HEADLINES

Economy

US: New home sales pull back much more than expected in April. After reporting a sharp increase in new home sales in the US in the previous month, the Commerce Department released a report showing new home sales pulled back by much more than expected in the month of April. The Commerce Department said new home sales plunged by 4.7% to an annual rate of 634,000 in April after surging by 5.4% to a revised rate of 665,000 in March. (RTT)

EU: Private sector recovery gains strength on new orders. The euro area private sector activity grew at the fastest pace in a year in May on bigger increases in new orders, employment and an improvement in business confidence, flash survey data from S&P Global showed. The flash composite output index posted 52.3 in May, up from 51.7 in the previous month. The score was also above economists' forecast of 52.0. The score suggested that the activity growth accelerated for the second straight month to post the fastest expansion in a year. (RTT)

EU: French private sector activity unexpectedly contracts in May. France's private sector unexpectedly shrank in May after expanding in April, with the dominant services industry joining manufacturing in reporting a contraction in activity. The HCOB flash purchasing managers index for the services sector, fell to 49.4 from 51.3 the month before, well below the 51.6 forecast. (Reuters)

UK: Growth across British business dips in May, in early blow to Sunak. Growth across British businesses has cooled noticeably this month and by more than any economist had predicted, in an early blow for Prime Minister Rishi Sunak's election campaign. The S&P Global UK Composite PMI for the services and manufacturing sectors fell to 52.8 in May from 54.1 in April, undercutting the median poll forecast for a much more modest dip to 54.0. (Reuters)

Japan: Private sector expands most in 9 months. Japan's private sector expanded at the fastest pace in nine months in May as the manufacturing activity recovered for the first time in a year, flash survey results from S&P Global showed. The au Jibun Bank flash composite output index hit 52.4 in May, up from 52.3 in April. (RTT)

South Korea: BOK retains key rate; lifts growth outlook. The BOK maintained its benchmark rate unchanged again and retained its hawkish stance toward future policy as it upgraded the economic growth outlook on improving global factors and the easing of sluggish domestic demand. The Monetary Policy Board unanimously decided to hold the Base Rate at 3.5%. The rate has been kept unchanged for the eleventh consecutive session. (RTT)

Thailand: Exports return to growth in April, beat forecast. Thailand's exports returned to growth in April, and at a much faster pace than analysts' expectations, and the commerce ministry said shipments were expected to eke out a small gain in the second quarter. Customs-based exports rose 6.8% in April from a year earlier, beating a forecast of a 0.35% increase, and compared with March's 10.9% decline. Exports, a key driver of Southeast Asia's second-largest economy, dropped 6.7% from March, however. (Reuters)

Markets

Sime Darby Property (Neutral, TP:RM1.00): To build and lease hyperscale data centre in Elmina Business Park in RM2bn deal. Sime Darby Property Bhd (SDPR) has entered into a build and lease agreement with Pearl Computing Malaysia Sdn Bhd, a wholly-owned subsidiary of a multinational technology company, to develop and lease a hyperscale data centre in Elmina Business Park. According to SDPR, the data centre will be located on about 19.8 hectares of land within Elmina Business Park. The project is set to break ground in the second quarter of 2024 (2Q24), with construction completion targeted for the financial year ending Dec 31, 2026. (New Straits Times)

Comments: We understand that the parties will enter into a 20- year lease valued at up to RM2bn, with options to renew for two additional five-year terms upon completion of the project. As the project is expected to complete by end-2026, we make no change to our earnings estimates for now. Maintain Neutral with TP unchanged at RM1, pegged at c.30% discount to book value

Carimin Petroleum: To acquire crew boat for RM23m. CARIMIN Petroleum Bhd (CPB) plans to acquire a crew boat from Penguin Shipyard Asia Pte Ltd for USD4.96m or RM23.4m. CPB said its wholly-owned subsidiary, Carimin Resources Services SB (CRS), has today entered into a memorandum of agreement (MoA) with Penguin for the proposed acquisition of an unregistered new build crew boat, named Hull 460. CPB plans to finance 30% of the acquisition cost through internally generated funds, while the remaining 70% will be secured via bank borrowing. The acquisition aligns with CPB’s strategy to bolster its offshore maintenance and hook-up & commissioning activities. (The Malaysian Reserve)

Cahya Mata: Remains cautiously optimistic. Cahya Mata Sarawak Bhd remains cautiously optimistic about its prospects for 2024, despite challenges stemming from the high foreign exchange rate and the outcome of the ongoing arbitration for Cahya Mata Phosphates. The group said it will continue to refine its strategies to align with growth and value opportunities. (The Star)

Petron Malaysia: Posts RM69.71m 1Q net profit. - Petron Malaysia Refining and Marketing posted a lower net profit of RM69.7m in the first quarter ended 31 March, 2024 (1Q 2024) from RM108.7m in the year-ago period. Revenue, however, rose 22% to RM4.7bn from RM3.8bn previously, supported by sales volume growth coupled with higher oil prices, the company said. The total sales volume in 1Q 2024 of 9.8 million barrels was 18% higher than the 8.3m bbl sold in the same period last year. (Bernama)

Fajarbaru Builder: 3Q profit soars over 14 times to highest in over 20 years. Fajarbaru Builder Group saw its net profit jumped more than 14 times to RM27.2m for the third quarter ended 31 March, 2024 (3QFY2024), from RM1.9m a year earlier, mainly due to higher contribution from property development segment. This is the group's highest quarterly profit since 2002. The group's quarterly revenue surged more than three-fold to RM142.7m from RM46.7million a year before. Earnings per share spiked to 3.67 sen from 0.26 sen. Its property segment recorded a six-fold jump in profit before tax to RM33.4m from RM5.57m, as revenue increased to RM99.1m from RM17.7m. The surge in revenue and profit before tax were mainly attributed to the Vierra Residence @ Kinrara development, which recorded incremental growth in work progress as compared to 3QFY2023, the group said. (The Edge)

MARKET UPDATE

The FBM KLCI might open weaker today as most US stocks slumped Thursday after strong economic reports raised the possibility of interest rates staying painfully high. The weakness was widespread and overshadowed another blowout profit report from market heavyweight Nvidia. The S&P 500 fell 0.7% for its sharpest drop since April and pulled further from its record set earlier this week. The Dow Jones Industrial Average dropped 605 points, or 1.5%, and the Nasdaq composite slipped 0.4%. Stocks broadly struggled under the weight of higher yields in the bond market. Treasury yields cranked up the pressure following the stronger-than-expected reports on the U.S. economy, which forced traders to rethink bets about when the Federal Reserve could offer relief to financial markets through lower interest rates. In stock markets abroad, indices were mixed across Europe and Asia. Japan’s Nikkei 225 rose 1.3% in part on strength for semiconductor-related companies following Nvidia’s powerful profit report. Indices fell 1.7% in Hong Kong and 1.3% in Shanghai amid questions about whether a flurry of policies meant to help China’s troubled property sector will end the industry’s crisis. Back home, Bursa Malaysia closed higher as buying activities returned following Tuesday’s profit-taking activities. At the closing bell, the FBM KLCI gained 7.09 points, or 0.44%, to 1,629.18 from Tuesday’s close of 1,622.09.

Source: PublicInvest Research - 24 May 2024