Policy reforms drive · Highly favored by foreign capital. JPMorgan: Inciting Malaysian stocks towards a bull market.

南洋商报 NYSP wrote a column · Jul 16, 2024 07:50

JPMorgan Chase is optimistic that Malaysia's implementation of policy reforms will drive economic development and increasingly attract foreign investment, sustaining the upward trend of Malaysian stocks.

JP Morgan Chase, after hosting the first JP Morgan Chase Malaysia Forum in early July, engaging in dialogues with three ministers from the Ministry of Finance, Ministry of Transport, and Ministry of Digital, and visiting multiple semiconductor factories in Penang, upgraded our country's rating from 'shareholding' to 'neutral' last week.

This globally renowned investment bank has set a target for the FTSE Bursa Malaysia KLCI to reach 1650 this year, and believes that achieving 1700 points if the market can sustain a bull market is not out of reach.

In the complete report released by JP Morgan, the opinion of Malaysia's Second Finance Minister Datuk Seri Amiruddin Hamzah was quoted, pointing out that Malaysia's political stability enables the government to implement policy reforms.

The report further indicates that Malaysia is committed to implementing necessary reforms to drive the economy towards upstream value chains and reduce the country's fiscal deficit.

"The gradual implementation of policy reforms has received positive feedback, and the 24% year-on-year growth in foreign investment approvals in the first quarter of this year already demonstrates the situation," Amiruddin Hamzah added.

Amiruddin Hamzah also added that the implementation of targeted subsidies requires difficult decisions, and thus the government must execute in a practical manner to ensure proper management of the inflation impact brought about by such implementations.

Policy reforms drive · Highly favored by foreign capital. JPMorgan: Inciting Malaysian stocks towards a bull market.

Enhancing Transport Hub

In discussions with Minister of Transport Wee Ka Siong, the JP Morgan analyst team learned that Malaysia intends to further enhance the capacity of transport hubs through investments in airports, railroad infrastructure, and seaports.

The upcoming East Coast Rail Link (ECRL), expected to commence operations in 2027, will strengthen railway freight connectivity, bringing benefits to increasing port throughput.

It is reported that the Kuala Lumpur-Singapore High-Speed Rail (HSR) will be led by the private sector, with Malaysian consortia possibly securing contracts for projects in Malaysia. As for the Mass Rapid Transit Line 3 (MRT 3) project, the government is also exploring different financing models.

Lu Zhaofu added that the project costs may be recovered through cooperation with private developers in the development of transportation-oriented projects.

The Johor Bahru-Rapid Transit System (RTS) is expected to begin operation in early 2027, shortening the end-to-end journey to about 20 minutes and has sparked interest in the Johor property market.

The policy is favorable to data centers.

As for the hot data center field, the analysis team said they are very selective in this field and prefer companies that provide infrastructure or support services.

However, the analysis team emphasized that the speed of new data center construction in Malaysia and the abundant supply of electricity and water make the country an attractive destination for data center investments.

In addition, Minister of Digital Economy, Gobind Singh Deo, also pointed out that current policies are favorable to data center investments, such as the Personal Data Protection Act 2010 and the Cybersecurity Act 2024, which will support the implementation of technology-related investment growth.

After visiting multiple electrical and electronics (E&E) companies in Penang with investors, we share the same desire for NIMP 2030, which is to enhance the value chain.

The analysis team emphasized that the local technology industry will continue to be positively impacted by China's +1 supply chain migration strategy, improve worker skills and expand talent pools, as well as attract more front-end activities such as IC design and wafer fab investments.

Overall, JP Morgan Chase listed its preferred stocks, including Kinwui Da, $GAMUDA (5398.MY)$National Energy, $TENAGA (5347.MY)$Industrial Bank $PBBANK (1295.MY)$and Henglong Banks. $HLBANK (5819.MY)$。

Commenting on listed companies,

At the same time, after contacting the management of listed companies, JP Morgan Chase also gave the following comments:

1. Kinwui Da

Contracts are coming in successively.

Rating: Hold.

The management of IJM expects that by the end of this year, the unfinished orders will increase to RM30 billion to RM35 billion, and the new orders that may be obtained recently include the Penang LRT, Sabah Upper Padas hydroelectric project, and Australia suburban railway loop.

If successful in bidding for the new data center project, besides potentially increasing the target orders, the Industrialized Building System (IBS) business can also undertake the main and core engineering worth RM2 billion for the data center project.

At the same time, IJM is bullish on the overseas market and aims to expand its business from the current New South Wales to other states in Australia, with the goal of doubling its construction revenue in the next 5 years.

2. IJM

Bidding for more data centers

评级:中和

截至今年3月，IJM $IJM (3336.MY)$获得3.7 billion令吉新订单，并正积极投标更多的数据中心项目，但分析员认为，由于内部缺乏机械、电气、管道（MEP）能力，需将这些部分外包给外部承包商。公司预计，数据中心项目的税前增幅将达到高个位数。

另外，随着砂拉越州政府支出增加，IJM将投标古晋智轨列车（ART）第二阶段。

3.西港控股

吞吐量可增8%

Rating: Hold.

尽管港口拥堵，导致西港控股 $WPRTS (5246.MY)$次季吞吐量受到一些影响，但摩根大通认为，其中期前景依然光明。

As multinational companies implement the China +1 strategy, West Harbour Holdings will continue to benefit from the influx of foreign direct investment (FDI).

Management expects that congestion will ease by the end of the year, and mid-term container throughput growth will range from 6% to 8%, with long-term growth at about 4% to 5%.

Analysts pointed out that the company's existing freight rates will expire at the end of August, and the proposed container freight rates are expected to increase, aiming to cover inflation and capital expenditure at the 2.0 port.

