01/10/2024

BIZ & FINANCE TUESDAY | OCT 1, 2024 20 MARKETS/FROM THE BROKERS

SUNBIZ presents extracts of a selection of commentaries and research reports received from stockbrokers on counters that could be of interest to investors.

DISCLAIMER: The information is extracted from stockbrokers’ commentaries and research reports and do not represent the views or opinions of Sun Media Corporation Sdn Bhd. It is not a solicitation, recommendation or an offer to buy or sell the equities featured. Sun Media Corporation shall not be liable or responsible for any consequences resulting from usage of the information.

[ Compiled by SunBiz Team

Ringgit hits fresh 39-month high against greenback THE Malaysian ringgit closed marginally higher yesterday but still hit a new 39-month high against the greenback on continued expectation of another cut in US interest rates after the latest inflation data there. At 6pm, the ringgit traded at 4.1210/1280, up from Friday’s close of 4.1230/1280. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid attributed the ringgit’s upward resilience to continued expectation that the US Federal Reserve (Fed) is on track to keep cutting interest rates further in light of the lower inflation trajectory in the US. “The ringgit maintained its upward bias against the greenback yesterday and went to as high as 4.09 level in the early morning session, last seen in April 2021 (41 month high), before retracing back towards 4.12 in the second half of the day,” he told Bernama. A key Fed inflation gauge – the personal consumption expenditures (PCE) price index - rose 2.2% in August, lower than expected, it was reported last Friday. The ringgit traded lower against a basket of major currencies, weakening against the Japanese yen to close at 2.8899/8936 compared to 2.8804/8841 on Friday. It was lower against the euro, ending at 4.6106/6162 from 4.6009/6064 and slipped against the British pound to 5.5193/5260 from 5.5178/5245 last week. The local currency also slid against Asean currencies, except versus the Indonesian rupiah, increasing to 272.1/272.6 from 272.5/273.0 last week. It ticked down against the Singapore dollar to 3.2175/2217 from 3.2146/2187 at Friday’s close, eased to 12.8037/8248 from 12.7202/7407 against the Thai baht.

Local bond yields expected to rise moderately this week KUALA LUMPUR: Kenanga Investment Bank Bhd expects a moderate rise in local bond yields, driven by expectations of continued strong US economic performance, as indicated by upcoming Job Openings and Labour Turnover Survey (Jolts) data and job openings. “Domestically, we foresee positive momentum in the manufacturing sector, supported by stable purchasing managers’ index (PMI) data due next week,“ the research firm said in a report. The Malaysian Government Securities (MGS) and Government Investment Issues (GII) yields displayed mixed movements last week, ranging from -0.8 bps to 3.1 bps overall. The 10-year MGS rose by 2.7bps to 3.72%, while the 10-year GII increased at a lower pace of 1.4bps to 3.75%. Domestically, Kenanaga noted that August’s lower-than expected Consumer Price Index (CPI) of 1.9% triggered RM1 billion inflows into Malaysia’s debt market on Sept 24. The research firm noted that this influx and the Fed’s 50bps rate cut last week lowered local yields and contributed significantly to the ringgit’s appreciation. “Meanwhile, China’s surprise monetary stimulus added downward pressure on yields, although we are now observing a gradual increase in the yields of 10-year MGS. “This increase is driven by strong US economic data, especially from a stronger labour market with declining jobless claims and improving business activity,“ Kenanga said. Meanwhile, the US Treasury (UST) yields displayed an upward trend last week, moving from 4.7bps to 8.5bps overall. The 10-year UST saw a sizable rise of 8.3bps to 3.79% while the 2-year UST increased by 4.7bps to 3.62%.

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD BUYING TT

BUYING OD

1 US Dollar

4.1725 2.9020 3.2520 3.0800 4.6580 2.6640 3.2520 5.5850 4.9850

4.0395 2.7860 3.1590 2.9980 4.5070 2.5670 3.1590 5.4070 4.7750 3.3150 57.3200 58.9300 51.5000 4.7500 0.0258 2.8380 37.4800 1.4300 7.1200 109.7600 106.6500 22.8100 1.3200 38.8100 11.9700 108.8700 N/A

4.0295 2.7700 3.1510 2.9860 4.4870 2.5510 3.1510 5.3870 4.7600

1 Australian Dollar 1 Brunei Dollar 1 Canadian Dollar 1 New Zealand Dollar 1 Singapore Dollar 1 Sterling Pound 1 Swiss Franc 100 UAE Dirham 100 Bangladesh Taka 100 Chinese Renminbi 100 Danish Krone 100 Hongkong Dollar 100 Indian Rupee 100 Indonesian Rupiah 100 Japanese Yen 100 New Taiwan Dollar 100 Norwegian Krone 100 Pakistan Rupee 100 Philippine Peso 1 Euro

114.8000 3.5600 59.8300 64.0300 54.1900 5.0600 0.0285 2.9310 14.2000 40.7400 1.5300 7.5600 115.6200 112.3500 25.2700 1.4400 42.6100 13.4900

