The FBM KLCI ended a choppy session higher, mainly buoyed by the telecommunication heavyweights as foreign funds returned for the second consecutive day. While the local bourse may cheer on hopes over China’s reopening, investors may remain cautiously optimistic as the US inflation data which will due later this week may indicate a prolonged interest rate upcycle environment, adding more risk to the shaky stock market.

SFP Tech Holdings Bhd (SFPTECH) is regarded as a one-stop automated equipment solution provider that offers conceptualising, designing, assembling, and commissioning of automated equipment and production line systems for factory manufacturing lines. Their key clients are predominantly in the semiconductor, electrical & engineering and solar photovoltaic industries.

Seasonally, local sales will be supported by the higher demand ahead of the yearend festive seasons. We reckon that the export market recovery towards prepandemic levels (c. 60.0% of total revenue) may remain challenging for the time being. Meanwhile, the on-going adoption of automation and digitalisation process is expected to see net margins returning to above the low-teens level in FY23f.

Tracking the bullish performances across most of the regional markets, the FBM KLCI concluded Friday with a significant rebound as the market was cheered by China’s reopening hopes. With the Wall Street turning positive last week, we expect the local front to trade positively ahead of the GE15 as well as the upcoming financial reporting period. However, we expect investors to stay cautious nearer to the announcement of the US inflation rate as that may dictate the Fed’s view and direction of the markets going forward.

The FBM KLCI plunged after the hawkish remarks from the US Fed; foreign investors turned net seller as outflows from Malaysia accelerated (5-day net foreign selling: -RM114.5m). We believe the local bourse performance may be impacted by the gloomy sentiment over the near term as investors anticipate further interest rate hikes by the US Fed to tackle inflation, contributing to the recession fears. However, investors may position themselves ahead of the GE15 event and the November reporting season.

The FBM KLCI rebounded as investors saw the recent selldown as a buy-the-dip opportunity, positioning for the GE15 event, but the trading activities was relatively quiet as investors remained cautious prior to the US Fed’s FOMC meeting and BNM’s meeting. Nevertheless, we expect the selling pressure may emerge in the Asian stock markets after the US Fed Chairman Jerome Powell reiterated the hawkish stance to combat stubbornly-elevated inflation, which may dampen the attractiveness on interest rate sensitive sector such as technology.

Prospects remains buoyant as KGB is equipped with an outstanding orderbook of approximately RM2.22bn. This which represents an orderbook-to-cover ratio of 4.3x against FY21 revenue of RM517.7m that will provide strong earnings visibility over the next 2 years. Meanwhile, tenderbook stays healthy at approximately RM1.50bn that is skewed towards the semiconductor space.

Opcom Holdings Bhd (OPCOM) engages in the (i) manufacturing of fibre optic cables, provision of engineering services to telco and power utilities industries as well as (ii) manufacturing and trading of cable filling and flooding compounds for export markets.