4. Malaysia Airport

The occupancy rate has exceeded 80%

评级:中和

Malaysia Airport $AIRPORT (5014.MY)$The new operating agreement (OA) for Malaysia Airport will facilitate the necessary modernization of the airport.

In addition, by configuring tenant combinations, leasing models, and introducing more dining options, the airport's commercial revitalization plan has achieved a current rental rate of 80%, with an expected increase to 87% by the end of the year.

As for the privatization activities, it is understood that Malaysia Airports has obtained approval from the General Authority for Competition (GAC) in Saudi Arabia, with 3 remaining conditions to be fulfilled.

5. Frontech Technology

Developing the markets in the USA, Europe, and Japan

Rating: Hold.

Frontech Technology $FRONTKN (0128.MY)$Significant progress has been made in the new proprietary coating technology. If successful in verification, this technology may expand its business scope from September.

In addition, Frontech Technology is still evaluating the feasibility of entering the markets in the USA, Europe, and Japan within the next 3 years, provided they can obtain sufficient demand for mature node cleaning from major clients in these markets.

客户需求持续上升，但公司正面临劳动力短缺，尤其是新的2号工厂。

较高的员工成本可能让公司次季赚幅承压，但管理层预计，随着市场份额扩大，下半年及以后前景会更好。

6.益纳利美昌

迎手机超级周期

评级:中和

益纳利美昌 $INARI (0166.MY)$正逐步转向新的先进封装技术；获得了四个新客户和两个新的技术合作伙伴，并在现有产品组合中开展涉及高速收发器和闪存 (RF) 的新项目，以及大功率LED、边缘AI和电源管理模块。

一旦所有机会实现，管理层预计，2026财年营收将达到3 billion令吉，相比2023财年增长121%。该公司正在扩大槟城和菲律宾的产能，预计明年完成。

At the same time, the company expects that the launch of the flagship smartphone equipped with AI will bring a super cycle.

7. Johor Medical Healthcare

Increase the share of medical tourism

Rating: Hold.

Johor Medical Healthcare $KPJ (5878.MY)$The revenue for the first quarter of the 2024 fiscal year achieved an 11% growth, mainly due to increased spending per patient. However, due to higher cost pressures, the profit margin was lower than expected.

The company focuses on developing excellent centers, increasing its market share in medical tourism in Malaysia, which may help drive future revenue intensity. There is also further room for improving efficiency within the organization. The company aims to add 350 beds this year, and strategically expand to establish excellent centers focusing on cardiology, oncology, gastroenterology, and other specialties.

8. Mr. DIY

Make good use of the company's strengths.

Rating: Hold.

Mr. DIY $MRDIY (5296.MY)$It has a robust business model, with over 90% of its stores achieving breakeven within two years.

The management indicated that actively leveraging the company's strengths, including property channels and networks, supplier relationships, and operational knowledge, can lead to the launch of new brands or models.

Analysts believe that this is crucial for sustaining the company's growth, as the saturation of its existing operational model is a cause for concern.

The Malaysian stock market rose by another 10.76 points, reaching a new 3-year closing high.

It is worth noting that the bullish trend in the Malaysian stock market continued, with a 10.76-point increase on Monday (15th), closing at 1629.82 points, marking a three-year closing high.

Despite a brief pullback in June, the Malaysian stock market continued to surge as foreign funds flowed back in.

Looking back today, construction, industrial, and banking stocks were favored by investors, driving the FTSE Bursa Malaysia KLCI up by 0.66% or 10.76 points, reaching a high of 1632.69 during the day, but ultimately closing below 1630 points. $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$If we look at today's trading volume, the volume was flat in the morning, became more active during the afternoon, pushing the composite index up to 1632.69, and then the gains narrowed, closing at a low of 1627.

In the final 15 minutes before closing, a large amount of funds poured into the stock market, lifting the composite index, finally closing at 1629.82.

The last time the Malaysian stock market closed above 1630 points was on March 10, 2021.

With the overnight strength of the US stock market, the momentum is likely to continue today.

If we look at the overnight performance of the US stock market, the momentum is likely to continue today. $Dow Jones Industrial Average (.DJI.US)$ $S&P 500 Index (.SPX.US)$ $Nasdaq Composite Index (.IXIC.US)$Strength, the upward momentum may continue today.

Foreign capital continued to net purchase Malaysian shares last week, with a total net purchase of 478 million.

Last week, despite the shorter trading days, foreign capital continued to flow in, buying Malaysian shares for the second consecutive week. The total net purchase last week was 400 million and 78.2 million ringgit.

According to the fund flow report released by MIDF Research this week, Bank Negara Malaysia announced last Thursday that it would maintain the overnight policy rate (OPR) at 3.0% for the seventh consecutive time. As a result, foreign capital surged in, with a total inflow of 300 million and 89.2 million ringgit on that day.

The three sectors that foreign capital bought the most last week were construction (1.1 billion and 89.2 million ringgit), utilities (1.1 billion and 11.61 million ringgit), and industrial products and services (1.1 billion and 11.8 million ringgit). The three sectors that foreign capital sold the most were consumer products and services (-92.7 million ringgit), energy (-33.4 million ringgit), and healthcare (-21.9 million ringgit).

Similar to foreign capital, local institutions also started net selling Malaysian shares after three consecutive weeks of buying, with a total net sell of 300 million and 18.5 million ringgit.

In terms of participation, the average daily trading value (ADTV) of foreign capital increased by 24.7%, local institutions increased by 10.9%, while retail investors declined by 1.3%.

Foreign capital made significant net purchases of stocks.

Source: Nanyang Siang Pau

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