We reckon that net margins may stay in mid-to high teens in 1HFY23 before potentially improving towards slightly above 20.0% in 2HFY23 after the issue of defective products received from its FDA approved supplier resolves. While there were several rounds of selling price revisions last year, we reckon that margins recovery will be challenging due to the elevated copper prices that traded above USD8,000/MT year-to-date vs. USD5,000 6,500/MT level during pre-pandemic.

YoY, core net profit fell 16.6% YoY to RM3.7m, primarily resulted from (i) lower contribution from OEM segment that outweighed the slight increase contribution from House Brand segment, (ii) increase in administrative expenses resulting from annual bonus provisions and employee benefit expenses for share options, and (iii) increase in amortisation of research and development cost as a result of new products launched.

The FBM KLCI ended marginally higher as the key index reversed earlier rally into the afternoon session amidst mixed regional market. Following the heavy plunge on Wall Street overnight, we believe investors may stay on the sidelines as concerns over the interest rate hikes expectation continues to pressure the market sentiment. Nevertheless, the US FOMC meeting minutes will remain in focus and should provide more clues going forward.

The FBM KLCI was in the midst of a pullback, declining for the third session as investors were staying on the sidelines ahead of the re-tabling of Budget 2023. Also, investors may continue to monitor the geopolitical tensions as the European Union aims to adopt a new package of sanctions against Russia this week, as well as the US President Biden’s visit to Ukraine. On the local front, earnings reports and the Budget 2023 re-tabling on Friday will remain as the key focus while investors monitor for a series of global economic data.

We continue to like REXIT’s business model leveraging on its core competencies such as its 24x7 secured e-Cover infrastructure, experienced management team, and solid relationship with clients which will ensure a stream of recurring income. Meanwhile, the group is in negotiation with potential new clients for FY24 who will bring new source of revenue for the business in both transactions and subscription basis.

For now, MSC remains committed to gradually improving their daily mining output level. However, we remain cautious that the rising natural gas price may continue to impact bottomline margins. Hence, we expect net margins to stay around midsingle digit over the foreseeable future.

TSH Resources Bhd’s plantation operations spans over 42,000-ha in planted areas across Sabah as well as parts of Kalimantan and Sumatra, Indonesia. Besides, their 67.0%-owned subsidiary; Ekowood International Bhd is operating in 2.0m sqf manufacturing plant located at Gopeng, Perak with production capacity up to 27.0m sqf of engineering hardwood flooring (EHF) per annum.

The FBM KLCI consolidated further last Friday amidst bearish sentiment across the regional markets. However, we believe bargain hunting activities may emerge on the local bourse after a broad-based selldown ahead of the re-tabling of Budget 2023, but the global sentiment could weighed further by renewed concerns over expectations of larger interest rate hikes going forward. This week, investors may keep an eye on the US FOMC minutes, US GDP growth rate (second estimates), Eurozone’s inflation rate, Malaysia’s inflation rate, as well as the re-tabling of Budget 2023.