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Author: MalaccaSecurities   |   Latest post: Fri, 22 Feb 2019, 09:50 AM

 

Mplus Market Pulse - 22 Feb 2019

Author: MalaccaSecurities   |  Publish date: Fri, 22 Feb 2019, 09:50 AM


Toppish Conditions Could Prompt Pullback

  • The FBM KLCI clawed back earlier losses and closed higher in the final hour, on the back of extended buying-support in selected heavyweights. The FBM Small Cap, the FBM Fledgling and FBM Ace strengthened by 0.6%, 0.01% and 1.5% respectively, while the broader market was slightly bearish.
  • Market breadth remained positive as gainers continued to beat the losers on a ratio of 509-to-398 stocks. Traded volumes, however, inched 3.0% lower to 3.71 bln as investors lock-in profits amid global trade uncertainties.
  • Sustained buying-support in Nestle (+40.0 sen), Hong Leong Financial Group (+30.0 sen), Press Metal (+16.0 sen), Petronas Dagangan (+12.0 sen) and Tenaga Nasional (+12.0 sen) propped up the Main Board. Anchoring the gainers list on the broader market were Carlsberg (+RM1.18), BAT (+RM1.12), Dutch Lady (+76.0 sen), United Plantations (+74.0 sen) and Hengyuan Refining (+44.0 sen).
  • Among the biggest decliners were Fraser & Neave (-42.0 sen), KLCC (-18.0 sen), Chin Teck Plantations (-15.0 sen), Apollo Food (-13.0 sen) and Perusahaan Sadur Timah (-12.0 sen). Giant gloves manufacturers like Hartalega (-9.0 sen) and Top Glove (-7.0 sen) were among the key-index laggards, alongside IOI Corporation (-15.0 sen), Petronas Chemicals (-10.0 sen) and Public Bank (- 6.0 sen) after the banking heavyweight posted weaker-than-expected quarterly results.
  • Japanese stockmarkets eked-out gains as the Nikkei closed mostly flat, weighed down by weak manufacturing data, renewing fears of a widely-expected economic slowdown. The Hang Seng index, however, maintained its upside momentum on hopes of an end to the dragged-out trade war between the U.S. and China, while the Shanghai Composite fell by 0.3%. The majority of the ASEAN stocks ended up at Thursday’s closing bell.
  • Wall Street was painted red overnight, ending its consecutive days of wins as investors booked profits ahead of the U.S.’s trade negotiations with China in Washington. The Dow close 0.4% lower, while on the broader market, the S&P 500 (-0.4%) snapped its three-day gains, weighed down by losses in healthcare and energy stocks. The Nasdaq also lost 0.4% to closed slightly below the 7,460 psychological point.
  • The majority of the European blue-chip bourses closed higher, with the exception of the FTSE (-0.9%), on the back of disappointing corporate earnings reports and strengthening Pound. The CAC was flattish, while the DAX ended 0.2% higher despite a volatile session.

The Day Ahead

  • The intraday bouts of profit taking and the subsequent late afternoon that allowed the key index to make headway yesterday is pointing to an increasingly toppish market environment. As it is, the profit taking spells are already taking shape after the key index’s surge over the past few sessions.
  • Going into the final trading day of the week, we think that profit taking activities are likely to escalate, which is deemed healthy as the FBM KLCI’s technical indicators are already overbought. At the same time, the key index’s valuations have also inched closer to the expensive zone and we think that further gains are more difficult to come by as a result. With the downside looming, we see supports at the 1,725 and 1,720 levels coming into play, while the resistances are at 1,733 and 1,736 respectively.
  • Similarly, the lower liners are on an extended overbought streak and a consolidation spell is already overdue. We see profit taking activities taking hold over the near term as market players lock in some of their recent gains ahead of the weekend.