108.6700

3.1150

N/A

58.7300 51.3000 4.5500 0.0208 2.8280 37.2800 1.2300 6.9200 109.5600 106.4500 22.6100 1.1200 38.6100 11.5700 N/A

100 Qatar Riyal 100 Saudi Riyal

100 South Africa Rand 100 Sri Lanka Rupee 100 Swedish Krona

100 Thai Baht

Source: Malayan Banking Bhd/Bernama

Kim Loong Resources Bhd Hold. Target price: RM2.50

Beshom Holdings Bhd Hold. Target price: RM0.96

Uzma Bhd Buy. Target price: RM1.78

Sept 30, 2024: RM0.895

Sept 30, 2024: RM2.39

Sept 30, 2024: RM0.985

Source: TA Research, Bloomberg

EXCLUDING exceptional items, Kim Loong Resources Bhd (KIML) reported an 8.7% YoY decline core net profit, totalling RM40.3 million in Q2’25. This was despite a 5.3% increase in revenue. The weaker results were primarily attributed to lower OER. Cumulatively, the core net profit rose by 17.1% YoY to RM88 million, supported by an 11.5% increase in revenue. This improvement was largely driven by higher FFB and palm oil prices. The 1H’25 profit accounted for 58% of our full-year estimate and 55% of the consensus forecast. We consider these results to be in line with expectations as we anticipate softer palm oil prices in the H2 of the year. Plantation: In 1H’25, the operating profit rose by 18.2% YoY primarily driven by 2.2% increase in FFB production and 4.9% rise in the average selling price of FFB to RM767/tonne. Palm Oil Milling: In 1H’25, the operating profit surged by 19.1% YoY to RM66.4 million, primarily driven by 5.7% increase in CPO production to 157k tonnes and improved processing margins in Q1’25. Additionally, the average selling price of CPO surged 4.5% YoY to RM4,087/tonne. The group declared an interim dividend of 5 sen/share for the quarter under review, which was similar to last year. Following a decent 15% growth in FFB production in FY24, management anticipates a moderate 5.0% growth in FY25 FFB harvest, supported by improved age profile of young palm productive areas and ongoing replanting programs. In FY23, the group resumed its replanting efforts and aims to replant approximately 1,000ha in FY25, a significant rise from 350ha replanted in FY24. Maintain HOLD with unchanged TP of RM2.50. – TA Research, Sept 30

Source: Philip Capital Research, Bloomberg

LAST Friday, Uzma made several announcements aimed at rewarding its shareholders: 1) declared a first and final dividend per share (DPS) of RM0.02 for FY24, 2) proposed to establish a dividend reinvestment scheme (DRS), and 3) proposed bonus issue of 1 bonus share for every 3 existing ordinary shares, totalling up to 172m new shares. Both the DRS and bonus issue will be subject to shareholder approval at an extraordinary general meeting, while the dividend payout will be finalized at the annual general meeting. The dividend payout comes as a positive surprise, marking the resumption of Uzma’s dividend payment since 2014. The RM0.02 DPS represents 17% payout ratio. Together with the DRS, we believe Uzma is committed to a consistent dividend payout going forward, reaffirming the group’s positive outlook for improved earnings and cash flow. The proposed DRS will give existing shareholders the option to reinvest in whole or in part of their cash dividend for new ordinary shares, providing Uzma with flexibility in capital management by retaining cash that would otherwise be distributed. We also encouraged by the bonus issue, which is expected to further improve the stock liquidity. We had not previously accounted for a dividend payout in our estimates, but now projecting a DPS of RM0.02 for FY25–27. We remain positive on Uzma’s earnings prospects, supported by increased O&G work activities, commencement of LSS4 and healthy RM2.9 billion orderbook. We make no changes to the rest of our assumptions. We reiterate our BUY rating and RM1.78 target price. – Philip Capital Research, Sept 30

Source: TA Research, Bloomberg

BESHOM Holdings Bhd (BESHOM)’s Q1’25 results accounted for 14% and 15% of ours and consensus’ full year estimates, respectively. We deemed the results to be within expectation as we expect stronger festivities sales in 2H’25 and improved cost management going forward. Core earnings remained flat at RM2.6 million, while quarterly revenue declined by 4.9% YoY to RM33.5 million. The weaker overall performance was mainly dragged by the underperformance of the wholesale division, which offset the improved results from the MLM and retail segments. Wholesale: Segmental revenue dipped by 20.3% YoY to RM11.4 million, primarily due to lower sales of vintage tea and Chinese medicated tonic products. Meanwhile, EBIT declined by 82.2% YoY to RM0.4 million, mainly due to higher input and logistics costs, along with lower sales in Q1’25. MLM: EBIT more than doubled to RM1.3 million (+283.4% YoY), while revenue increased by 3.7% YoY to RM12.9 million. The better results were primarily driven by a reduction in rebates/promotions, leading to a 7.6%-pts YoY increase in EBIT margin to 10.4%. Retail: LBIT narrowed to RM0.3 million from RM0.4 million a year ago, driven by higher revenue of RM7.6 million (+8.7% YoY) posted in Q1’25. The improved sales were largely attributed to higher contributions from its house brand products and spillover contributions from the members’ sales campaign (held from April 24 to May 5) in Q4’24. HOLD with an unchanged TP of RM0.96. – TA Research, Sept 30