02/10/2024

BIZ & FINANCE WEDNESDAY | OCT 2, 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

SC: Regulators must listen, experiment in innovation KUALA LUMPUR: Regulators need to continuously listen to feedback from various parties as part of their engagement when incorporating innovation. Securities Commission Malaysia (SC) executive director Dr Wong Huei Ching said it is important to listen to feedback on different topics and from multiple levels of stakeholders such as CEOs, chief technology officers (CTOs) and the rest of the working teams that come up with the various types of proposals. “We distilled all of it (the feedback) and also looked at other jurisdictions to see the trends (there) and identified the need to harness emerging technologies. “Another matter is to continue experimenting, for example, by introducing the regulatory sandbox. “The sandbox served as a contained environment, and sandboxing plays a part towards the approach of licensing the industry player,“ she told reporters after the “Jumpstart Dialogue – Regulators on The Future of Finance” panel session in conjunction with the SCxSC Fintech Summit 2024 yesterday. The SC would be introducing a regulatory sandbox and enhancing its regulatory framework to encourage securities tokenisation to help spur innovations in the capital market. Meanwhile, Wong further said through experimenting, regulators would better understand the reality and be able to operationalise the products and services in the market in a big way. She also encouraged regulators and industries to explore more pilot projects and other initiatives to bring innovation and understand the underserved sectors. – Bernama Astro Malaysia Holdings Bhd Neutral. Target price: RM0.30

Ringgit falls on profit-taking as hopes for big US rate cut fade THE ringgit closed lower against the US dollar yesterday on profit taking after recent sharp gains, in line with other regional currencies, as the US signalled a lower interest rate cut going forward. At 6pm, the ringgit traded at 4.1530/1610, down from Monday’s close of 4.1210/1280. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid attributed the weaker performance to the latest remarks by US Federal Reserve (Fed) chairman Jerome Powell, who reassured markets that monetary easing would continue but that the Fed is not in a hurry to cut rates quickly. He expects the Fed to maintain its usual pace of a quarter point rate cut at its upcoming meeting next month against previous expectations of another 50 basis points slash. “With the ringgit having appreciated sharply in recent days, traders took the chance to secure some profit. Additionally, heightened geopolitical risks in the Middle East could increase demand for safe haven currencies like the US dollar,“ he told Bernama. The ringgit traded mostly higher against a basket of major currencies, except for the British pound, where it weakened to 5.5335/5441 from 5.5193/5260. It gained against the Japanese yen, closing at 2.8892/8950 compared to Monday’s 2.8899/8936, and also strengthened against the euro, ending at 4.6078/6166 from 4.6106/6162. Against Asean currencies, the ringgit mostly traded lower, except for the Thai baht, where it rose to 12.7412/7716 from 12.8037/8248. It declined against the Indonesian rupiah, dropping to 273.1/273.7 from 272.1/272.6, slipped against the Singapore dollar to 3.2269/2334 from 3.2175/2217 and fell against the Philippine peso to 7.39/7.41 from 7.35/7.37.

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD BUYING TT

BUYING OD

1 US Dollar

4.2170 2.9280 3.2770 3.1110 4.6970 2.6810 3.2770 5.6420 5.0150

4.0810 2.8100 3.1800 3.0260 4.5430 2.5820 3.1800 5.4610 4.8000

4.0710 2.7940 3.1720 3.0140 4.5230 2.5660 3.1720 5.4410 4.7850

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

116.0400

109.9700

109.7700

3.5990

3.3490

3.1490

N/A

N/A

N/A

64.5900 54.7800 5.1100 0.0288 2.9320 14.3000 41.0000 1.5400 7.6100 116.8300 113.5200 25.2800 1.4600 42.7700 13.5600

59.4000 52.0200 4.7900 0.0260 2.8360 37.6900 1.4500 7.1700 110.9100 107.7600 22.8200 1.3400 38.9200 12.0200 N/A

59.2000 51.8200 4.5900 0.0210 2.8260 37.4900 1.2500 6.9700 110.7100 107.5600 22.6200 1.1400 38.7200 11.6200 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