COMPANY BRIEF

  • AMMB Holdings Bhd's 3QFY19 net profit climbed 59.7% Y.o.Y to RM349.9 mln, boosted by higher lending volume, lower cost base and increase in recoveries. Revenue for the quarter increased 6.5% Y.o.Y to RM2.30 bln.
  • For 9MFY19, cumulative net profit rose 18.9% Y.o.Y to RM1.05 bln. Revenue for the period increased 6.6% Y.o.Y to RM6.78 bln. (The Star Online)
  • Sime Darby Bhd's 2QFY19 net profit gained 3.9% Y.o.Y to RM317.0 mln due to strong contribution from the group's industrial division. Revenue for the quarter rose 6.9% Y.o.Y to RM9.42 bln.
  • For 1HFY19, cumulative net profit fell 66.6% Y.o.Y to RM542.0 mln. Revenue for the period, however, climbed 7.7% Y.o.Y to RM18.30 bln. A first interim dividend of two sen per share, payable on 8th May 2019, was declared. (The Star Online)
  • Petron Malaysia Refining & Marketing Bhd’s 4Q2018 net loss stood at RM25.5 mln vs. a net profit RM99.6 mln recorded in the previous corresponding quarter, dragged down by decline in prices of finished products as crude price dropped towards the end of 2018 that resulted in inventory holding losses. Revenue for the quarter, however, rose 2.1% Y.o.Y to RM2.89 bln.  For 2018, cumulative net profit slipped 44.6% Y.o.Y to RM224.5 mln. Revenue for the year, however, gained 16.3% Y.o.Y to RM12.05 bln. (The Star Online)
  • AirAsia X Bhd’s (AAX) 4Q2018 net loss stood at RM99.3 mln vs. a net profit of RM84.4 mln recorded in the previous corresponding quarter, dragged down by increase in average fuel prices. Revenue for the quarter dropped 5.9% Y.o.Y to RM1.15 bln.
  • For 2018, cumulative net loss stood at RM312.7 mln vs. a net profit of RM98.9 mln in the previous year. Revenue for the year declined 0.4% Y.o.Y to RM4.54 bln. (The Edge Daily)
  • British American Tobacco (Malaysia) Bhd’s (BAT) 4Q2018 net profit rose 43.6% Y.o.Y to RM116.4 mln on higher sales. Revenue for the quarter climbed 12.5% Y.o.Y to RM770.6 mln.
  • Despite the stronger 4Q2018 results, the full-year net profit fell 4.9% Y.o.Y to RM468.5 mln. Revenue for the year declined 3.2% Y.o.Y to RM2.83 bln. A fourth interim dividend of 47.0 sen per share, payable on 19th March 2019, was declared. (The Edge Daily)
  • Pharmaniaga Bhd's 4Q2018 net profit plunged 79.5% Y.o.Y to RM4.4 mln mainly due to lower demand, coupled with higher finance costs. Revenue for the year fell 2.7% Y.o.Y at RM596.6 mln.
  • For 2018, cumulative net profit slipped 21.1% Y.o.Y to RM42.5 mln. Revenue for the year, however, rose 2.6% Y.o.Y to RM2.38 bln. It declared a fourth interim dividend of two sen per share to be paid on 10th April 2019. (The Edge Daily)
  • Allianz Malaysia Bhd’s 4Q2018 net profit rose 15.3% Y.o.Y to RM100.0 mln, mainly owing to an increase in general insurance contribution. Revenue for the quarter added 7.5% Y.o.Y to RM1.30 bln.
  • For 2018, cumulative net profit gained 30.9% Y.o.Y to RM377.0 mln, while revenue climbed 7.9% Y.o.Y to RM5.18 bln. An interim dividend of 40 sen per share plus an interim dividend of 48 sen per irredeemable convertible preference share was declared. (The Edge Daily)  

Source: Mplus Research - 22 Feb 2019

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M+ Online Technical Focus - 22 Feb 2019

Author: MalaccaSecurities   |  Publish date: Fri, 22 Feb 2019, 09:21 AM


The FBM KLCI managed to recover all its intraday losses to trend higher for the third straight session as the key index closed at around the 1,730.68 level yesterday. The MACD Histogram has extended another green bar, but the RSI is overbought. Resistances will be pegged around the 1,740-1,750 levels. Support will be set around the 1,710 level.

