10/10/2024

BIZ & FINANCE THURSDAY | OCT 10, 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 up against US dollar ahead of Fed minutes release THE ringgit closed marginally higher against the US dollar yesterday, ahead of the release of the minutes of the US Federal Reserve’s (Fed) September meeting, which will offer more clarity on its interest rate-cutting trajectory. At 6pm, the local currency increased to 4.2800/2830 versus the greenback compared to Tuesday’s close of 4.2850/2895. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the next data point to look out for is the US consumer price index (CPI), which is expected to moderate to 2.3% in September from consensus estimates of 2.5%. “In the interim, traders and investors are expected to remain cautious as the Fed mulls on its monetary easing approach,“ he told Bernama. At the close, the ringgit traded higher against major currencies. It strengthened versus the euro to 4.6939/6972 from 4.7079/7129 at Tuesday’s close, was higher against the Japanese yen at 2.8792/8815 from 2.8988/9022 and improved vis-a-vis the British pound to 5.6012/6052 from 5.6108/6167. The local note performed mixed versus Asean currencies. It was higher versus the Singapore dollar at 3.2822/2848 from 3.2876/2913 at Tuesday’s close and went up vis-a-vis the Philippine peso to 7.50/7.52 from 7.53/7.54.

Crest Group plans business expansion, Vietnam on radar KUALA LUMPUR: Crest Group Bhd (CGB), which debuted in the ACE Market of Bursa Malaysia yesterday, plans to expand its business, including new operations in Vietnam while enhancing its technical support and maintenance services. Chairman Ahmad Tajudin Omar said that in line with the company’s growth strategy, it is also rising in the adoption of the Internet of Things and Industry 4.0, and is well-positioned to meet the increasing demand for its solutions, supported by government initiatives in the electric and electronics and the aerospace sectors. “We are committed to providing imaging, analytical, and test solutions crucial to various industries including semiconductor, electrical and electronic, automotive, and healthcare. “Since our founding in 1999, we have expanded regionally into China, Singapore, and Thailand, driven by a strong business model and trusted partnerships with global suppliers. “Our management team’s extensive industry experience has been key to our growth, guiding us through challenges and positioning us for success,“ he said during the listing event. CGB opened at RM0.39 a share, representing a 12.9% premium over its issue price of RM0.35 per share. As of 9am, the opening volume was 11.3 million shares. The company raised RM45.75 million through the public issue of 130,705,300 new ordinary shares at RM0.35 per share. Out of the total proceeds raised, CGB has allocated 34.5%, or RM15.76 million, to setting up a new centralised headquarters and 31.7%, or RM14.52 million, to business expansion. Additionally, 12.8% or RM5.87 million is allocated to purchase additional demonstration equipment.

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD

BUYING TT

BUYING OD

1 US Dollar

4.3440 2.9440 3.3280 3.1750 4.7710 2.6610 3.3280 5.6930 5.0990

4.2080 2.8250 3.2300 3.0890 4.6150 2.5630 3.2300 5.5110 4.8790 3.4520 59.2200 60.3200 53.6000 4.9300 0.0260 2.8390 38.2500 1.4900 7.2800 114.2700 110.9700 23.1400 1.4000 39.4800 12.0200 113.3400 N/A

4.1980 2.8090 3.2220 3.0770 4.5950 2.5470 3.2220 5.4910 4.8640

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

119.5900 3.7090 61.8700 65.5800 56.4400 5.2600 0.0287 2.9340 14.6000 41.6100 1.5900 7.7300 120.3700 116.8900 25.6200 1.5200 43.3700 13.5500

113.1400

3.2520

N/A

60.1200 53.4000 4.7300 0.0210 2.8290 38.0500 1.2900 7.0800 114.0700 110.7700 22.9400 1.2000 39.2800 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

