03/09/2024

BIZ & FINANCE TUESDAY | SEP 3, 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 extends loss against US dollar on profit-taking THE ringgit extended last Friday’s loss to end easier against the US dollar yesterday on profit-taking following recent gains amid caution ahead of a US jobs report at the end of this week, an analyst said. At 6pm, the local currency fell to 4.3550/3600 versus the greenback from last Friday’s close of 4.3185/3225. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that the ringgit moved lower amid a cautious mood yesterday after performing considerably well in August. Afzanizam said the markets will also be awaiting the outcome of Bank Negara Malaysia’s (BNM) monetary policy council meeting on Thursday besides the US nonfarm payrolls data due on Friday. “The BNM is likely to keep the overnight policy rate steady at 3.00 per cent while the US Federal Reserve (Fed) is on track to reduce the Fed Funds Rate in the upcoming Federal Open Market Committee (FOMC) meeting on Sept 17-18,“ he told Bernama. At the close, the ringgit traded mostly lower against a basket of major currencies, except versus the Japanese yen, where it rose to 2.9688/9725 from 2.9754/9784 at last Friday’s close. The local unit declined vis-a-vis the euro to 4.8197/8252 from 4.7862/7906 and weakened against the British pound to 5.7203/7269 from 5.6939/6992. Similarly, the ringgit traded mostly lower against its Asean peers. The local note improved against the Thai baht to 12.7228/7429 from 12.7540/7726 last week but depreciated versus the Singapore dollar to 3.3321/3361 from 3.3158/3191. It also moved lower against the Indonesian rupiah to 280.4/280.9 from 279.3/279.8 last Friday and went down vis-a-vis the Philippine peso to 7.72/7.73 from 7.69/7.70. KPJ Healthcare Bhd Market Perform. Target price: RM1.95

3REN inks IPO underwriting deal with KAF Investment Bank BUKIT MERTAJAM: 3REN Bhd has signed an underwriting agree ment with KAF Investment Bank Bhd for its initial public offering (IPO). 3REN executive director and CEO Koh Dim Kuan said the signing marks the beginning of an exciting new chapter for the company. “We are excited about the future and our plans to keep growing. We will use the funds to strengthen our research and development, allowing us to create and improve innovative solutions. “Additionally, we will set up dedicated delivery centres to handle specific product engineering services, especially for designing and developing semiconductor chips. “This will bolster our overall competitiveness within the wide array of industries we serve,“ he said. 3REN’s IPO entails a public issue of 110 million new ordinary shares and an offer for sale of up to 45 million existing shares. From the public issue portion, which represents 16.9% of 3REN’s enlarged share capital, 32.5 million new shares are available for application by the Malaysian public. 30 million new shares are allocated to eligible directors, employees, and contributors to the 3REN group’s success. Additionally, 3.8 million new shares will be privately placed with Bumiputera investors, as approved by the Ministry of Investment, Trade, and Industry (Miti). Furthermore, 43.7 million new shares are reserved for selected investors through private placement. The offer-for-sale portion, representing 6.9% of 3REN’s enlarged share capital, will also be privately placed with bumiputra investors approved by Miti. Capital A Bhd Market Perform. Target price: RM0.78

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD

BUYING TT

BUYING OD

1 US Dollar

4.4000 2.9960 3.3680 3.2570 4.8670 2.7590 3.3680 5.7840 5.2090 3.7570 62.4500 66.8900 57.0000 5.3300 0.0294 3.0120 42.5700 1.6000 7.9500 121.9500 118.4700 25.5500 1.5100 44.2000 13.4900 121.1400 N/A

4.2630 2.8740 3.2670 3.1680 4.7070 2.6560 3.2670 5.5980 4.9860 3.4960 59.7700 61.5200 54.1300 5.0000 0.0266 2.9130 39.1300 1.5000 7.4900 115.7700 112.4600 23.0600 1.3900 40.2200 11.9500 114.8000 N/A

4.2530 2.8580 3.2590 3.1560 4.6870 2.6400 3.2590 5.5780 4.9710

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

114.6000

3.2960

N/A

61.3200 53.9300 4.8000 0.0216 2.9030 38.9300 1.3000 7.2900 115.5700 112.2600 22.8600 1.1900 40.0200 11.5500 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