NOTION has advanced to breakout above the RM0.67 level with high volumes. The MACD Indicator has issued a BUY Signal, while the RSI remains above 50. Price may stage a mild pullback, before targeting the RM0.725 and RM0.755 levels. Support will be set around the RM0.615 level.

AWC has formed a breakout-pullback-continuation pattern to close above the EMA120 level with rising volumes. The MACD Histogram has extended another green bar, while the RSI remains above 50. Price may trend higher towards the RM0.82-RM0.865 levels. Support will be anchored around the RM0.685 level.

BAHVEST has formed a breakout-pullback-continuation pattern above the EMA9 level with high volumes. The MACD Histogram has turned green, but the RSI is slightly overbought. Price may advance, targeting the RM0.55-RM0.59 levels. Support will be pegged around the RM0.48 level.

Source: Mplus Research - 22 Feb 2019

Labels: NOTION, AWC, BAHVEST
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Mplus Market Pulse - 21 Feb 2019

Author: MalaccaSecurities   |  Publish date: Thu, 21 Feb 2019, 10:24 AM


Still Gaining, But Already Toppish

  • The FBM KLCI powered higher again, following optimism from the possible reinstatement of the East Coast Rail Link (ECRL) project with China. All the lower liners - FBM Small Cap (+1.8%), FBM Fledgling (+0.8%) and FBM Ace (+0.8%) rallied, while the Construction (+3.9%) and the Energy (+3.3%) sectors outperformed the rest of the broader market constituents.
  • Market breadth was bullish as advancers dominated the decliners on a ratio of 724-to-252 stocks, while traded volumes also jumped 36.2% to 3.82 bln amid hopes of a recovery in the construction sector.
  • Key-index charttoppers were Nestle (+RM1.50), PPB Group (+60.0 sen), Genting (+31.0 sen), Kuala Lumpur Kepong (+30.0 sen) and Petronas Dagangan (+30.0 sen). Meanwhile, notable winners include sin stocks like BAT (+88.0 sen), Carlsberg (+60.0 sen) and Heineken Malaysia (+26.0 sen), followed by Fraser & Neave (+90.0 sen) and Hengyuan Refining (+29.0 sen).
  • On the opposite side of the trade, Dutch Lady (-36.0 sen), Genting Plantations (- 10.0 sen), Rapid Synergy (-10.0 sen), Bintulu Port (-7.0 sen) and Formosa Prosonic Industries (-7.0 sen) were the big losers. The only loser on Bursa Malaysia, meanwhile, was Hartalega (-2.0 sen) as it faces rising costs and increasing competition.
  • Asian equities traded higher on Wednesday – led by renewed expectations of a short-term tariff delay as the U.S. and China irons out a longerterm trade agreement. The Nikkei pushed forward after notching 0.6% gains, despite weaker-than-expected export data. The Shanghai Composite also ekedout 0.2% gain after swinging in and out of the negative territory, together with the Hang Seng index (+1.0%), while ASEAN stocks closed mostly higher.
  • Major U.S. indexes – The Dow (+0.2%), the S&P 500 (+0.2%) and the Nasdaq moved incrementally higher as investors digested the latest round of earnings reports and the minutes from the Federal Reserve’s last meeting.
  • London markets rallied on Wednesday as news of major share buybacks by Lloyds and Glencore softened the blow from weak earnings performance. The FTSE added 0.7%, although the run-up was limited by losses in Sainsbury after U.K.’s regulators hinted at the possibility of blocking its merger with its competitor Asda Group. The proposed merger could create the largest supermarket group in Britain and thus, poses significant anticompetition risks. The DAX and the CAC also added 0.8% and 0.7% respectively amid stronger commodity prices.

The Day Ahead

  • Stocks on Bursa Malaysia continues to head higher amid the sustained buying of index linked stocks as they play catch up to the regional equities gains. However, the past two session’s gains have left the key index overbought. At the same time, valuations are also inching closer above its long term average that could place it in the expensive zone.
  • With few negative market and economic developments, we see further near term upsides albeit the gains could be limited amid the already toppish market environment. This could set the stage for some mild profit taking actions that will limit the upsides to the 1,730-1,733 levels. On the downside, there is support at the 1,720 level, followed by the 1,711 level.  The lower liners and broader market shares are also lingering in the oversold region with a pullback already due. However, the current market strength could extend their upsides for longer, albeit we think that the gains could be capped as profit taking activities are likely to pick up pace.

