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Author: MalaccaSecurities   |   Latest post: Mon, 17 Jun 2019, 12:00 PM

 

Mplus Market Pulse - 17 Jun 2019

Author: MalaccaSecurities   |  Publish date: Mon, 17 Jun 2019, 12:00 PM


Still Looking Insipid

  • The FBM KLCI (-0.3%) was painted red, in-tandem with the global weakness and sluggish Chinese industrial data, fuelling concerns of slower economic growth and weaker demand amid the ongoing U.S.-China trade conflicts. The lower liners also closed mostly lower as the FBM Fledgling and FBM ACE declined 0.02% and 0.6% respectively. The broader market, meanwhile, finished on a mixed note.
  • Market breadth was negative as decliners outpaced the advancers on a ratio of 498-to-288 stocks. Traded volumes tanked 14.3% to 1.75 bln shares amid the prevailing negative sentiment.
  • On the downside, heavyweights like Nestle (-RM1.00), Public Bank (-30.0 sen), Petronas Gas (-16.0 sen), Tenaga (-14.0 sen) and Hong Leong Bank (-10.0 sen) retreated. Broader market losers were BAT (-76.0 sen), Carlsberg (-28.0 sen), Lafarge Malaysia (-26.0 sen), Heineken Malaysia (-20.0 sen) and Atlan Holdings (-19.0 sen).
  • In contrast, United Plantations (+50.0 sen), Apex Healthcare (+25.0 sen), Shangri-La Hotels (+16.0 sen), Boustead Heavy Industries (+12.0 sen) and KESM Industries (+10.0 sen) were the main broad market gainers. Key-index advancers include Malaysia Airports (+25.0 sen), Hap Seng Consolidated (+15.0 sen), PPB Group (+6.0 sen), Hartalega (+5.0 sen) and Maxis (+5.0 sen).
  • Key regional benchmark bourses extended their losses ahead of key economic data from China and rising crude oil prices. The Nikkei recovered some of losses on Friday, propped up by energy-linked stocks amid heightened U.S.-Iran tensions following the attacks on two tanker ships. The Hang Seng Index (-0.7%) and the Shanghai Composite (-1.0%), however, ended on a weak note, alongside the majority of ASEAN stockmarkets.
  • U.S. stockmarkets closed mostly lower last Friday, albeit slightly offset by stronger-than-expected retail data. The Dow (-0.1%) and the S&P 500 (-0.2%) retraced in the eleventh hour, ahead of the FOMC meeting next week. Meanwhile, the Nasdaq weakened 0.5% after downbeat results from Broadcom triggered a selldown in the tech-sector amid concerns of slowing demand.
  • Key European benchmark indices were mostly in the red, weighed down by weakness in tech-stocks and uncertainties in the global landscape amid the ongoing tensions in the Middle East. The FTSE fell 0.3% as investors digested the latest political developments, while the DAX and the CAC closed 0.6% and 0.2% lower following weak Chinese industrial data.

The Day Ahead

  • Market conditions on Bursa Malaysia are staying insipid in the absence of new catalysts and still toppish conditions on the FBM KLCI that could leave sentiments on the wayside again. As it is, concerns are still abound over the state of the global economy as the U.S-China trade dispute lingers.
  • After making headway for the past few weeks, the FBM KLCI remains toppish with valuations veering to the upper range of its historical forward valuations. We think that further upsides will be more difficult to attain unless there are further improvements in corporate earnings. There has been some upward revision to the year’s corporate earnings growth prospects, but it has already been reflected in the recent runup.
  • Hence, we think that the key index could continue to drift with the downside bias still very much the prevailing trend. On the downside, there supports are now at 1,635 and 1,630 respectively. The resistances, meanwhile, are 1,640 and 1,650 respectively.
  • The tide is also turning on the lower liners and broader market shares with early signs of weakness appearing after their recent uptrend. Therefore, we think that profit taking activities may escalate as there are fewer available catalysts to lift market sentiments for now, in our view.

