Revisiting The Technology and Glove Sectors

Market Review

Malaysia: The FBMKLCI (-0.67%) saw a pullback, as the index was dragged down by selling pressure in Industrial Products & Services heavyweights, notably PMETAL (- 19.0 sen). The decline was due to China’s latest fiscal measures falling short of market expectations, which pressured the aluminium prices lower.

Global markets: Wall Street ended on a negative note, and Treasury yields saw a pullback as economic data came in within expectations, which may lower the probability of a December rate cut. Meanwhile, the European market ended 1% higher while Asian market fell.

The Day Ahead

The FBMKLCI retreated as gains in the Energy sector were offset by losses in Industrial Products & Services; the latter declined due to China’s latest fiscal measures, which fell short of market expectations and pressured aluminium prices lower. Meanwhile, the US Producer Price Index (PPI) met expectations, with both PPI and Core PPI posting a monthly increase of 0.2%-0.3%. Consequently, Wall Street closed in negative territory, with the Nasdaq experiencing the largest decline. Today, traders will closely watch (i) Retail Sales and (ii) Q3 2024 Malaysia GDP data. In the commodities market, Brent crude oil hovered around USD72, weighed down by OPEC+ demand forecasts. Gold prices retreated further to USD2,566 as the dollar gained strength, while CPO prices traded below the RM5,000 psychological level, with a slowdown in exports impacting vegetable oil prices.

Sector Focus: In light of a strong dollar environment and expectations of a slower rate-cut cycle, we believe investors may revisit the Technology and Glove sectors. Also, the breakout in KGB due to strong earnings and positive prospects offers upside potential for AI-driven stocks. Selected stocks in the Construction, Property, and Building Materials sectors are also expected to report stronger earnings, supported by ongoing data center investments.

FBMKLCI Technical Outlook

The FBM KLCI index retreated towards the 1,600 level. Meanwhile, the technical readings on the key index were negative, with the MACD Histogram turned negative, while the RSI trended below 50. The resistance is envisaged around 1,615-1,620, and the support is set at 1,580-1,585.

Company Briefs

Bumi Armada Bhd (ARMADA) is exploring a merger with MISC Bhd’s (MISC) offshore business that could create a global energy services powerhouse with combined assets worth over RM20bn. Under the memorandum of understanding signed, the parties will have nine months to conduct due diligence and sign a definitive agreement. The merged entity is expected to remain listed on Bursa Malaysia. The prospective merger is expected to be an all-share transaction. For MISC, the merger will only involve its offshore business that owns, leases, operates and maintains offshore, floating, production, storage and offloading (FPSO) terminals. (The Edge)

Separately, MISC Bhd (MISC) saw its net profit fell 21% in the third quarter ended Sept 30, 2024 (3QFY2024) to RM338.9m from RM430.4m in 3QFY2023, dragged by lower charter rates for its natural gas carriers and higher vessel operating costs, as it flagged a tough outlook for its key business. Revenue fell 12% to RM2.96bn from RM3.37bn on lower billings in its offshore construction business. Outlook for liquefied natural gas (LNG) shipping spot rates moving into the fourth quarter and beyond remains “softer, driven by a high number of vessel deliveries, limited additional liquefaction capacity, and moderate anticipated demand in Europe”. It declared a dividend per share of 8 sen, higher than the 7 sen it announced in 3QFY2023. (The Edge)

Berjaya Food Bhd (BJFOOD) posted its fourth consecutive quarter in the red as the anti-Israel boycott movement continued to affect the group, which operates the Starbucks coffee chain in Malaysia. It posted a net loss of RM33.68m for its first quarter ended Sept 30, 2024 (1QFY2025), versus a net profit of RM19.03m a year earlier. Its quarterly revenue more than halved to RM124.19m from RM278.53m. No dividend was declared for the quarter under review. (The Edge)

Home-grown retailer Mr D.I.Y. Group (M) Bhd (MRDIY) saw a marginal 1.9% drop in its net profit ended Sept 30, 2024 (3QFY2024) to RM121.65m from RM123.95m a year earlier, on higher administrative and other operating expenses. The higher expenses were driven primarily by higher staff costs, depreciation of right-of-use assets and fixed assets, and higher utility expenses, consistent with the group’s business expansion activities and support for its growing store network. Quarterly revenue, however, rose 6.4% to RM1.14bn in 3QFY2024 from RM1.07bn in 3QFY2023, driven by higher transactions and the contribution of new stores. It declared an interim dividend of one sen per share for the financial year ending Dec 31, 2024 (FY2024), payable on Dec 13. (The Edge)