Company Update

  • Teo Seng Capital Bhd’s 4Q2018 net profit added 19.3% Y.o.Y to RM17.3 mln, mainly boosted by the sharp increase in the average selling prices (ASP) of chicken eggs, coupled with the lower feed cost. Revenue for the quarter gained 26.3% Y.o.Y to RM147.2 mln. For 2018, cumulative net profit skyrocketed 777.5% Y.o.Y RM30.4 mln. Revenue for the period climbed 16.0% Y.o.Y to RM490.3 mln.
  • The reported results came above expectations, making up to 160.7% of our previous estimated net profit estimate of RM18.9 mln. The reported revenue also came above our expectations, amounting to 107.9% of our full-year forecast of RM454.2 mln. The variance in the bottom line was mainly due to the surge in average selling prices of chicken eggs which led to the higher margins.

Comments

  • With the reported earnings coming above our expectations, we raised our net profit forecast by 23.1% and 19.4% to RM34.3 mln and RM37.7 mln for 2019 and 2020 respectively, reflecting the sharp increase in the ASP of chicken eggs. However, we downgrade Teo Seng to HOLD (from BUY), but with a higher target price of RM1.45 (from RM1.05) as we reckon that current valuations, trading at PERs of 11.5x and 10.5x for 2019 and 2020 respectively, are already close to fair after its share price rallied 36.8% year-todate.
  • We arrive our target price by ascribing a target PER of 12.5x (unchanged) to its revised 2019 EPS of 11.4 sen. The ascribed target PER is at a 25.0% discount to its peer average of 16.5x, due to its smaller market capitalisation.

COMPANY BRIEF

  • Matrix Concepts Holdings Bhd’s 3QFY19 net profit slipped 31.1% Y.o.Y to RM48.6 mln, dragged down by product mix that yielded a lower margin. Revenue for the quarter, however, rose 7.3% Y.o.Y to RM285.7 mln.
  • For 9MFY19, cumulative net profit fell 9.7% Y.o.Y to RM151.7 mln. Revenue for the period, however, grew 19.8% Y.o.Y to RM769.0 mln. (The Star Online)
  • Ahmad Zaki Resources Bhd has bagged a RM150.5 mln contract from Rantau Properties Sdn Bhd. The contract is for refurbishment and upgrading works to the existing Petronas office complex (Block A) and Kompleks Operasi Petronas 1 (Block B) and construction and completion of new annex building (Block C), infrastructure and landscaping works on part of Lot 52271 and 52272 in Kemaman, Terengganu. The contract works shall be completed within 26 months from the date for possession of site on 1st March 2019. (The Star Online)
  • Ranhill Holdings Bhd has announced that it intends to partner with Thai-based Treasure Specialty Co Ltd (TS Co) to export electricity from Kedah to Thailand. The two companies are working out a proposal for a 1,150 MW combined cycle gas turbine (CCGT) power plant in Kedah. TS Co is currently the advisor to Ranhill’s water businesses in Thailand and will be its joint developer and co-investor in Ranhill’s new water concessions in Thailand. (The Edge Daily)
  • Public Bank Bhd's 4Q2018 net profit fell 5.4% Y.o.Y to RM1.41 bln, as the group incurred higher other operating expenses and higher non-operational foreign exchange loss during the period. Revenue for the quarter gained 5.2% Y.o.Y to RM5.63 bln.
  • For 2018, cumulative net profit added 2.2% Y.o.Y to RM5.59 bln. Revenue for the year climbed 5.7% Y.o.Y to RM22.04 bln. (The Edge Daily)
  • Heineken Malaysia Bhd's 4Q2018 net profit grew 6.8% Y.o.Y to RM100.0 mln, boosted by to higher revenue and efficient and effective management of commercial spend and overheads. Revenue for the quarter added 12.3% Y.o.Y to RM662.3 mln.
  • For 2018, cumulative net profit gained 4.6% Y.o.Y to RM282.5 mln. Revenue for the year increased 8.3% Y.o.Y to RM2.03 bln. (The Edge Daily)
  • MSM Malaysia Holdings Bhd’s 4Q2018 net loss stood at RM10.4 mln vs. a net profit of RM9.3 mln recorded in the previous corresponding quarter on lower average selling price and higher finance cost. Revenue for the quarter contracted 16.4% Y.o.Y to RM531.1 mln.
  • For 2018, cumulative net profit stood at RM35.6 mln vs. a net loss of RM36.3 mln in the previous year. Revenue for the year, however, fell 16.1% Y.o.Y RM2.22 bln. (The Edge Daily)
  • IOI Corp Bhd's 2QFY19 net profit sank 67.2% Y.o.Y to RM195.5 mln, dragged down by lower contribution from the plantation segment, coupled with net foreign currency translation loss on its foreign-currency denominated borrowings and deposits. Revenue for the quarter slipped 6.4% Y.o.Y to RM1.88 bln.
  • For 1HFY19, cumulative net profit slipped 64.5% Y.o.Y to RM339.3 mln. Revenue for the quarter declined 3.1% Y.o.Y to RM3.76 bln. A first interim dividend of 3.5 sen, payable on 22nd March 2019, was declared. (The Edge Daily)
  • D&O Green Technologies Bhd’s 4Q2018 net profit improved 77.7% Y.o.Y to RM12.3 mln, on the back of higher revenue and better gross profit margins. Revenue for the quarter rose 6.1% Y.o.Y to RM140.6 mln.
  • For 2018, cumulative net profit gained 60.8% Y.o.Y to RM36.0 mln. Revenue for the year increased 5.9% Y.o.Y to RM490.8 mln. (The Edge Daily)
  • Favelle Favco Bhd have secured six contracts to supply tower cranes and offshore cranes to various clients for a cumulative sum of RM61.1 mln. Its units, Favelle Favco Cranes Pty Ltd, Favelle Favco Cranes (USA), Inc and Favelle Favco Cranes (M) Sdn Bhd received the purchase orders or letter of intent for the contracts from the period of 1st November 2018 till 20th February 2019. (The Edge Daily)  