COMPANY BRIEF

  • Eco World Development Group Bhd (EcoWorld Malaysia) will form a partnership with China’s state-owned construction company, PowerChina Group to jointly develop 117.4 ac. of industrial land. The land, located at Puncak Alam, Shah Alam has an estimated gross development value of RM850.0 mln and the project will be named Eco Business Park V, Phase 2.
  • The partnership will be carried out through a conditional joint venture that will see the formation of the JV company, Eco World PowerChina Business Park Sdn Bhd. Eco World PowerChina will be 60.0% owned by PowerChina and 40.0% owned by EcoWorld Malaysia. (The Star Online)
  • UEM Sunrise Bhd aims to downsize its Desaru, Johor, residential and beach development to 228.0 ac., from 680.0 ac. in order to conserve cash and limit exposure. This means that the price of the land is now reduced to RM120.8 mln from RM485.3 mln. The development will be undertaken by joint venture company, Desaru North Course Residences Sdn Bhd (DNCR), which is one of the three JV companies owned by the group and Khazanah-owned Themed Attractions Resort & Hotels Sdn Bhd (TAR&H). The excess RM73.4 mln paid to TAR&H will be refunded to DNCR as the group has paid RM194.1 mln to date. (The Edge Daily)
  • Sino Hua-An International Bhd will issue RM150.0 mln in Redeemable Convertible Medium-term Notes to fund business expansion measures. Advance Opportunities Fund, where Tan Choon Wee is principal shareholder and sole director will subscribe to the notes. The notes will be doled out in three tranches with all three containing RM50.0 mln in notes.
  • The notes are to mature within the first 36 months from the closing date of the first sub-tranche of the note’s first trance. (The Edge Daily)
  • Straits Inter Logistics Bhd’s unit acquired a 14-year-old oil tanker for US$4.7 mln (RM19.6 mln). The acquisition of the ship is at a discount to its current market value and is seen to enlarge its asset base. The unit will pay for the ship in 61 monthly cash instalments from 14th June 2019 onwards, with the unit placing a US$900,000 cash deposit as part of the acquisition. (The Edge Daily)
  • Perisai Petroleum Teknologi Bhd’s 51.0%- owned unit, Perisai Offshore Sdn Bhd won a US$20.0 mln (RM83.9 mln) deal from Petronas Carigali Sdn Bhd. The contract is in relation to the high specification jack-up rig — which is capable of operating in a water depth of 400 ft. with a drilling depth capability of 30,000 ft. for Petronas Samarang drilling campaign. The contract is from August 2019 and September 2019, with five wells to be completed in 200 days. (The Edge Daily)  

Source: Mplus Research - 17 Jun 2019

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M+ Online Technical Focus - 14 Jun 2019

Author: MalaccaSecurities   |  Publish date: Fri, 14 Jun 2019, 11:55 AM


The FBM KLCI registered its third straight session of decline, mirroring the weakness across its regional peers as the key index closed at around the 1,643.74 level yesterday. The MACD Histogram has extended another red bar, while the RSI is hovering in the overbought level. Resistances will be pegged around the 1,660-1,670 levels. Support will be set around the 1,630 level.

ADVCON has formed a bullish engulfing candle to close above the EMA60 level with mildly improved volumes. The MACD Histogram has turned green, while the RSI remains above 50. Price targets are envisaged at around the RM0.44 and RM0.47 levels. Support will be located around the RM0.365 level.

HSSEB has experienced a trendline breakout above the RM1.10 level with mildly improved volumes. The MACD Histogram has turned green, but the RSI is slightly overbought. Price may trend higher, targeting the RM1.19 and RM1.23 levels. Support will be anchored around the RM1.01 level.

VIZIONE has experienced a short-term consolidation breakout above the RM0.995 level with high volumes. The MACD Histogram has extended another green bar, while the RSI has risen above 50. Monitor for a breakout above the RM0.995 level, targeting the RM1.05-RM1.09 levels. Support will be pegged around the RM0.95 level.

