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Author: MalaccaSecurities   |   Latest post: Fri, 7 Aug 2020, 12:16 PM

 

Mplus Market Pulse - 7 Aug 2020

Author: MalaccaSecurities   |  Publish date: Fri, 7 Aug 2020, 12:16 PM


Recovery in place

Market Review

Malaysia: Tracking the gains on Wall Street overnight, coupled with the higher crude oil prices, the FBM KLCI (+1.3%) recovered all its intraday losses after hovering in the positive territory for the entire trading session yesterday. The lower liners remain upbeat, while profit taking sent the healthcare sector (-0.2%) to underperformed the positive broader market.

Global markets: : US stockmarkets extended their gains overnight as the Dow added 0.7% to mark its fifth straight session of winning streak buoyed by betterthan-expected jobless claims at 1.2m last week vs. consensus forecast of 1.4m. European stockmarkets retreated after Bank of England warned of a slow progress in economic recovery towards pre-Covid-19 levels, while Asia equities ended mixed

The Day Ahead

We see the liquidity driven market with trading volumes at fresh new high to play a key role for further upside on stocks across Bursa Malaysia. Sentiment is also driven by the Ringgit that rose to 5-months high against the Greenback alongside with the higher crude oil prices. At the same time, investors will be keeping an eye on Malaysia’s unemployment rate as a gauge to the economic performance.

Sector focus: We see healthcare-related stocks continue to soar while safe-haven asset-related stocks on course for further upside. The stabilising CPO prices above RM2,700/MT may garner some trading interests within the planation sector play on rising demand from Middle East and Africa.

The FBM KLCI has formed another hammer candle after recovering most of its intraday losses yesterday. With the lack of follow-through buying support, we continue to see the 1,600 as the immediate resistance, followed by 1,615. The immediate support remains pegged at 1,560, followed by 1,530. Indicators are still weak with the MACD Histogram extended another red bar and remains below the Signal Line, while the RSI is slightly above 50.

Company Brief

Anzo Holdings Bhd managing director Datuk Chai Woon Chet has made an unconditional mandatory takeover offer (MTO) for restaurant owner Oversea Enterprise Bhd after acquiring 63.4% of the company, comprising 151.3m shares, for RM45.4m or 30 sen a share. (The Star)

AEON Co (M) Bhd's RM142.0m court case levied by Mega Continental Sdn Bhd has been set aside, with judgement in relation to its alleged failure to perform an obligation under a lease agreement with Mega Continental in Alor Setar. The company will be undertaking legal actions against Mega Continental for the loss of income, reputation and unnecessary inconvenience caused to its customers, people and partners. (The Edge)

Advancecon Holdings Bhd inked a memorandum of understanding (MoU) with hypermarket operator Mydin Mohamed Holdings Bhd to develop a 2,344.3kWp rooftop solar power system to be installed at the latter's outlet in Bandar Seremban Utama, Negeri Sembilan. Advancecon will develop the solar photovoltaic system throughout the terms of a supply agreement with renewable energy (SARE) among Mydin, Advancecon Solar and Tenaga Nasional Bhd, with ownership, operation and maintenance of the system to be transferred to Mydin after the expiration of the SARE terms. (The Edge)

Hock Seng Lee Bhd's 2QFY20 net profit dropped 76.0% YoY to RM4.0m, attributed to the height of the Movement Control Order. Revenue shrank to RM83.05 m, from RM175.41 m. (The Edge)

Gas Malaysia Bhd's unit has established Islamic medium-term note (IMTN) and Islamic Commercial Paper (ICP) programmes. Both programmes have a nominal value of RM1.00b each and have a combined issuance limit of up to RM1.00b under the Shariah principle of Muharabah. The IMTN have tenure of 15 years and ICP lasting seven years. (The Edge)

JAG Bhd inked a lease agreement with RH Silver Sdn Bhd to lease 45.3-ha. of land in Manjung in order to bid for the LSS@MEnTARI programme (Large Scale Solar) for a proposed capacity of up to 29MWac. The power plants under the scheme are expected to be operational by end-2023, with the development of each plant taking up to 18 months. JAG is to lease the land for 23 years, including a renewal term of 10 years or a period it agrees upon with RH Silver. (The Edge)

Source: Mplus Research - 7 Aug 2020

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Serba Dinamik Holdings Berhad - Exceeding expectations

Author: MalaccaSecurities   |  Publish date: Fri, 7 Aug 2020, 12:15 PM


Summary

  • Serba Dinamik Holdings Bhd has received and accepted a letter of award from Future Digital Data Systems L.L.C (FDDS) to undertake the engineering, procurement, construction and completion of a data centre and its related facilities, infrastructure, and landscaping. The project shall be built at Mussaffah, Abu Dhabi and will be a master plan for total information technology (IT) with capacity of 20MW that can host mission critical systems and provide co-location services, business continuity and managed services facilities.
  • The contract price including taxes is a fixed lump sum price of approximately US$350.0m (approximately RM1.47bn) will be built by several phases – Phase 1A valued at U$$155.0m, Phase 1B valued at US$45.0m, Phase 2A valued at US$105.0m and Phase 2B valued at US$45.0m. The total duration of the contract is for 4 years. We reckon that the abovementioned project will yield gross margins around 15%, translating to a potential gross profit of >RM200.0m.
  • We are upbeat on the abovementioned contract secured and will strengthen the group’s outstanding orderbook to approximately RM18.50bn, providing earnings visibility till 2026. Breakdown of the existing orderbook; 50.0% from EPCC, 40% from O&M and 10% from ICT.  
  • The latest win deciphers Serba Dinamik efforts on diversification into other income stream apart from their bread and butter business. Assuming a burn rate of approximately RM2.30bn for the remainder of the year, the group outstanding orderbook by end-2020 will come at approximately RM16.20bn which exceeded our expectations of RM15.00bn. Moving forward, we reckon that the oil & gas business segment will still anchor the topline, contributing >70.0% of total revenue in both FY20 and FY21 respectively.