OCK Group Bhd Market Perform. Target price: RM0.60

Sept 2, 2024: RM1.93

Sept 2, 2024: RM0.765

Sept 2, 2024: RM0.53

Source: Kenanga Research

Source: Kenanga Research

Source: Kenanga Research

CAPITALA’s 1H’24 results disappointed as the rebound in air travel fell short of expectations. It reported a 1H’24 core net loss of RM545 million, against our full-year net profit forecast of RM229 million and the full-year consensus net profit estimate of RM502 million. The variance against our forecast came largely from the rebound in air travel falling short of expectations. YoY, its 1H’24 revenue more than doubled on improved performance from both its airlines and digital segments. For the airlines segment, AirAsia Malaysia, Thailand, Indonesia, and Philippines delivered improved performance across key metrics, with a system-wide load factor of 90%, reflecting a 3ppts improvement. Passenger volume grew 67% to 32m (84% of pre-Covid) boosted by higher ASK (+63%), outpacing capacity growth of 7% while capacity recovery achieved 81%. The growth was largely attributed to routes to China and India following visa-free travel implementation at the end of 2023 for China and India travellers. Additionally, both domestic and international segments are experiencing similar growth rates, indicating a holistic recovery across AirAsia’s network. AirAsia Philippines and Thailand emerged as top performers, chalking the highest load factor of 93%. AirAsia Malaysia and Indonesia followed closely with an impressive load factor of 89% and 87%, respectively. For the digital segment, Capital A Aviation services’ 1H’24 revenue rose 30% of which 67% was contributed by ADE, followed by Santan (15%) and the balance by DARTS and Capital A Consultancy. Teleport’s revenue rose 35% driven by growth from existing and onboarding of new customers, re-activation of AirAsia fleet, and additional capacity from third party airlines allowing expansion into new lanes beyond AirAsia’s network. We maintain our TP of RM0.78 but upgrade our call to MARKET PERFORM. – Kenanga Research, Sept 2

OCK’s 1H’24 results disappointed, mainly due to weaker revenue at the telco network services (TNS) segment. Its 1H’24 core net profit of RM18.9 million underwhelmed, coming in at 34% and 35% of our full-year forecast and the consensus estimate, respectively. OCK declared maiden DPS for FY24 of 0.71 sen (Q2’23: nil), which was within our expectation. The shortfall versus our forecast was mainly due to weaker-than expected revenue from the TNS segment. We attribute this to the slowdown in the rollout of 5G sites for Malaysia’s first 5G network, following the achievement of its 80% population coverage target in Dec 2023. OCK recognised a chunky impairment loss of RM7.6m on trade receivables in Q2’24. We deem this an exceptional non-core item as OCK rarely impairs its receivables, as evident from its strong historical track record. This stems from the stable, recurring payments it receives from major telco tenants for tower tenancy leases. Moving forward, we are concerned that the ongoing delay in the rollout of Malaysia’s second 5G network and JENDELA Phase 2 could hinder OCK’s order book replenishment. Hence, this would result in cloudy earnings visibility, unless OCK plugs the revenue shortfall by securing other major projects swiftly. Additionally, the impairment of receivables, albeit infrequent, raises concerns about potential future risks, including: (i) impairments of its tower assets, and (ii) reduced earnings contributions if tenants default on lease payments. Risks to our call include: (i) unfavorable regulatory changes, (ii) delayed roll-out of 5G infrastructure, and (iii) country and political risks at frontier markets where OCK has a presence. MARKET PERFORM with lower TP of RM0.60. – Kenanga Research, Sept 2

KPJ expects sustained performance in 2H’24 underpinned by revenue intensity and rising demand. Beyond CY24, it will add >1,500 beds (>+30%) bringing totalled beds to 5,000 over the next five years which we have already factored into our forecast. To recap, key operating indicators remained solid in 1H’24. 1H’24 earnings were driven by higher inpatient throughput (+9%), outpatient (+1%), bed capacity (+7%), surgeries (+5%) and average revenue per inpatient (+7%) and outpatient (+6%). It is optimistic that the performance of its five new hospitals will further improve for the rest of FY24. We understand that losses in 1H’24 at new hospitals have narrowed but the group stopped short of guiding. Recall, in Q1’24 net losses of these hospitals narrowed by 30% YoY. With incremental revenues from higher patient throughput, Damansara Specialist Hospital 2 (DSH2), KPJ Perlis, KPJ Batu Pahat and KPJ Bandar Dato Onn already turned EBITDA-positive in 1H’24, while KPJ Miri is expected to achieve the same in end 2024. Note that Miri and DSH2 were EBITDA-negative in Q4’23. Particularly, DSH2 continued to show improvement reporting a RM3.2 million EBITDA in Q2’24 compared to RM0.6m in Q1’24. The group is hopeful with effective marketing and advanced technological equipment, DSH2 is capable of achieving double-digit topline growth in the next few quarters. It has conducted its first robotic surgery on partial nephrectomy. Presently, DSH2 registered average revenue of RM10 million per month compared to RM4 million per month last year. It is targeting DSH2 to register revenue of RM100 million in FY24. We maintain our forecasts, TP of RM1.95 and MARKET PERFORM call. – Kenanga Research, Sept 2