Source: Mplus Research - 14 Jun 2019

Labels: ADVCON, HSSEB, VIZIONE
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Engtex Group Bhd - Ceasing Coverage - Underwhelming Prospects

Author: MalaccaSecurities   |  Publish date: Fri, 14 Jun 2019, 11:24 AM


Prospects

  • Engtex’s outlook remains clouded by uncertainties over its under-utilised capacity in both the mild steel (MS) and ductile iron (DI) pipes production that was running at 48.5% and 22.4% respectively in 2018. In the meantime, its steel welded mesh and hard drawn wire plants that have a combined capacity of 210,000 tonnes per annum is operating at 44.4% in 2018. The volatility of steel prices, partly arising from the intensifying Sino-U.S. trade dispute also does not bode well for the group as demand stalled after buyers continue to adopt the wait-and-see approach.
  • Elsewhere, we reckon that both its property development and hospitality segments will remain in the red in 2019 and 2020 on the prolonged slump in the property development market, coupled with the competitive hotel room rates from demand for rental platforms such as Airbnb, Booking.com and HomeAway. In the absence of new catalysts and the difficult operating environment that is expected to prolong, we are ceasing our coverage on Engtex. Our last recommendation was a Sell.
  • We expect Engtex’s earnings to deteriorate by 54.1% Y.o.Y to RM6.0 mln in 2019 before bottoming out and recover 110.0% Y.o.Y to RM12.7 mln in 2020, helped by the possible stabilisation of steel prices, coupled with the resumption of works on certain mega infrastructure projects. However, we don’t see a significant boost from non-revenue water (NRW) pipe replacement programmes currently undertaken by eight states in Malaysia due to the constraints in the government’s coffers.
  • Our last assigned target price was RM0.48, arrived by ascribing a target PER of 8.0x to its manufacturing and wholesale & distribution businesses. Its hospitality segment earnings is pegged to a PER of 6.0x to its 2019 earnings due to its smaller contribution to the group, while its property development segment’s is valued at 0.6x its BV due to its relatively small-scale property development projects.

Source: Mplus Research - 14 Jun 2019

Labels: ENGTEX
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Mplus Market Pulse - 14 Jun 2019

Author: MalaccaSecurities   |  Publish date: Fri, 14 Jun 2019, 10:06 AM


Still Toppish

  • The FBM KLCI (-0.4%) trended lower for the third straight session after lingering the in the negative territory in tandem with the weakness across its regional peers. The lower liners also closed mostly lower as the FBM Fledgling and FBM ACE declined 0.02% and 0.6% respectively. The broader market, meanwhile, finished on a mixed note.
  • Market breadth turned positive as advancers nudged decliners on a ratio of 397-to-379 stocks. Traded volumes rose 16.2% to 2.04 bln shares on rotational play amongst the lower liners.
  • More than half of the key index components fell, dragged down by Tenaga (-22.0 sen), followed by Genting (-14.0 sen), Hap Seng Consolidated (- 13.0 sen), MISC (-7.0 sen) and Public Bank (-6.0 sen). Among the biggest decliners on the broader market were BAT (-20.0 sen), Heineken (-14.0 sen), Apollo Foods (-8.0 sen), Bursa Malaysia (-8.0 sen) and Oriental Holdings (-8.0 sen).
  • On the flipside, notable gainers on the broader market include Lafarge (+56.0 sen), LPI Capital (+52.0 sen), Imaspro Corporation (+28.0 sen) and Hume Industries (+19.0 sen). Greatech Technology added 13.0 sen on its debut in Bursa Malaysia. Meanwhile, Nestle (+RM1.00), Petronas Dagangan (+28.0 sen), Sime Darby Plantation (+9.0 sen), Hong Leong Financial Group (+2.0 sen) and CIMB (+2.0 sen) advanced on the local bourse.
  • Asian benchmark indices closed mostly lower yesterday as the Nikkei declined 0.5%, taking cue from the weakness on Wall Street overnight. The Hang Seng Index fell 0.2%, weighed down by the ongoing social unrest due to the extradition bill protest, but the Shanghai Composite (+0.1%) managed to shrug off its earlier losses. ASEAN stockmarkets, meanwhile, closed mostly lower on Thursday.
  • Wall Street rebounded overnight as the Dow rose 0.4%, boosted by Walt Disney, coupled with gains in energy shares after crude oil prices staged a sharp recovery. Likewise, the S&P 500 rose 0.4% with only the healthcare sector (-0.1%) underperforming, while the Nasdaq finished 0.6% higher.
  • Earlier, European benchmark indices – the FTSE (+0.01%), CAC (+0.01%) and DAX (+0.34) all closed in the positive territory after enduring a volatile trading session. Gains were driven by telecommunication companies on Germany’s 5G auction, coupled jump in energy shares stemming from the higher crude oil prices.

