Market Review

Following three days of gains, the FBM KLCI cooled off to 1,653.6 (-1.3%) yesterday due to profit-taking activities by investors in tandem with the weaker US market overnight. Among the index constituents, the top decliners include CIMB (-4.5%), PCHEM (-3.5%), and YTL (-3.2%). Not surprisingly, all the sectors were mostly in the red except REIT (+0.2%). Overall, the sectors which underperformed mostly include Construction (-4.6%), Technology (-2.3%) and Financial Services (-1.8%). The broader market breadth remained negative with 851 losers outpacing 316 gainers

Economics

Malaysia: Johor-S'pore SEZ deal to be signed by November, feedback from businesses being addressed — MB

The Johor and federal governments are taking serious steps to address feedback and concerns of businesses over the upcoming Johor-Singapore Special Economic Zone (JS-SEZ), said Johor Menteri Besar Datuk Onn Hafiz Ghazi. He said at the ASEAN Conference here that issues such as the ease of doing business, ease of people and goods movement, talent availability as well as security and safety in Johor are being actively addressed. To address issues of safety and security, he said the police and local councils in Johor are working together and investing in CCTVs to substantially reduce the crime rate in the state. Meanwhile, Onn Hafiz, in addressing concerns over a delay in the signing of the final agreement, said that the details and incentives are still being fine-tuned. (Bernama)

Malaysia: Sarawak must decouple economic growth from unsustainable energy consumption — premier

Sarawak stands at a critical juncture where the state must decouple economic growth from unsustainable energy and resource consumption, said Sarawak Premier Tan Sri Abang Johari Tun Openg. “We are committed to fostering inclusive growth through sustainable resource use, ensuring that our economic growth does not lead to an overconsumption of resources and high greenhouse gas emissions,” he said in his keynote address at the Australia-ASEAN Business Forum 2024 in Sydney, Australia, on Thursday. He said the state had set an ambitious goal to achieve a 10-gigawatt renewable energy mix by 2030 or the ‘102030’ goal. (Bernama)

UK: Trans-Pacific trade agreement to come into force by Dec 15, 2024

The British government said on Thursday that its agreement to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) would enter into force by Dec 15 this year after it received the final ratification required. CPTPP is a free trade agreement sealed in 2018 among 11 countries, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The CPTPP requires countries to eliminate or significantly reduce tariffs and strongly commit to opening services and investment markets. It also has rules around competition, intellectual property rights, and protections for foreign companies. (Reuters)

German: Inflation down in six German states, pointing to national decline

Inflation fell in six important German states in August due to lower energy prices, preliminary data showed on Thursday, suggesting Germany's national inflation rate could decline noticeably this month. In Saxony, the inflation rate fell in August to 2.6% from 3.1% in the previous month, in Brandenburg it fell to 1.7% from 2.6%, in Baden-Wuerttemberg it fell to 1.5% from 2.1%, in Hesse it fell to 1.5% from 1.8% and in Bavaria it fell to 2.1% in August from 2.5% in July. The inflation rate in North Rhine-Westphalia, Germany's most populous state, fell to 1.7% in August from 2.3% in July. (Reuters)

Companies

Binastra: Bags RM155m sewage treatment plant project in Sri Hartamas

Binastra Corp Bhd, formerly Comintel Corp Bhd, has secured an RM155m contract to redevelop a sewage treatment plant in Sri Hartamas. The contract shall be completed in 36 months from the commencement date, which GLSB will notify, said Binastra in a filing with the bourse. As of Thursday, Binastra’s outstanding order book is about RM2.3bn. This latest contract boosted the group’s year-to-date contract wins for FY2025 to RM1.4bn. (The Edge)

KIP REIT: Expands portfolio with RM98m acquisition of four industrial properties

KIP Real Estate Investment Trust, which primarily invests in retail properties, has proposed to acquire another four industrial properties for a total purchase price of RM98.3m. The first SPA is a leasehold land with an industrial building in Cheras Jaya which includes a factory with a net lettable area of 66,632 sq feet. The second SPA involves the purchase of a warehouse on 5.7 acres of freehold land in Pasir Gudang, Johor with a net lettable area of 184,120 sq ft. The third SPA is an existing lease over part of leasehold land with an industrial building in the Port Klang Free Zone, Pulau Indah. The warehouse, is situated on 6.4 acres of leasehold land with a net lettable area of 193,365 sq feet. The final SPA involves the acquisition of a processing plant sited on 9.7 acres of leasehold land in Bintulu, Sarawak with a net lettable area of 207,315 sq feet.

Upon completion, KIP REIT’s portfolio will expand to 15 assets, including the seven KIPMalls, AEON Mall Kinta City and three existing industrial properties in Pulau Indah. This expansion will increase its total net lettable area by 30.8%, from the current 2.08m sq ft to 2.73m sq ft. (The Edge)

Genting Malaysia: 2Q net profit up 75%, pays six sen dividend

Genting Malaysia Bhd saw its net profit rose 74.5% to RM82.2m for the second quarter ended June 30, 2024 (2QFY2024) from RM47.1m a year earlier, driven by its leisure and hospitality business. Quarterly revenue rose 7.9% to RM2.7bn from RM2.5bn a year earlier. This was predominantly due to higher volume of business from Resorts World Genting's (RWG) gaming and non-gaming segments and offset by higher operating expenses incurred. Revenue from the leisure and hospitality businesses in the UK and Egypt also rose 20% y-o-y to RM468.8m, while that in the US and Bahamas increased 11% y-o-y. GENM declared an interim dividend of six sen per share for the financial year ending Dec 31, 2024 (FY2024), payable on Oct 7.