Prolintas Infra Business Trust (PLINTAS), which owns highways, nearly tripled its net profit for the third quarter ended Sept 30, 2024 (3QFY2024) to RM12.09m, over RM4.35m a year ago, thanks to a jump in toll collection, tax credit and deferred tax gain. Revenue was 2.5 times higher year-on-year at RM81.41m, from RM33.13m from higher traffic volume. It did not propose any distribution but said it is on track to meet its targeted RM70m total distribution for FY2024. (The Edge)

Cash-rich Lysaght Galvanized Steel Bhd (LYSAGHT) has declared a special dividend of 35 sen per share as its quarterly earnings rose to an eight-year high. This brings the total dividend for the current financial year ending Dec 31, 2024 (FY2024) so far to 43 sen per share — the highest since FY2018, when it paid out 50 sen dividend per share. The steel pole and masts maker, which is in a net cash position of RM97m as at end-September, will pay the special dividend totalling RM14.56m on Dec 9. Lysaght posted a net profit of RM4.79m for the third quarter ended Sept 30, 2024 (3QFY2024), up 62% from a year earlier. This is the group's highest net profit since 4QFY2018 when it achieved a net profit of RM4.79m. Quarterly revenue grew 9.2% to RM26.5m — its highest since 3QFY2017 — from RM24.27m. (The Edge)

Oil and gas services firm Keyfield International Bhd (KEYFIELD) reported record quarterly earnings and revenue, driven by higher vessel utilisation and increased vessel numbers. The group, which was listed in April, posted a net profit of RM81.12m for the third quarter ended Sept 30, 2024 (3QFY2024), up 77.18% from RM45.78m a year earlier. Quarterly revenue rose 45.54% year-on-year to RM216.79m from RM148.95m. It declared a third interim dividend of 4 sen per share, to be paid on Dec 19, raising the total payout so far in the year to 8 sen per share. (The Edge)

Teo Seng Capital Bhd (TEOSENG) posted a 32% jump in net profit for its third quarter ended Sept 30, 2024 (3QFY2024) to RM58.1m from RM43.8m a year ago, lifted by strong gains in its key poultry farming business, as well as its segment on investments and trading of poultry-related products. This was despite quarterly revenue dipping 4.8% to RM190.31m from RM200m. It declared a third interim dividend of 4 sen per share, payable on Dec 18, 2024, raising the group's year-to-date payout to 9.5 sen per share, versus two sen last year. (The Edge)

YTL Power International Bhd's (YTLP) 53.2%-owned subsidiary Ranhill Utilities Bhd (RANHILL) has scrapped plans to jointly pursue a public-private partnership project with China Energy International Group Co Ltd (CEIG) for the proposed development of a regional drinking water supply facility project in Indonesia. This follows the expiry of a memorandum of understanding (MOU) on Oct 29. The decision will not have any material impact on the group. Ranhill signed the MOU in October last year with CEIG to collaborate and jointly pursue the development of the Djuanda source- to-tap water supply system (Jatiluhur II) project and to co-develop and cooperate on other potential projects in Southeast Asia. (The Edge)

Property developer Seal Incorporated Bhd (SEAL) is seeking its shareholders' approval at an extraordinary general meeting to provide corporate guarantee to a RM293m banking facility that its 20%-owned associate MSR Green Energy Sdn Bhd (MSRGE) is obtaining from a financial institution. MSRGE is also obtaining an uncommitted foreign exchange contract (FEC) facility amounting to RM10m from the same financial institution. The corporate guarantee, in proportion to Seal's 20% shareholding in MSRGE, amounts to RM60.6m. (The Edge)

LBS Bina Group Bhd (LBS) said it is looking into developing a 10-gigawatt (GW) green hydrogen plant in Kota Marudu, Sabah jointly with the Sabah Forestry Development Authority (Safoda), Invest Sabah Bhd and Midwest Green Sdn Bhd. The facility aims to produce 10GW of energy, generating over 250,000 tonnes of green hydrogen annually. The group plans to act as the master developer for the hydrogen facility powered by solar and wind energy, as well as a future green industrial park on a potential site ranging from 15,000 acres to 30,000 acres in Kota Marudu. (The Edge)

Source: Mplus Research - 15 Nov 2024