THE DAY AHEAD

  • Yesterday’s market retreat was not surprising given the already overbought conditions that were a precursor to an impending pullback, coming on the back of the FBM KLCI’s over 4.0% gain in the past few weeks. At the same time, there were also fewer buying impetuses from domestic sources after the conclusion of the most recent corporate results reporting season.
  • Going into the final trading day of the week, conditions remain toppish on the key index that may continue to dent market interest. At the same time, rising geopolitical concerns in the Middle East and the unresolved trade dispute between the U.S. and China will leave sentiments on the wary side.
  • Therefore, we think the key index is likely to continue drifting over the near term with the downside bias still prevalent, possibly sending the FBM KLCI back to the 1,640 level. Further below, the support is at the 1,636 level, while the resistances are at the 1,650 and 1,657 levels.
  • Elsewhere, conditions should remain mixed with fewer positive catalysts and the potential profit taking activities ahead of the weekend could dictate the lower liners and broader market shares’ direction.

COMPANY BRIEF

  • Comintel Corp Bhd’s (Comcorp) external auditor Messrs RSM Malaysia has made a qualified opinion that the group has several uncertainties which may affect its ability to continue as a going concern.
  • According to the auditors, Comcorp’s ability to continue as going concern is dependent on the timely and successful implementation of its regularisation plan — which it is submitting to Bursa Malaysia on 10th July as well as its ability to achieve sustainable and viable operations with adequate cash flows generated from its operating activities.
  • Daya Materials Bhd's 58.5%-owned subsidiary, Daya Proffscorp Sdn Bhd is disposing 22 mobile cranes and two forklifts worth RM11.5 mln to Key Prospect Sdn Bhd. Subsequently, an SPA will be signed within 15 days from 13th June 2019 to effect the agreement. (The Edge Daily)
  • Hap Seng Consolidated Bhd’s property development unit is selling a 20-acre vacant plot of land in Tawau for RM27.1 mln to Goldencoin Ventures Sdn Bhd – a unit of Hong Kong-based Lei Shing Hong Ltd. Hap Seng Consolidated is expected to make a net gain of RM20.3 mln.
  • The disposal consideration will be used to repay borrowings and/or fund working capital upon the completion of the sale. If completed in 2019, earnings per share will increase 0.81 sen and net assets per share will improve by 1.0 sen, while gearing will decrease to 0.53x, from 0.54x. (The Edge Daily)
  • TH Heavy Engineering Bhd (THHE) won a US$11.4 mln (RM47.4 mln) contract from Afcons Infrastructure Ltd of India for an offshore process platform project (CPP & LQUP) for the development of KG-DWN- 98/2 NEP Block offshore India.
  • Contract works includes the fabrication of piles for offshore jackets, with the scheduled to commence in August and be completed on 31st December 2020. (The Edge Daily)
  • Berjaya Food Bhd (BFood) registered a 1QFY19 net profit of RM4.1 mln, from RM837,000 last year, mainly due to higher Starbucks revenue and lower finance costs. Revenue, meanwhile, rose to RM169.9 mln vs. RM160.0 mln a year ago. The group, which changed its financial year end to 30th June, has also declared a fourth interim dividend of one sen, payable on 26th July this year.
  • For the 12-month period from May 2018 to April 2019, the group registered a net profit of RM26.3 mln, from RM1.2 mln in the previous corresponding financial period. (The Edge Daily)
  • Media Prima Bhd is appointing Datuk Syed Hussain Syed Junid as its Chairman from 1st July 2019 replacing Datuk Mohd Nasir Ahmad, whose tenure ends on 30th June 2019. Datuk Syed Hussain will also be appointed to the group’s board as an Independent Non-Executive director and group Chairman-designate effective immediately. (The Edge Daily)
  • Telekom Malaysia Bhd (TM) has appointed Datuk Noor Kamarul Anuar Nuruddin as its Managing Director and Chief Executive Officer (CEO) effective 13th June, 2019. He will replace acting CEO Imri Mokhtar, who will be returning to his role as TM’s Chief Operating Officer. Previously, Datuk Noor was also part of Celcom Axiata Bhd's senior management team from 2003 until March 2018. (The Star Online)
  • YTL Corp Bhd’s 98.0%-owned subsidiary YTL Cement, has upped its shareholding in Lafarge Malaysia Bhd to 77.0% following the conclusion of the mandatory general offer (MGO). The MG resulted in YTL Cement acquiring an additional 220.7 mln shares (or 26.0%) of Lafarge. YTL Cement previously said that it will maintain Lafarge Malaysia’s listing. (The Star Online)

