MY Morning Wrap | Sunway-REIT Expected to Recover in Financial Year 2024, Say Research Houses
Good morning mooers! Here are things you need to know about today's market:
●US Stocks Rebound After Fed Comments
●Trading Opportunities in Crude Palm Oil Futures Market Expected in Q1 2024
●Stocks to watch: Sunway, IJM
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Wall Street Summary
US stocks rebounded from Wednesday's slump that was fueled by Federal Reserve Jerome Powell's comments signaling policymakers aren't likely to start cutting interest rates in March. The $S&P 500 Index (.SPX.US)$ rose 1.25%, while the $Nasdaq Composite Index (.IXIC.US)$ also gained 1.30%. The $Dow Jones Industrial Average (.DJI.US)$ increased almost 1%.
Breaking News
Trading Opportunities in Crude Palm Oil Futures Market Expected in Q1 2024
Maybank Investment Bank Research has projected that trading opportunities have emerged in the crude palm oil (CPO) futures market in Q1 2024, as prices are expected to trend higher in the near term. The price of CPO is expected to strengthen this month due to a low output cycle, lack of competing oils, and expected Ramadan-driven demand boost. Maybank IB Research expects the CPO price to briefly breach RM4,200 per tonne in February to March 2024. However, the CPO price is expected to trend lower by mid-2024, as supplies improve with the availability of new South American harvests and anticipation of CPO output recovery in the second half of 2024. The sustainable long-term CPO price will always be referenced against producers' unit cost of production, and Maybank IB Research expects Malaysian planters' unit cost to ease somewhat in 2024 relative to 2023 on lower fertiliser cost and improving yields.
Stocks to Watch
$SUNWAY (5211.MY)$: Sunway Real Estate Investment Trust's (Sunway-REIT) performance for the fourth quarter of financial year 2023 was dragged down by higher costs, but several research houses remain optimistic about its performance in financial year 2024. The recovery in Malaysia's tourism sector is expected to boost Sunway-REIT's hotel occupancies and support tenant sales and footfall among its prime malls, with occupancy rates expected to keep improving in financial year 2024. Sunway Pyramid's ongoing space refurbishment of a former anchor tenant seeks to introduce more specialty-centric stores, with new and existing tenants potentially elevating rental yields going forward. Sunway-REIT is expected to benefit from six new Giant hypermarkets, new mall 163 Retail Park in Mont Kiara, higher retail and hotel segments, and positive rental reversion.
$IJM (3336.MY)$: IJM Corp Bhd is on track to meet its order book replenishment target of RM4bn for the financial year ending March 31, 2024, having secured new jobs amounting to RM2.5bn as of end-December 2023, according to UOB Kay Hian (UOBKH) Research. The near-term outlook of IJM's construction segment continues to improve, underpinned by increasingly promising infrastructure job flows, with potential new wins coming from the Mass Rapid Transit 3 and Penang Light Rail Transit projects, the extension of the New Pantai Expressway, Indian highways, and various industrial building jobs. UOBKH Research raised its target price for IJM to RM2.13 a share from RM1.70, with an unchanged "hold" call on the counter.
$YINSON (7293.MY)$: Kenanga Research is positive on Yinson Holdings Bhd's acquisition of a solar power plant in Peru, which is the group's first operating project in South America. The Matarani Solar project in Peru has a capacity of 97 megawatt and is expected to contribute approximately RM16mil annually at full operational capacity, yielding an internal rate of return of 8%. The majority of the project's energy is under a 15-year power purchase agreement with an undisclosed off-taker, set to commence in the third quarter of 2024. Kenanga Research has reiterated its "outperform" call on Yinson with a raised target price of RM3.47 per share.
$UZMA (7250.MY)$: Uzma Bhd's recent contract win of a five-year contract from Hibiscus Oil & Gas Malaysia Ltd reaffirms the positive outlook on the company, according to Kenanga Research. The contract win is aligned with the assumption of Uzma securing RM1bil new contracts for upstream services in the financial year ending June 30, 2024. Kenanga Research maintained its "outperform" call on Uzma, with an unchanged target price of RM1.22. Phillip Capital Research also noted that the contract win would add to Uzma's order book with earnings visibility until 2027 and reiterated a "buy" call with an unchanged target price of RM1.30.
$OMH (5298.MY)$: OM Holdings Ltd (OMH) could see a meaningful earnings rebound in 2024 with the reversal of the US interest rate cycle, boosting demand for its products, says UOB Kay Hian (UOBKH) Research. The Australian-listed OMH has smelting plants in Sarawak and is involved in manganese and silicon smelting and trading of raw ores and processed ferroalloys. According to the research firm, OMH is "set to achieve a multi-year profit bonanza with expanded capacity, as hydro-powered smelters' cost advantage has significantly widened versus global competitors". OMH has a significant low cost advantage due to its long-term access to 350 megawatt (MW) of inexpensive hydropower in Sarawak, placing it in the lowest quartile for production costs. OMH is diversifying into MetSi to capture further growth potential and marks its first step in diversifying into the aluminium, chemicals, and solar downstream industries.
$SASBADI (5252.MY)$: Sasbadi Holdings Bhd is poised to see a pickup in sales in the coming quarters with the start of the new school term after a soft start in the first quarter of financial year 2024. The publisher of education materials saw its revenue dropping 17.5% year-on-year to RM15.3mil mainly due to the lack of government contract contribution in the form of textbooks supply and Common European Framework of Reference for Languages (CEFR) digital solutions. Inter-Pacific Research expects"sales to pick up significantly in 2Q24 and 3Q24 before the start of school terms", which will improve its print publishing segment. Inter-Pacific Research has a "buy" call on Sasbadi with a 24 sen a share target price.
Source: Dow Jones Newswires, Bursa Malaysia, The Malaysian Reserve, The Star, The EDGE
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