The FBM KLCI inched lower after hovering mostly in the red, with selling pressure seen in other sectors outweighing gains in the banking heavyweights. The rebound attempt on Wall Street overnight may trigger the regional markets to recover some grounds. Meanwhile, investors are awaiting the consumer confidence data and Chicago PMI to gauge the US Fed’s tone in interest rate direction. We reckon cautious sentiment will prevail on the local front with foreign investors turning net sellers, but bargain hunting may be noticed.

Local sales in 4QFY22 at RM29.6m continues to anchor topline, making up to 64.5% of total revenue, followed by sales to Japan at RM12.6m (27.8% of total revenue), Australia at RM2.4m (5.3% of total revenue) and other countries at RM3.2m (2.8% of total revenue). With the easing of container shortages and tapering of freight costs, we reckon that SLP may step up their efforts to shore up their export sales. Still, we expect local sales to remain as the key contributor in FY23f.

Given the absence of new orderbook replenishment, we reckon that the construction segment may continue to remain in red, while the balance EPC works at Vietnam is expected to be recognised progressively in subsequent quarters. Moving forward, outstanding orderbook of c.RM150.0m will provide revenue visibility over the next 2 years.

Moving forward, AME is equipped with an outstanding construction orderbook of c. RM300.0m to sustain earnings visibility over the next 2 years. For 9MFY23, new property sales of c.RM200.0m make up to 80.0% of our projection at RM250.0m. As a result, unbilled property sales at c. RM130.0m (up from RM122.9m in 2QFY23) will sustain the property development segment earnings for 2 years. Following the disposal of 10 plots of land to AME REIT, the group is equipped with a sizeable war chest with a net cash position at RM189.3m.

Hibiscus Petroleum Bhd (HIBISCS) is the Malaysia’s first public listed independent O&G E&P firm, focusing on the development and production of oilfield assets in United Kingdom, Malaysia and Australia. In 2QFY23, net oil, condensate and gas production rate stood at an average 13,513 barrels per day (bpd).

The FBM KLCI logged marginal losses after hovering mostly in the negative territory, taking cue from the negative biased regional markets. Following a sharp selldown on Wall Street in the previous week, we reckon the regional markets and the local bourse may stay rocky while investors could be looking out for fresh catalysts. Meanwhile, we believe the downside risk could be limited following the revised Budget 2023 as investors may trade in sectors that will benefit from it.

Government proposed to allocate RM386.1bn under the revised budget to boost the economy by 4.5% in 2023. Overall, the budget targets to lower down the living costs while ensuring the smooth recovery on the economy. Key highlights include the (i) higher DE of RM97bn, (ii) changes in selected personal tax structure and (iii) extension of the green energy policies. Fairly positive to the stock market given no Capital Gain Tax on listed companies was being implemented. Sectors that we favour include the construction, building material, automotive, consumer, telecommunication, tourism, plantation and healthcare sectors.

Going forward, the outstanding construction orderbook of approximately RM400.0m (as at end-FY22) will provide earnings visibility over the next 2-3 years. We gather that road upgrading works at Kulim valued at RM229.2m is at still infant stage (4% completion), while the Prihatin housing project valued at RM442.7m is expected to commence this year. This may boost contribution from the construction segment that was inactive over the past 3 financial years.