Source: Mplus Research - 14 Jun 2019

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Mplus Market Pulse - 13 Jun 2019

Author: MalaccaSecurities   |  Publish date: Thu, 13 Jun 2019, 9:12 AM


Awaiting New Leads

  • The FBM KLCI (-0.03%) extended its losses in tandem with the weakness across its regional peers after lingering in the negative territory for the entire trading session. The lower liners also closed mostly lower as the FBM Small Cap and FBM Fledgling fell 0.1% each. The broader market ended mostly negative with the energy sector (-0.7%) taking the heaviest beating after crude oil prices slumped.
  • Market breadth stayed negative as decliners outpaced advancers on a ratio of 446-to-317 stocks. Traded volumes shrank 21.8% to 1.76 bln shares amid the negative market sentiment.
  • Petronas Gas (-12.0 sen), topped the big board decliners list, followed by Nestle (- 10.0 sen), Petronas Dagangan (-10.0 sen), RHB Bank (-8.0 sen) and Hartalega (-6.0 sen). Notable decliners on the broader market include United Plantations (-50.0 sen), Heineken (-30.0 sen), Bintulu Port (-16.0 sen), Oriental Holdings (-12.0 sen) and Boustead Heavy Industries (-11.0 sen).
  • Meanwhile, BAT (+30.0 sen), Ajinomoto (+28.0 sen), Chin Teck Plantations (+22.0 sen), MPI (+15.0 sen) and QL Resources (+15.0 sen) topped the broader market gainers list. Key winners on the local bourse were IHH (+8.0 sen), Genting (+7.0 sen), Tanaga (+6.0 sen), MISC (+4.0 sen) and Genting Malaysia (+2.0 sen).
  • Asia benchmark indices ended lower on concerns over the on-going trade standoff between U.S. and China Both the Nikkei and Shanghai Composite fell 0.6% and 0.4% respectively. The Hang Seng Index sank 1.7% on political uncertainties after protesters swarmed the streets in opposition to a possible new extradition law. ASEAN stockmarkets, meanwhile, closed mostly lower yesterday.
  • U.S. stockmarkets extended their losses after hovering mostly in the negative territory as the Dow fell 0.2% on the ongoing concerns over the Sino-U.S. trade dispute. On the broader market, the S&P 500 slipped 0.2%, dragged down by the energy sector (-1.4%) after crude oil price tumbled to four-month low, while the Nasdaq declined 0.4%.
  • Earlier, European benchmark indices – the FTSE (-0.4%), CAC (-0.6%) and DAX (- 0.3%) all ended in the red, mirroring the weakness across global stockmarkets. Meanwhile, the main opposition Labour party in U.K. announced plans to introduce parliamentary legislation to block the country exiting the European Union without a deal in place.

The Day Ahead

  • We see the continuing uncertainties over the U.S-China trade spat leaving sentiments on Malaysian stocks on the cautious side, which may linger into the upcoming G20 summit later in the month as the U.S. President ramps up his tariff rhetoric.
  • Domestically, there are also few leads following the completion of the recent corporate earnings reporting season that saw the continuing mixed performance, albeit more companies reporting improved earnings. At the same time, the market’s gain over the past month has largely reflected the improved earnings outlook and this is leaving little room for significant near term upsides, in our view.
  • Therefore, we think the indifferent trend may persist in view of the lack of new leads and this could see the FBM KLCI linger within a narrow range between the 1,645 and 1,660 levels for now.
  • The lower liners and broader market shares are also seeing a mixed performance after their respective recovery in the past few sessions. There are also fewer leads and with coupled with few compelling buys, we think that a mixed trend could prevail for now.