Source: Mplus Research - 21 Feb 2019

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Teo Seng Capital Bhd - ASPs To Stay Firm

Author: MalaccaSecurities   |  Publish date: Thu, 21 Feb 2019, 10:22 AM


Results Highlights

  • Teo Seng’s 4Q2018 net profit added 19.3% Y.o.Y to RM17.3 mln, mainly boosted by the sharp increase in the average selling prices (ASP) of chicken eggs, coupled with the lower feed cost. Revenue for the quarter gained 26.3% Y.o.Y to RM147.2 mln. For 2018, cumulative net profit skyrocketed 777.5% Y.o.Y RM30.4 mln. Revenue for the period climbed 16.0% Y.o.Y to RM490.3 mln.
  • The reported results came above expectations, making up to 160.7% of our previous net profit estimate of RM18.9 mln. The reported revenue also came above our expectations, amounting to 107.9% of our full-year forecast of RM454.2 mln. The variance in the bottom line was mainly due to the surge in average selling prices of chicken eggs which led to the higher margins.
  • Segment wise in 4Q2018, the poultry farming segment’s pretax profit jumped 83.6% Y.o.Y to RM20.56 mln, boosted by improved chicken egg ASPs, higher sales quantity and lower feed cost. The trading segment’s pretax profit improved 74.6 Y.o.Y to RM4.2 mln on higher demand for animal health products.
  • As of 4Q2018, Teo Seng’s gearing is reduced to 63.0% (from 67.4% recorded in 3Q2018). Moving forward, we expect Teo Seng’s gearing level to remain above the 50.0% level as the group continues to hinge on external funding for its long-term expansion plans, targeting production of 5.0 mln eggs per day by 2022. A second interim dividend of 2.5 sen per share, payable on 25th April 2019, was declared.

