tier dividend of five sen per share, payable on Nov 13. (The Edge)

Oil and gas services provider Propel Global Bhd (PGB) has proposed a private placement to raise up to RM8.25m for business expansion and working capital for new projects. The fundraising exercise involves an issuance of up to 67.59m new ordinary shares, representing approximately 10% of its issued shares, at an issue price to be determined later. Separately, the group is acquiring a 39% stake in its majority-owned subsidiary Best Wide Engineering (M) Sdn Bhd (BWE) for RM6.19m, raising its shareholding to 90% from 51%. BWE operates within the oil and gas industry, specialising in engineering, procurement, construction and commissioning services for new plants and refurbishment of plants, as well as design and supply of skidded process systems for onshore plants and offshore platforms. (The Edge)

Crescendo Corporation Bhd’s (CRESNDO) net profit for the second quarter ended July 31, 2024 (2QFY2025) surged more than 30-fold year-on-year (y-o-y), boosted by its data centre-linked land sales in Nusa Cemerlang Industrial Park, Johor. Net profit for the three-month period came in at RM140.84m, compared to RM4.28m a year ago. Quarterly revenue jumped more than fivefold to RM321.46m from RM61.12m in 2QFY2024. Notably, its property development and construction operations recorded revenue of RM291.4m and operating profit of RM182.5m, contributing over 75% to the operations. It declared an interim dividend of one sen per share, along with a special dividend of 5 sen per share, totalling 6 sen per share, to be paid on Nov 13. (The Edge)

Frozen seafood supplier PT Resources Holdings Bhd’s (PTRB) partnership with China’s Ocean Exchange (Fujian) Foreign Trade Services Co Ltd (Ocean Exchange) to develop the Malaysia East Coast International Supply Chain Intelligent Park in Kuantan, Pahang has fallen through. The project, which aimed to facilitate bilateral trade between Malaysia and China through Fuzhou, China, was estimated to be worth about RM1bn. Separately, PT Resources announced that its net profit for the first quarter ended April 30, 2024 (1QFY2025) rose 5.75% to RM4.96m from RM4.69m in 1QFY2024 on the back of a 25.46% jump in revenue to RM165.16m from RM131.64m a year before. It attributed the better revenue to increased demand from both domestic and overseas markets, primarily from the Chinese customers. It declared a first interim dividend of 0.99 sen, payable on Oct 16. (The Edge)

Flat steel products manufacturer Astino Bhd (ASTINO) reported that its net profit jumped 62.79% year-on-year due to an increase in sales and profit margin. Net profit rose to RM8.71m for the fourth quarter ended July 31, 2024 (4QFY2024), from RM5.35m in 4QFY2023. Revenue climbed 4.59% to RM158.33m from RM151.38m, as local demand grew. Astino proposed a final dividend of one sen per share. (The Edge)

Signature International Bhd (SIGN) plans to transfer its ownership in the two subsidiaries it wants to spin off for a listing into a newly formed entity, Signature Alliance Group Bhd (SAG), and then offer 26% of SAG's enlarged share base to the public via an initial public offering. The two subsidiaries are its 51%-owned renovation company Space Alliance Contracts Sdn Bhd (SAC) and 50.1%-owned interior fit out business that focuses on commercial projects, Zig Zag Builders (M) Sdn Bhd (ZZB). The remaining 49% shareholding in SAC is owned by Chang Chung Fei and Ng Mun Woh. As for ZZB, Foo Khai Shin holds the balance 49.9% stake. For the proposed IPO, SAG will issue 260m IPO shares that represent about 26% of its enlarged share base at an issue price to be fixed. Of the 26%, 5% (50m shares) will be set aside to be subscribed by the Malaysian public, 3% (30m) by SAG's eligible employees and 2% (20m) by Signature's shareholders. The balance IPO shares will be placed out to Bumiputera investors approved by the Ministry of Industry and Trade (12.5% or 125m) and selected investors (3.5% or 35m). Post-IPO — the proceeds of which will accrue entirely to SAG — Signature’s stake in SAG will be reduced to 37.5%, while Chang's will drop to 16.4%, Foo's to 13.1%, and Ng’s to 7%. (The Edge)

Property developer Talam Transform Bhd (TALAMT) has proposed to consolidate every five existing shares held by its shareholders into one share, with the entitlement date to be determined later. Talam also wants to undertake a capital reduction by cancelling RM650m of its issued share capital to offset accumulated losses of RM624.37m at the group level, leaving it with retained earnings of RM24.4m that Talam said will be used in a manner deemed fit by the board. Apart from that, Talam has proposed a private placement of up to 20% of its total issued shares, which could raise RM21.33m to repay borrowings and for working capital. (The Edge)

Source: Mplus Research - 30 Sep 2024