Unisem (M) Bhd Buy. Target price: RM3.93

Inari Amertron Bhd Neutral. Target price: RM3.06

Malaysian Pacific Industries Bhd Buy. Target price: RM38.50

Oct 9, 2024: RM3.14

Oct 9, 2024: RM2.86

Oct 9, 2024: RM26.42

Source: RHB Research, Bloomberg

Source: RHB Research, Bloomberg

UNISEM sales are mainly denominated in USD terms, but it will be partially hedged by USD purchases which typically make up 40 50% of the COGS. A 1% FX depreciation could result in 2-3% impact to bottomline, ceteris paribus. Meanwhile, its USD borrowings should see savings in interest costs and FX gains. These, coupled with currency hedging, should help to cushion the negative revaluation of receivables. The margin compression stemming from the negative FX movements can be passed on to customers through renegotiation, revised quotation, engineering, and process efficiency. We factored in the stronger MYR/USD to be in line with our in house FX assumption to 4.40/4.05/4.20 from 4.50/4.30/4.30, resulting in FY24-FY26 earnings cut by 11.7%, 10.6%, and 13.4%. Note that we also tweaked our cost assumptions on efficiency gains through process improvements, cost pass-through exercise, and slower revenue growth. Unisem’s 1H’24 revenue of RM759.4 million (+3.6% YoY) translated into core earnings of RM26.7 million was below expectations due to margin compression [EBITDA margin compressed to 18.7% (1H’23: 20.5%)] stemming from changes in product mix and higher operating costs from additional hiring for expansions. Management guided for stronger (+8-10%) QoQ revenue and sees potential upside risks from its utilisation in Ipoh, if the recovery gains pace. Headcount is also on a rising trend for three consecutive quarters, reaching 6,359 from 6,067 to cater to rising loadings. Keep BUY with RM3.93 TP. – RHB Research, Oct 9

THE majority of INRI’s revenue (>90%) is denominated in USD, but it will be partially hedged by its USD purchases, which typically make up 40-50% of COGS. A 1% FX depreciation could result in 1 2% impact to bottomline, ceteris paribus. However, loadings and yields remain the primary earnings drivers. Management indicates that margins compression, stemming from the negative FX movements, can be passed on to customers through revised quotations periodically, and engineering and process efficiency. We factored in the stronger MYR/USD to be in line with our in house FX assumption to 4.10, 4.20, and 4.20 from 4.30, 4.20, and 4.20, resulting in FY25-FY27 earnings cut by 14%, 11%, and 12%. Note: We also tweaked our cost assumptions on efficiency gains through process improvements, and lower our forecast for INRI’s China venture. Management guided on softer-than-expected volume loadings for the new premium smartphone range, but sees potential upside from the staggered release of nascent AI features and new budget phone range to be launched in 1H’25. However, content growth in the range of 15% is expected for the new RF components. The optoelectronic segment should see more traction towards 2H’25 with fibre optics and power LED products to contribute more significantly – there is a target to double revenue by FY26. On the Yiwu-JV, the China plant is running with small volumes with only one customer qualified so far. Management expects high volume manufacturing to begin in CY25, with volume commitment after certain changes in engineering processes are implemented. Still NEUTRAL with RM3.06 TP. – RHB Research, Oct 9

Source: RHB Research, Bloomberg

MPI sales are mainly denominated in USD terms, but will be partially hedged by its USD purchases that typically make up 40 50% of the COGS. A 1% FX depreciation could result in a 1-3% impact to bottomline, ceteris paribus. However, the margins compression stemming from the negative FX movements can be passed on to customers through renegotiations, revised quotations, and engineering and process efficiencies. We factored in the stronger MYR/USD to be in line with our in house FX assumptions of 4.10, 4.20, and 4.20 from 4.30, 4.30, and 4.30 previously, resulting in downward earnings revisions of 14%, 7%, and 4% for FY25-27. FY24 revenue of RM2.1 billion (+2.5% YoY) translates into a core PATAMI of RM182 million (excluding the share-based payment for its executive share scheme) met expectations. EBITDA margins improved marginally by 60bps, boosted by favourable FX movements and lower opex. Asia and US revenues were higher 1% and 10%, while Europe sales were flattish. The Suzhou plant continued its profitable trend with better utilisation rates following the upticks in Chinese semiconductor activities. The Ipoh plant saw intermittent slowdowns from automotive clients. Management is cautiously optimistic for a stronger FY25, fuelled by the recovery of the semiconductor sector. The automotive segment is expected to trend higher in China, cushioning weakness from the Ipoh side, but the industrial segment is expected to continue growing. Still BUY with RM38.50 TP. – RHB Research, Oct 9