Prospects

Chicken egg prices trended higher in 4Q2018, (see Appendix 1) as a result of: (i) rising demand for chicken eggs on the back of year-end festive seasons, (ii) rising chicken feed cost as the Ringgit remains downbeat against the Greenback, (iii) decline in Malaysia’s egg supply by approximately 3.0% in December 2018 due to the possible outbreak of avian flu in northern Malaysia, and (iv) closure of smaller farms that were unable to cope with the rising production costs due to the lack of economics of scale.

Teo Seng’s egg production rose to average of approximately 3.9 mln eggs per day in 4Q2018 (from an average of 3.7 mln eggs per day in 3Q2018). This is line with the group’s objective in ramping up its chicken egg production, targeting a daily production of 5.0 mln eggs by end-2022. Moving forward, we reckon that the rally in chicken eggs prices are likely to taper moving into 1H2019 as the recent appreciation of Ringgit will lower imported feed costs.

The group’s major production cost, soybean prices was fairly stable in 4Q2018, averaging at RM36.61 per bushel (+3.7% Q.o.Q) as the trade spat between the U.S. and China remained unabated. Maize prices, however, soared in 4Q2018, averaging at RM737.17 per tonne (+13.5% Q.o.Q) due to infestation of the dreaded pest Fall Army Worm (FAW), coupled with prolonged drought in key producing areas South Africa (see Appendix 2).

Moving forward, we expect soybean prices to remain fairly stable, trading below RM40.00 per bushel, whilst Maize prices are expected to remain on the upper band over the near term, above RM700.00 per metric tonne for the remainder of 2019 as the recent supply shortage remains in play.

Valuation And Recommendation

We continue to like Teo Seng as one of the largest vertically integrated chicken egg player, backed by its gradual production expansion plans. Although, we expect the recent recovery in chicken eggs prices to taper, we expect the pullback to be mild over the foreseeable future as the demand-supply condition remains well-balanced.

With the reported earnings coming above our expectations, we raised our net profit forecast by 23.1% and 19.4% to RM34.3 mln and RM37.7 mln for 2019 and 2020 respectively, reflecting the sharp increase in the ASP of chicken eggs. However, we downgrade Teo Seng to HOLD (from BUY), but with a higher target price of RM1.45 (from RM1.05) as we reckon that current valuations, trading at PERs of 11.5x and 10.5x for 2019 and 2020 respectively are already close to fair after its share price rallied 36.8% year-to-date.

We arrive our target price by ascribing a target PER of 12.5x (unchanged) to its revised 2019 EPS of 11.4 sen. The ascribed target PER remains at a 25.0% discount to its peer average of 16.5x, due to its smaller market capitalisation.

Risks to our recommendation include avian influenza outbreak – a viral infection that can infect not only birds, but also humans and other animals. Chicken feed (mainly soybean and maize) makes up 70% of its feed cost. Stronger commodity prices (soybean and maize) will negatively impact its margins and vice versa. A firmer Ringgit against the U.S. Dollar could also affect the group’s bottom line as a recovery in the local currency against the Greenback will have a positive impact on the group’s earnings and vice versa, as the commodity purchases are denominated in U.S. Dollars.

Source: Mplus Research - 21 Feb 2019

Labels: TEOSENG
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M+ Online Technical Focus - 20 Feb 2019

Author: MalaccaSecurities   |  Publish date: Wed, 20 Feb 2019, 03:23 PM


The FBM KLCI recorded its biggest daily gain year-to-date after breaching above the 1,700 psychological level as the key index closed at around the 1,706.56 level yesterday. The MACD Indicator has issued a BUY Signal, while the RSI has risen above 50. Resistances will be pegged around the 1,720-1,730 levels. Support will be set around the 1,690 level.

JHM has experienced a breakout above the RM1.08 level with high volumes. The MACD Line has expanded positively above the zero level, but the RSI is overbought. Price may stage a mild pullback, before targeting the RM1.20 and RM1.28 levels. Support will be set around the RM1.00 level.

EWINT has experienced a breakout above the RM0.795 level with improved volumes. The MACD Histogram has turned green, while the RSI remains above 50. Price may advance towards the RM0.85- RM0.895 levels. Support will be anchored around the RM0.74 level.