Cypark Resources Bhd Neutral. Target price: RM0.70

Banks Overweight

Oct 1, 2024: RM0.28

Oct 1, 2024: RM0.65

Source: PublicInvest Research

ASTRO Malaysia (Astro) reported Q2’25 headline net profit of RM53.2 million, jumping 170% YoY mainly due to lower net financing costs on favourable unrealised foreign exchange (forex). However, normalised net profit was down 37% YoY to RM27 million on the back of a 6% decline in TV subscription revenue. Additionally, TV advertising revenue fell 19% YoY. 1H’25 results came in below expectations. Although the strengthening of the ringgit against USD should help to ease the pressure of rising content cost, Astro has hedged its FY25 currency exposure at rates higher than the prevailing spot rates. Hence, a stronger ringgit may only translate to lower operating cost in FY26. Q2’25 revenue fell 6% YoY, mainly due to a 6% decline in TV subscription revenue while advertising revenue was down 19%. Radio revenue was also weaker, falling by 20% YoY. All in all, advertising revenue dropped 20% YoY due to muted consumer sentiment, with clients opted for caution stance in advertising spend. Also, we believe competition from the non-traditional digital platforms have resulted in market share loss for Astro. Meanwhile, EBITDA margin fell by 3 ppts to 24%. Outlook: Although 2024 is a major sporting year (i.e. Olympics and UEFA Euro), we are not expecting adex to pick up strongly in the coming quarters given the weak consumer sentiment. Coupled with a more intense competition from other video streaming services, its TV subscription revenue is likely to remain muted. While we believe content cost should ease in FY26 due to a more favourable exchange rates, topline growth is expected to be restricted by a challenging industry landscape. Our DCF-based TP is revised down to RM0.30. We maintain our NEUTRAL rating on Astro. – PublicInvest Research, Oct 1

Source: RHB Research, Bank Negara Malaysia

Source: PublicInvest Research

SYSTEM loans grew 6% YoY (MoM: +0.3%), driven by household loans (+6% YoY, +1% MoM), as well as the finance (+16% YoY, -2% MoM) and wholesale & retail trade (+10% YoY, +1% MoM) sectors. On the other hand, we saw a slight decline in loans to the utilities sector (-11% YoY, flat MoM). Residential mortgages (+8% YoY, +1% MoM) and hire purchase loans (+10% YoY, +1% MoM) continued to be the main drivers of household loans. YTD, system loans have grown at an annualised 4.4%, which trails our 5-5.5% forecast for 2024 for now. 8M’24 lending indicators show that system loan applications and approvals were up 5% and 4% YoY. Of this, business loan approvals were up by a healthy 4%, which indicate that there could be chunky loan disbursements in the remaining four months of the year. We also note that most of the banks under our coverage are aiming for loans growth north of 6% in their respective financial years, implying some optimism from the lenders in the domestic economy. System deposits increased 4% YoY (flat MoM), ie at a slower pace compared to loans growth – this led to a tightening of the system LDR to 88%, close to the all-time high levels of c.89%. We believe the tighter liquidity forms part of the banks’ strategy to support NIM, as on-the-ground feedback suggests that asset yields are very competitive at present. Encouragingly, however, CASA deposits (+5% YoY, flat MoM) are growing at a slightly faster pace than fixed deposits (FD) (+3% YoY, flat MoM), which could help to alleviate pressure on NIMs. Maintain OVERWEIGHT. – RHB Research, Oct 1

CYPARK Resources (Cypark) reported another quarterly core net Loss After Tax and Minority Interest (LATAMI) of RM26.8 million in Q1’25, narrowing from a core net LATAMI of RM68.4 million in Q4’24. This was mainly due to the absence of derecognition of RM46 million deferred tax assets in Q4’24, following the over provision during the kitchen sinking exercise in FY23. On YoY basis, Cypark reported higher core net LATAMI from RM2.3 million reported in Q1’24 as its waste-to-energy (WTE) segment dragged the performance due to prolonged unscheduled shutdown. Overall, Q1’25 performance was lagging ours and consensus full-year net PATAMI estimates of RM9.7 million and RM25.2 million respectively, with the variance largely due to rectification works of its WTE plant. We cut our estimate to net LATAMI of RM16 million for FY25 and reduced net PATAMI by 53% and 25% for FY26 and FY27 respectively due to prolonged rectification works on WTE, rescheduled of commercial operation date (COD) of Large Solar Scale 2 (LSS2) Danau Tok Uban to Q4’24 and higher financing cost after LSS3 COD. Renewable Energy (RE) segment contributed higher revenue, rising 33.9% on QoQ basis after Cypark achieved COD for its 100MW LSS3 Merchang on June 9. It is estimated that about RM7.8 million of revenue from LSS3 Merchang was recognised in Q1’25. However, the commencement of LSS3 has increased its financing cost by 65.8% as Cypark started to book in expenses instead of capitalising the project’s financing cost. We maintain our NEUTRAL call and further reduce our sum-of parts (SOP) TP to RM0.70. – PublicInvest Research, Oct 1