Focus On Export And Commodity Sectors

Market Review

Malaysia: Despite Malaysia’s economy projected to grow at 4.5-5.5% next year, the FBMKLCI (-0.91%) closed lower after hitting an intraday high of around 1,648, as banking heavyweights dragged down sentiment on the local front. The Construction (+2.21%) sector closed higher after GAMUDA (+0.34 sen) win a RM4.3bn project.

Global markets: Despite resilient economic data, Wall Street ended on a mixed note as traders weighed the prospects of a slower pace of Fed rate cuts after the election, with investors reducing their exposure ahead of earnings season. Moreover, both European and Asian markets closed lower.

The Day Ahead

The FBM KLCI and FBM Small Cap ended lower as profit-taking activities continued following the announcement of Budget 2025. Meanwhile, Wall Street saw a mixed performance, with uncertainty looming ahead of the US elections and ongoing corporate earnings reports. Additionally, rising Treasury yields, which often indicate tighter monetary policy, are reducing the likelihood of further rate cuts. Currently, Bloomberg consensus suggests a 92% chance of a 25 bps rate cut at the upcoming FOMC meeting. In the commodities market, Brent crude oil extended its rebound for a second consecutive session, driven by China's efforts to revive economic growth, while gold prices surged near an all-time high. CPO prices also broke above the RM4,450 resistance level, signalling a potential upward rally.

Sector Focus: As the ringgit weakened from RM4.10/USD to RM4.325 over the past month, we anticipate investors may shift their attention to export-oriented sectors such as Gloves and Technology. Also, the rebound in oil prices and the CPO breakout may attract traders to the O&G and Plantation sectors. On the Budget 2025, we also see opportunities in Construction, Property, and Renewable Energy sectors.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower towards the 1,642 level. The technical readings on the key index were mixed, with the MACD histogram extended another positive histogram, but the RSI has trended below 50. The resistance is envisaged around 1,657-1,662, and the support is set at 1,622-1,627.

Company Brief

Gamuda Bhd (GAMUDA) and its joint-venture partners have been awarded a RM4.3bn main design and build contract by the Department of Rapid Transit Systems, New Taipei City Government, to deliver the Xizhi Donghu Mass Rapid Transit (MRT) in Taiwan. This is the largest project Gamuda has secured in Taiwan since entering the market two decades ago. With a significant 75% share within the JV, Gamuda’s share of the contract value is RM3.2bn. The JV is obligated to undertake additional works worth RM10.8bn, further increasing Gamuda's share to approximately RM8.1bn. Combined with the main design and build contract, the overall project value will be RM15.1bn. (The Edge)

Bahvest Resources Bhd (BAHVEST) has entered into an exclusive prospecting and contract of works agreement with Aurelius Borneo Mining Sdn Bhd, which is involved in gold mining. Under the agreement, Bahvest’s wholly-owned subsidiary Wullersdorf Resources Sdn Bhd (WRSB) shall collaborate with Aurelius exclusively to explore, prospect, sample, survey and drill for gold containing ore at Mt Andrassy in Tawau, Sabah, spanning 18,000 hectares. There is also a profit-sharing arrangement from any future potential gold mined: 70% for WRSB and 30% for Aurelius. (The Edge)

Globetronics Technology Bhd (GTRONIC) said its CEO Heng Charng Yee and executive director Kang Wei Luen have resigned from their positions. Both cited personal matters and other commitment as the reason for the resignation. Heng's last day of employment will be Dec 31, while Kang is vacating his post with immediate effect. The group also said that its chief operating officer Yip Wai Chee, 56, will be re-designated as CEO effective Jan 2, 2025. (The Edge)

Teo Seng Capital Bhd (TEOSENG), whose share price soared to an all-time high of RM2.60 on Monday, has proposed a one-for-one bonus issue of up to 300m shares to reward shareholders. As of Sept 30, the egg producer has an issued share capital of RM60m, comprising 300m shares. Teo Seng said its share price adjusted for the bonus issue must not be less than 50 sen, based on the daily volume-weighted average market price (VWAMP) for the three-month period before the application date, to comply with Bursa's listing requirements. The theoretical ex-bonus price for the group's shares is expected to be between RM0.8641 and RM1.1615, based on the lowest daily VWAMP during the three-month period of RM1.7281 and the five- day VWAMP up to Sept 30 of RM2.323. (The Edge)

Loss-making Green Ocean Corp Bhd (GOCEAN) has proposed to undertake a RM92.5m share capital reduction to wipe out the food and beverage distributor’s accumulated losses. The ACE Market-listed company has been in the red for four consecutive years, racking up losses totalling RM60.8m by end-September 2023. The RM92.5m to be credited from the share capital reduction will be used to set off the accumulated losses and give rise to retained earnings of RM31.41m based on audited financial statements for the 15-month financial period ended Sept 30, 2023. (The Edge)

Contract manufacturer Ge-Shen Corp Bhd (GESHEN), whose share price has jumped over 200% year-to-date, has obtained shareholders’ approval to buy a 40% stake in electronic manufacturing services (EMS) firm Local Assembly Sdn Bhd for RM48m, cash, and diversify its existing business to include EMS. At Tuesday's extraordinary general meeting, Ge-Shen’s shareholders voted 100% in favour of the acquisition deal and proposed diversification. Its shareholders also voted in favour of a private placement involving 39.60m shares to raise gross proceeds of up to RM91.20m to fund the acquisition, borrowings as well as working capital. (The Edge)

Source: Mplus Research - 23 Oct 2024