TGUAN has gapped-up to close above the EMA20 level with high volumes. The MACD Histogram has turned green, but the RSI remains below 50. Monitor for a trendline breakout above the RM2.38 level, targeting the RM2.60-RM2.71 levels. Support will be pegged around the RM2.27 level.

Source: Mplus Research - 20 Feb 2019

Labels: JHM, EWINT, TGUAN
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Mplus Market Pulse - 20 Feb 2019

Author: MalaccaSecurities   |  Publish date: Wed, 20 Feb 2019, 09:25 AM


Surprise Breakout, Looks To Head Higher

  • The FBM KLCI extended its gains for the second consecutive session, mainly due to the strong rally in Petronas Chemicals. The lower liners maintained its upward momentum – led by the FBM Small Cap (+0.7%), while the broader market closed positively, with all of its twelve sectors in the green.
  • Market breadth was bullish with 517 winners against 385 losers, while traded volumes was flattish at 2.81 bln (+2.0%) shares due to the lack of trading catalysts.
  • On the FBM KLCI, key winners include Petronas Chemicals (+33.0 sen), Tenaga Nasional (+32.0 sen), Kuala Lumpur Kepong (+26.0 sen), Hong Leong Bank (+18.0 sen) and Top Glove (+15.0 sen). Significant advancers on the broader market were Heineken Malaysia (+60.0 sen), Dutch Lady (+58.0 sen), Hong Leong Industries (+28.0 sen), Fraser & Neave (+24.0 sen) and MI Technovation (+22.0 sen).
  • In contrast, BAT (-98.0 sen), Aeon Credit (-38.0 sen), Southern Acids (-10.0 sen) and DKLS Industries (-9.0 sen) topped the broader market decliners list, alongside Guan Chong (-15.0 sen) following its cash call proposal. Meanwhile, Nestle (-30.0 sen), Press Metal (-6.0 sen), Maxis (-5.0 sen), Petronas Dagangan (-4.0 sen) and Dialog (-3.0 sen) were the biggest losers on the local bourse.
  • Japanese shares rose on Tuesday – mostly on gains in defensive stocks as investors turned cautious amid the ongoing U.S.-China trade talks. The Nikkei gained 0.1% but its regional peers like the Hang Seng index (-0.4%) and the Shanghai Composite (+0.1%) remained pressured by slowing economic growth in China.  Main U.S. indices posted marginal gains after a volatile session, owing to the gains in retailers while investors monitor the FOMC minutes due Wednesday. The S&P 500 rose 0.2%, boosted by Walmart following stronger-than-expected quarterly earnings, while the Nasdaq closed higher for the seventh-day running. The Dow also eked out gains on Tuesday’s close.
  • Earlier, European stocks were mainly downward pressured, weighed down by the weakness in HSBC due to disappointing earnings performance. The FTSE was 0.6% lower as London remains shrouded in Brexit woes, on top of soft wages data and a stronger Pound. The CAC (-0.2%) also retreated, although the DAX beat the regional trend and closed slightly higher.

The Day Ahead

  • The FBM KLCI performed better-thananticipated yesterday after renewed buying on selective index linked stocks lifted it past the 1,700 points level. While we continue to think that the gains were largely superficial and not on fundamental gains, we think that key index is attempting to build up momentum to break out of its rangebound trend over the past two months.
  • The breakout of the 1,700 points level could signal further gains ahead, albeit on a cautious note, as market players also react to the prospects of a trade agreement between the U.S. and China, albeit there remains no significant change to Malaysia’s equity market fundamentals.
  • Nevertheless, we see construction and construction related stocks poised for a positive response to the potential revival of the East Coast Rail Link after the government said that the project could be revived and built at a lower cost. In the interim, the FBM KLCI is likely to face hurdles at the 1,708 and 1,718 levels, while the 1,700 points level will serve as the main support for now, followed by the 1,693 level.
  • The lower liners and broader market shares, meanwhile, are still looking toppish after their gains over the past two months. Hence, we continue to think that their upsides will be limited as fresh buying is likely to wane.

