With the quicker-than-expected change of tide in demand, material prices, both FeSi and SiMn are expected remain unexciting over the foreseeable future (below USD2,000/MT and USD1,300/MT respectively). We believe uncertainties persisted surrounding the global inflationary pressure may continue to sap demand.

We continue to favour OSK, on the back of (i) prudent new property development launches to avoid an overhang of unsold stocks scenario, (ii) stable loan portfolio and (iii) dividend income from strategic investment in RHB. We reckon that demand for affordable housing remains on the fore with the group’s future launches continue to place great emphasis through competitive pricing.

We expect the construction industry to remain beset by the rising costs of labour and raw materials. The price index per unit of steel & metal section increased 15.8% YoY in July 2022, according to the building and structural work, department of statistics Malaysia.

The FBM KLCI eked out marginal gains, outperforming the negative regional markets as selling pressure subsided after the morning session selldown. Still, we expect global market sentiment to remain cautious on the back of persistent concerns over interest rate hikes going forward as the Fed stands firm on its hawkish stance. Meanwhile, on the local front, an increase in Malaysia’s July inflation rate may lead to another Overnight Policy Rate hike by Bank Negara.

As of 1QFY23, AME is equipped with an outstanding construction orderbook of RM318.7m to sustain earnings visibility over the next 2 years. Meanwhile, unbilled property sales of RM120.4m (up from RM91.3m in 4QFY22) will sustain the property development segment earnings for 2 years. After delivering new property sales of RM168.4m in FY22, we expect stronger performance to come by for FY23f at RM250.0m (1QFY23 new property sales at RM65.8m).

The FBM KLCI extended gains to close marginally above the psychological 1,500 level on Friday, tracking the improved sentiment across regional markets last week. However, the local bourse may be headed for a widespread selloff, following a sharp decline on Wall Street overnight after the US Fed’s Chair reiterated its hawkish tone to tame inflation. We believe the US Fed’s interest rate decision going forward will continue to fuel market volatility. On the local front, investors may watch for Malaysia’s inflation rate at noon.

Thong Guan Industries Bhd (TGUAN) is regarded as one of the largest stretch film manufacturers in Malaysia. TGUAN is supported by 17 factories with more than 2,000 employees and products are exported to 70 countries worldwide.

Moving forward, outlook of the group may remain challenging given the global geopolitical risks as well as uncertainties over global economic growth. Nevertheless, REXIT is committed to its expansion strategies to bring two new customers on board in FY23 and FY24 respectively, while gaining new business from existing customers.