COMPANY BRIEF

  • DRB-Hicom Bhd’s 50.1%-owned unit, Proton Holdings Bhd has inked a jointventure (JV) agreement with Altel Communications and ECarX (Hubei) Technology Co Ltd, China to set up a company to develop more indigenous digital technology and car connectivity systems.
  • Separately Proton announced that its RM1.2 bln assembly plant’s commissioning is drawing near and production trial runs have begun for the X70. (The Edge Daily)
  • ACE Market-listed furniture maker, Wegmans Holdings Bhd is planning to transfer to Bursa Malaysia’s Main Market after meeting the bourse’s criteria such as profit track record, public shareholding spread, healthy financial position and liquidity. The transfer is expected to be completed in the 4Q2019, (The Edge Daily)
  • UEM Group Bhd has denied allegations of transferring US$741,440 (RM3.1 mln) to a Cabinet Minister and senior PKR leader. Subsequently, UEM has lodged a police report on the matter. This comes after allegations that the group had transferred the money to Economic Affairs Minister Datuk Seri Azmin Ali's alleged Deustche Bank account in December 2017. (The Edge Daily)
  • Bermaz Auto Bhd‘s (BAuto) 4QFY19 net profit rose to RM60.1 mln (+5.1% Y.o.Y), from RM57.2 mln last year on the back of lower operating overheads. Quarterly revenue, however, fell 5.7% Y.o.Y to RM538.3 mln, from RM570.6 mln following lower vehicle sale volume in Malaysia and the Philippines.
  • The group's full-year net profit, meanwhile, jumped 89.5% Y.o.Y to RM265.3 mln compared to RM140.0 mln in FY18, while revenue gained 25.1% Y.o.Y to RM2.49 bln, from RM1.99 bln. Subsequently, the group declared a fourth interim dividend of 3.5 sen and a special dividend of 7.0 sen – payable on 25th July, 2019. Total dividends declared in FY19 amounted to 21.25 sen, from 10.4 sen last year – the highest level seen since listing. (The Star Online)
  • The Inland Revenue Board (LHDN) has accepted a voluntary declaration by Seacera Group Bhd’s unit to settle overdue tax for the tax years 2009 and 2012 amounting to RM22.2 mln.
  • The unit, Duta Skyline Sdn Bhd had received a letter dated 31st May 2019 from the tax authorities stating the declaration was made without the written approvals of Duta Skyline and Duta Nilai Holdings Sdn Bhd. According to the group, the tax bill is the result of Seacera’s acquisition of Duta Nilai Holdings on 16th November, 2016. (The Star Online)  

Source: Mplus Research - 13 Jun 2019

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Mplus Market Pulse - 12 Jun 2019