COMPANY BRIEF

  • Sunway Construction Group Bhd has secured a RM781.3 mln contract from Tenaga Nasional Bhd for the power giant's phase two of the headquarters campus development in Bangsar. The project is for 26 months from the date of commencement which will be determined by the parties. This latest award increased SunCon’s outstanding order book to RM6.00 bln. (The Star Online)
  • Boustead Holdings Bhd is disposing its Royale Chulan Bukit Bintang Hotel business to Singapore-based Hotel Royal Ltd for RM197.0 mln. As part of the terms, Hotel Royal is granted an exclusivity period of one month to conduct a due diligence on the hotel. (The Edge Daily)
  • Hup Seng Industries Bhd’s 4Q2018 net profit fell 11.4% Y.o.Y to RM12.7 mln as a result of higher cost of sales and weaker margins. Revenue for the quarter declined marginally by 0.4% Y.o.Y to RM85.9 mln.
  • For 2018, cumulative net profit slipped 3.4% Y.o.Y to RM43.0 mln. Revenue for the year, however, rose 2.6% Y.o.Y to RM307.4 mln. (The Edge Daily)
  • Asia Brands Bhd has aborted its plan to undertake a private placement exercise, which would have seen it issuing up to 20.0% of its enlarged share capital to new investors to raise RM23.3 mln. It will not proceed with the implementation of the private placement as the company had achieved its objective to raise funds from the rights issue for the repayment of the Islamic Medium Term Notes (Tranche 1, Series 3) of RM40.0 mln due on 18th March 2019. (The Edge Daily)
  • Hibiscus Petroleum Bhd's 2QFY19 net profit soared 353.9% Y.o.Y to RM50.1 mln, on additional contribution from its recently-acquired North Sabah assets and higher production efficiency at its Anasuria Cluster in the UK. Revenue for the quarter jumped 117.1% Y.o.Y to RM165.2 mln.
  • For 1HFY19, cumulative net profit surged 587.6% Y.o.Y to RM150.1 mln. Revenue for the period expanded 291.0% Y.o.Y to RM525.1 mln. (The Edge Daily)
  • Pesona Metro Holdings Bhd has bagged a contract worth RM408.8 mln from Malaysian Resources Corp Bhd (MRCB) for superstructure works for a mixed development in Seksyen 98.
  • Separately, it said its Pembinaan KaleighPesona Metro joint venture (JV) has mutually terminated another project worth RM371.4 mln in relation to the civil works for Section 6 of the Kapar Interchange to Asam Jawa Interchange of the privatisation of the West Coast Expressway.
  • The termination comes with a settlement sum of RM7.2 mln payable by the main contractor — Konsortium Kontraktor Sdn Bhd-Pembinaan Kaliegh JV to the Pembinaan Kaleigh-Pesona Metro JV. (The Edge Daily)
  • KPJ Healthcare Bhd’s 4Q2018 net profit fell 12.5% Y.o.Y to RM53.3 mln due to higher effective tax rate and losses from the discontinued Australian operations. Revenue for the quarter, however, rose 3.6% Y.o.Y to RM863.4 mln.
  • For 2018, cumulative net profit climbed 10.8% Y.o.Y to RM179.4 mln. Revenue for the year added 4.0% Y.o.Y to RM3.31 bln. (The Edge Daily)
  • GHL Systems Bhd has entered into a merchants and aggregator transaction acceptance agreement with Bank Negara Indonesia (BNI). The agreement will enable GHL Indonesia to manage merchant transactions and allow them to receive electronic payments through EDC terminals (electronic data capture), QR (mobile payments), mPOS (mobile sales points) or other acceptance methods as determined by both parties. (The Edge Daily)
  • WCE Holdings Bhd’s 3QFY19 net profit grew 7.4% Y.o.Y to RM10.3 mln on lower taxation. Revenue for the quarter, however, fell 19.9% Y.o.Y to RM123.3 mln.
  • For 9MFY19, cumulative net profit fell 21.7% Y.o.Y to RM21.7 mln. Revenue for the period declined 9.2% Y.o.Y to RM493.1 mln. (The Edge Daily)  

Source: Mplus Research - 20 Feb 2019

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