On its outlook, GENM said it is cautiously optimistic of the near-term prospects of the leisure and hospitality industry and remains positive in the longer term. In Malaysia, GENM remains focused on leveraging its integrated resort offerings to capitalise on the ongoing recovery in regional travel. Its investment in new and refreshed products and lifestyle experiences is part of the group’s ongoing strategy to strengthen its position as a premier tourism destination and drive further growth. (The Edge)

TNB: 2Q profit jumps over fourfold to RM1.45b amid higher electricity sales, favourable forex; plans 25 sen dividend

Tenaga Nasional Bhd's (TNB) net profit for the second quarter ended June 30, 2024 (2QFY2024) jumped more than fourfold to RM1.5bn from RM327.9m a year ago, as it recorded higher electricity sales, a favourable foreign exchange translation, and lower net finance costs. Operating profit for the quarter rose 19.9% year-on-year (y-o-y) to RM2.2bn from RM1.9bn, primarily due to a smaller negative fuel margin amid more stable coal prices. Quarterly revenue grew 7.83% y-o-y to RM14.4bn from RM13.3bn, driven by a 5.7% or RM745.8m increase in electricity sales. TNB proposed an interim single-tier dividend of 25 sen per share with payment dates to be announced in due course.

The utilities giant noted that the imbalance cost pass-through (ICPT) under-recovery fell to RM5.2bn for 6MFY2024, from RM6.5bn in the same period the previous year, due to a lower negative fuel margin. TNB is anticipating stable performance for the rest of FY2024, given that the Malaysian economy is projected to grow between 4% and 5%. (The Edge)

IHH Healthcare: 2Q net profit more than doubles to RM623m, declares 4.5 sen dividend

Net profit for the three months ended June 30, 2024 (2QFY2024) rose to RM623m from RM301m, according to the group’s bourse filing on Thursday. Revenue climbed 30.36% to RM6.1bn from RM4.7bn on sustained patient volume growth and taking on more acute, complex cases across all markets. IHH announced an interim dividend of 4.5 sen per share, which will be paid on Oct 30. IHH expressed confidence in its growth trajectory and said it aims to add nearly 4,000 new beds over the next five years. “Overall, the group expects continued revenue growth fuelled by healthcare megatrends and will focus on driving profitability and sustaining healthy return on equity, while maintaining prudent capital management and mitigating inflationary and interest rates pressures,” the group said in a statement. (The Edge)

Press Metal: 2Q net profit surges as higher aluminium prices, stronger USD help

Net profit for the three months ended June 30, 2024 (2QFY2024) was RM505.8m compared to RM305.8m over the same period a year earlier. Revenue for the quarter rose 5.2% year-on-year to RM4bn from RM3.8bn. Apart from macroeconomic uncertainties, rising alumina prices from temporary supply interruptions are lifting costs, Press Metal flagged, “though we anticipate these pressures to ease by year end as supply normalises”.

“We remain optimistic about aluminium's long-term prospects as economic conditions improve,” said CEO Tan Sri Paul Koon. The cost of alumina, meanwhile, has risen due to shortages of the essential feedstock in China since the start of 2024, helping to keep aluminium prices elevated. The company has also declared an interim dividend of 1.75 sen per share, amounting to total payout of RM144.2m, payable on Sept 30. (The Edge)

Alliance Bank: 1Q profit jumps over 17%

Alliance Bank Malaysia Bhd reported a net profit of RM176.7m in the first quarter ended June 30 (1QFY2025), up 17.3% from RM150.5m a year ago. It did not declare any dividends. The bank’s net interest income grew 15.8% to RM464.7m, driven by higher loan volume while net interest margin was at 2.45%. This included net income from Islamic banking business of RM130.1m. The non-interest income rose 15.7% to RM75.1m, primarily from higher wealth management income, foreign exchange sales and trade fees.

In a separate statement, the banking group said overall loan momentum continued with a 14.8% year-on- year (y-o-y) growth, almost double that of the 7.9% growth recorded in 1QFY2024. The positive performance was led by the bank’s small and medium enterprise (SME) (17.1% y-o-y), commercial (17.5% y-o-y), corporate (9.7% y-o-y) and consumer (14.0% y-o-y) banking growth. Meanwhile, Alliance Bank’s customer deposits grew 11.6% year-on-year, and its current accounts savings accounts (CASA) ratio remains one of the industry’s highest at 41.5%. (The Edge)

Hong Leong Bank: Net profit rises nearly 20% in 4Q, to pay 43 sen dividend

Net profit for the three months ended June 30, 2024 (4QFY2024) was RM1bn compared to RM864.7m over the same period a year earlier. Net interest income grew 10.7% y-o-y to RM1.2bn, led by expansion in loan/financing and effective funding cost management. Meanwhile, non-interest income grew 26.5% y- o-y to RM271m, on the back of higher fee income from wealth management and credit card related fees, coupled with gains in foreign exchange. The company booked writeback of impairment on losses on loans, advances and financing totalling RM31.2m compared to allowance of RM14.4m in 4QFY2023. A final dividend of 43 sen per share was also declared for the current quarter payable on a date to be determined later.

As of June 30, Hong Leong's gross loans and financing grew 7.3% y-o-y to RM194.9bn, contributed by its expansion in mortgage, auto loans, small and medium enterprise (SME) and commercial banking segments, as well as from its overseas market. Meanwhile, customer deposits increased 4.1% to RM220.4bn, with current accounts and saving accounts (CASA) delivering growth of 10.0% to RM71.6bn as of June 30. (The Edge)

Source: Mercury Securities Research - 30 Aug 2024