Author: MalaccaSecurities   |  Publish date: Wed, 12 Jun 2019, 3:42 PM


Consolidation Spell Remains

  • The FBM KLCI (-0.3%) retreated as profit taking activities in selected index heavyweights emerged on Tuesday. The lower liners – the FBM Small Cap (+0.8%), FBM Fledgling (+0.4%) and FBM Ace (+0.5%), however, outperformed the local bourse to extend their gains, while the broader market closed mostly higher.
  • Market breadth stayed positive as advancers outstripped decliners on a ratio of 455-to-348 stocks. Traded volumes fell 1.7% to 2.24 bln shares as profit taking activities emerged.
  • Half of the key index constituents were in the red, led by Tenaga (-8.0 sen), followed by Hong Leong Bank (-24.0 sen), PPB Group (-16.0 sen), Hartalega (- 6.0 sen) and RHB Bank (-6.0 sen). Among the biggest decliners on the broader market were Genting Plantations (-24.0 sen), Heineken (-16.0 sen), UMW Holdings (-14.0 sen), QL Resources (-12.0 sen) and YNH Property (-11.0 sen).
  • On the contrary, significant gainers on the broader market include United Plantations (+56.0 sen), Hong Leong Industries (+20.0 sen), Magni-Tech Industries (+18.0 sen) and Dufu Technology (+17.0 sen). Ikhmas Jaya added 2.0 sen after bagging a package for the LRT3 project worth RM405.0 mln. Meanwhile, MISC (+16.0 sen), Nestle (+10.0 sen), Petronas Dagangan (+8.0 sen), Malaysia Airport Holdings (+5.0 sen) and Axiata (+4.0 sen) rose on the FBM KLCI.
  • Asia benchmark indices extended their gains as the Nikkei rose 0.3%, mirroring the positive sentiment on Wall Street overnight. The Hang Seng Index climbed 0.8%, while the Shanghai Composite jumped 2.6% after authorities allowed the usage of special bonds to finance certain investment projects, boosting infrastructure spending. ASEAN stockmarkets, meanwhile, closed mostly higher yesterday.
  • U.S. stockmarkets endured a volatile trading session before staging a pullback as the Dow (-0.1%) snapped a six-day winning streak as investors digested a new round of U.S.-China trade standoff after the U.S. look to impose additional tariffs on Chinese goods should an agreement not reach in the upcoming G20 meeting. On the broader market, the S&P 500 fell 0.03%, while the Nasdaq closed 0.01% lower.
  • Earlier, European benchmark indices – the FTSE (+0.3%), CAC (+0.5%) and DAX (+0.9%) all advanced, taking cue from the positive sentiment across Asian stockmarkets. In the meantime, the U.S.’ unemployment rate in May 2019 stood at 45 year low of 3.8%.

The Day Ahead

  • Yesterday’s FBM KLCI retreat was already in the offing amid the toppish technical indicators after the gains over the past few weeks. Judging by the new trend, it appears that there could be further near term weakness that could prompt more profit taking activities over the near term.
  • As it is, there remains little room for further upsides, not only due to the toppish conditions, but also the already fair valuations following the recent upsides of more than 4.0%. While some of the recent gains were due to betterthan-expected quarterly earnings, the improved earnings outlook is still largely meek due to the insipid global and domestic economic environment. Therefore, the toppish conditions could still see further near term consolidation with the 1,650 level serving as the immediate support, followed by the 1,644 level. The resistances are at 1,660 and 1,673 respectively.
  • The lower liners and broader market shares may still continue their upside as more retail players return to the market that could provide the near term buying impetus.

COMPANY BRIEF

  • Malaysia Building Society Bhd (MBSB) is planning to restructure to allow its unit, MBSB Bank Bhd to be the group’s holding company in the next two years. Subsequently the group will have to convert RM1.0 bln worth of conventional assets into Islamic assets, which currently constitute 10.0% to 12.0% of its asset portfolio within three years.
  • Separately for FY19, the group is targeting more than 5.0% loan growth, with non-performing loan (NPL) ratio to be 1.2% to 1.3%. The group also targets a net return on equity (RoE) of 10.0%.
  • The higher loan growth will be driven by new revenue streams such as trade finance, wealth management, internet and mobile banking, alternative financial services or peer-to-peer financing. (The Star Online)
  • Ikhmas Jaya Group Bhd has secured a RM405.0 mln subcontract for the construction and completion of LRT 3 from Bandar Utama to Johan Setia, Package GS09 — Guideway, Stations, Park and Ride, Ancillary Buildings and other associated works. The 26-month sub-contract brings the total contracts secured in 2019 to RM875.0 mln. (The Edge Daily)
  • Xin Hwa Holdings Bhd‘s external auditors, KPMG has revealed that the group’s funds were used to settle its Executive Directors’ personal expenses over the past two years. Thus, about three of eight allegations had some basis or were substantiated. The auditor found dividend payments from the group’s subsidiary was paid to a third party, instead of a registered shareholder, in order to settle personal debts on instruction from the registered shareholder.
  • In addition, the funds were also used to pay the Executive Director’s personal expenses with payments partially made out of directors fees and the balance recognised as debts owed by the directors to the company, that have been repaid. (The Edge Daily)
  • E.A Technique (M) Bhd has received a US$6.1 mln (RM25.4 mln) payment claim from Malaysia Marine Heavy Engineering Sdn Bhd (MMHE) over disputes regarding the non-payment of additional works performed by the latter, under the conversion contract signed in June 2015. (The Edge Daily)  

Source: Mplus Research - 12 Jun 2019

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