Softer Market Sentiment Expected

Market Review

Malaysia: The FBMKLCI (-0.51%) slipped as selling pressure was seen in MRDIY, driven by weaker earnings resulting from the absence of the festive season and the removal of diesel subsidies. On the broader market, Property (+0.49%) sector gained the most, led by ECOWLD (+5.0 sen) and IOIPG (+2.0 sen).

Global markets: Wall Street ended lower as the post-election rally lost momentum, with investors expressing their concerns regarding the outlook for interest rates. Meanwhile, the European market closed lower, while Asian market ended mixed as investors are assessing both the China economic data and Japan’s GDP.

The Day Ahead

The FBMKLCI retreated below the 1,600 level despite Malaysia’s Q3 GDP recording a growth of 5.3% YoY. Extending last week’s global sell-offs, we expect most Asian stocks to start the week on a softer note, as investors price in the potential impact of Trump’s tariff policies potentially reigniting inflation and a slower interest rate easing cycle expected in 2025. This week, traders will monitor key events, including: (i) a speech by the BoJ Governor, (ii) NVIDIA’s earnings release, (iii) the G20 Summit in Brazil, and (iv) China’s loan prime rate announcements. In the commodities market, Brent crude oil retreated towards the USD70 level as OPEC+ lowered its oil demand outlook. Gold prices hovered around the USD2,570 level, while CPO prices traded below the RM5,000 psychological level due to a slowdown in exports.

Sector Focus: Amid a stronger dollar environment and slower Fed rate cut expectations, we believe investors may focus on the Technology and Glove sectors. With CPO prices remaining elevated, coupled with Indonesia’s biodiesel mandates, we maintain a positive outlook for the Plantation sector. Also, we favour the Construction, Property, and Building Materials sectors, supported by data center investments. We also see opportunities in selected East Malaysia counters following recent strong IPO performances.

FBMKLCI Technical Outlook

The FBM KLCI index retreated below the 1,600 level to close at 1592.44. Meanwhile, the technical readings on the key index were negative, with the MACD Histogram closing downwards, while the RSI is trending below 50. The resistance is envisaged around 1,607-1,612, and the support is set at 1,572-1,577.

Company Briefs

A consortium led by Khazanah Nasional Bhd and the Employees Provident Fund on Friday made a formal takeover offer for Malaysia Airports Holdings Bhd (AIRPORT) at RM11 per share, after securing relevant regulatory approvals. The formal offer comes following greenlight from foreign and domestic authorities, fulfilling preconditions of the proposed takeover. The offer price — a 6% premium over the last traded price of RM10.34 on Friday — values Malaysia Airports at RM18.4bn or nearly 38 times the earnings in 2023. (The Edge)

Kossan Rubber Industries Bhd (KOSSAN) reported a 28.15% year-on-year drop in its net profit to RM29.44m in its third quarter ended Sept 30, 2024 (3QFY2024), from RM40.97m, dragged by higher raw material costs and unrealised foreign exchange (forex) losses. Revenue rose 25.75% to RM507.39m from RM403.48m in 3QFY2023. It declared a dividend payout of 8 sen per share — comprising a special dividend of six sen per share and an interim dividend of 2 sen per share — to be paid on Dec 12, as its net profit for the nine months ended Sept 30 (9MFY2024) jumped to RM92.33m, nearly 7 times the RM13.42m it made in 9MFY2023. (The Edge)

Malaysia Smelting Corporation Bhd (MSC) has boosted its dividend payout to 24 sen per share for the financial year ending Dec 31, 2024 (FY2024), comprising a special dividend of 17 sen and an interim dividend of 7 sen. This is the tin miner and metal producer's highest dividend since FY2011. The dividend payout totalled RM100.8m, about half its cash, bank balances and deposits of RM221.05m as at Sept 30, 2024. MSC posted a 20.88% increase in net profit to RM14.29m for the third quarter (3QFY2024), from RM11.82m a year earlier, thanks to increased sales of refined tin and higher average tin prices. (The Edge)

Prolintas Infra Business Trust (PLINTAS) said it will not face any financial losses after its subsidiary, Prolintas Expressway Sdn Bhd (GCE Co), was ordered by an arbitrator to pay RM46.13m to Bina Puri Holdings Bhd’s (BPURI) associate company KL-Kuala Selangor Expressway Bhd (Latar). This, it said, is because the major unitholder of the trust, Projek Lintasan Kota Holdings Sdn Bhd (PLKH), had previously agreed to indemnify the trustee manager, Prolintas Managers Sdn Bhd, against any losses incurred and made against GCE Co from the arbitration case. (The Edge)

Vegetable supplier Farm Price Holdings Bhd (FPHB) has scrapped its recently announced plan for a one-for-two bonus issue of warrants, saying it will revisit the plan next year instead, but did not elaborate. The initial proposal, which it announced just last week on Nov 7 to reward shareholders, involved issuing up to 225m warrants on the basis of one warrant for every two shares held by shareholders. (The Edge)

Sunsuria Bhd (SUNSURIA) is acquiring a 20% stake in property developer KL City Gateway Sdn Bhd (KLCG) for RM10.47m and subsequently inject about RM40m in shareholder advances to the company to develop a 9.66-acre site in Kampung Sungai Baru in Kampung Baru, Kuala Lumpur. The development for residential and serviced apartment, business suites, commercial and retail lots has an estimated gross development value of RM2.68bn. (The Edge)

Citaglobal Bhd (CITAGLB) has signed an agreement to build a 5.4-megawatt solar plant integrated with a battery energy storage system in Azerbaijan. The facility will supply power to the Port of Baku. The project is backed by a 21-year power purchase agreement that guarantees a fixed tariff. However, the value of the project and details such as tariff and timeline were not disclosed. The project will be led by Tiza Green Energy LLC, a joint venture between Citaglobal Tiza Global Azerbaijan LLC. Shareholding details of the joint venture were not disclosed. (The Edge)

Petra Energy Bhd (PENERGY) has secured a four-year contract from Sarawak Shell Bhd and Sabah Shell Petroleum Company Ltd for the provision of offshore crane operations and maintenance services. No fixed value was stated in the letter of award to its subsidiary Petra Resources Sdn Bhd. (The Edge)

Contract manufacturer Ge-Shen Corp Bhd (GESHEN) said it remains confident of sustaining growth and profitability after its third quarter net profit rose 46% to RM3.13m from RM2.14m a year earlier, driven by contributions from both existing manufacturing plants as well as from a newly acquired subsidiary in Kedah. Revenue grew by 3.5% to RM67.85m from RM65.59m. (The Edge)

Source: Mplus Research - 18 Nov 2024