Valuation & Recommendation

  • We raised earnings forecast by 1.0% and 8.8% to RM532.6m and RM591.4m for FY20f and FY21f respectively to account for the stronger-than-expected orderbook replenishment. Consequently we maintain our BUY recommendation on Serba Dinamik with a higher target price RM2.27 (from RM2.09). Our target price is derived by ascribing an unchanged target PER of 13.0x to its revised FY21 EPS of 17.5 sen.
  • We continue to like Serba Dinamik as one of the key players in the oil & gas industry, backed by its sturdy orderbook comprising of dozens of jobs from local and overseas that will provide long-term earnings visibility, coupled with the group’s ongoing effort diversification into businesses that generates recurring income.
  • Risks to our recommendation include failure to hit the targeted outstanding orderbook of RM16.20bn by end-FY20. A firmer ringgit against the USD could affect the group’s bottom line as it will have a negative impact on the group’s earnings and vice versa with majority of existing orderbook derived from overseas.

 

Source: Mplus Research - 7 Aug 2020

Labels: SERBADK
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Mplus Market Pulse - 6 Aug 2020

Author: MalaccaSecurities   |  Publish date: Thu, 6 Aug 2020, 11:52 AM


Lower liners in focus

Market Review

Malaysia: The FBM KLCI (-0.5%) edged down yesterday, dampened mostly by HAPSENG (-3.8%) with two third of the key index components in the red. However, the lower liners continued to rise, while the broader market finished mostly positive, with the exception of the financial (-0.2%) and plantation (-0.7%) sector. On a side note, jewellery counters shine on the back of the record high gold price.

Global markets: US stockmarkets rallied overnight as the Dow jumped 1.4% to close above the 27,000 psychological level on optimism over the Democrats and Republicans will be able to ink the second stimulus bill by end of this week. European stockmarkets also advanced, while Asia equities closed mostly higher.

The Day Ahead

Although the local bourse remained under pressured, the lower liners may continue with their ascending move. We continue to think that the liquidity driven market with trading volumes at fresh record high again may provide further impetus to the lower liners over the near term. Additionally, the positive momentum from Wall Street overnight may permeates into stocks across Bursa Malaysia.

Sector focus: As the US Dollar continues to depreciate against a basket of currencies, coupled with the gold prices staying above US$2,000 level may provide further leeway for gold-related players to march higher. Meanwhile, the Brent oil prices that closed at 5-months high may trigger interests within the energy sector. At the same time, the healthcare and technology sector will remain as the clear frontrunners owing to the robust demand.

The FBM KLCI has formed another hammer candle after recovering most of its intraday losses yesterday. With the lack of follow-through buying support, we continue to see the 1,600 as the immediate resistance, followed by 1,615. The immediate support remains pegged at 1,560, followed by 1,530. Indicators are still weak with the MACD Histogram extended another red bar and remains below the Signal Line, while the RSI is slightly above 50.

Company Brief

Green Ocean Corp Bhd’s proposed private placement of up to 10.0% of its issued shares or 29.0m new shares at 18.5 sen each has lapsed as payment conditions have not been met. The issue price of the placement shares will be re-determined and re-fixed by the board at a later date after all the regulatory approvals had been obtained. (The Star)

Datasonic Group Bhd has proposed a bonus share issue of one share for every existing share, involving up to 2.18bn new shares. (The Edge)

Top Glove Corp Bhd executive chairman Tan Sri Dr Lim Wee Chai claimed that old issues involving forced labour allegations against the company arose lately, due to the work of an activist who intended to “sabotage” the group. Top Glove is trying to find a solution to the matter and the company needs to explain the matter to the US Customs and Border Protection (CBP). The group expects to solve the issue within this month. (The Edge)

KLCC Stapled Group's 2QFY20 net profit fell 22.7% YoY to RM140.5m, due to a sharp decline in the performance of its hotel and retail segments following the implementation of the Movement Control Order (MCO). Revenue for the quarter fell 23.9% to RM267.2m. A second interim income distribution of 7.5 sen per stapled security was declared. (The Edge)

MMAG Holdings Bhd has sold its entire 29.9% stake in MSCM Holdings Bhd to Penang's Hong Seng Group for RM18.1m, and also has sold 75.2m MSCM warrants to another private company, Landasan Simfoni Sdn Bhd, for RM0.8m. (The Edge)

UMW Holdings Bhd’s UMW Toyota Motor sold 7,509 vehicles in July 2020, constituting a YTD high, up 70.0% MoM from the 4,417 units registered in June 2020 due to the sales tax exemption on locally-assembled cars from 15th June 2020 to 31st December 2020. Its 38.0%-owned associate Perodua also noted that July had recorded the highest monthly sales year with 23,303 vehicles, up 9.2% MoM from 21,250 units sold in June. (The Edge)

Caely Holdings Bhd's substantial shareholder Ni Hsin Resources Bhd has disposed of its entire 7.2m shares or 4.3% stake in the former for RM4.4m, with an expected gain of RM0.8m, which will be put towards working capital purposes. Ni Hsin’s total investment cost in Caely from 2017 to 3rd August 2020, stood at RM7.1m. (The Edge)

The trading of Pasdec Holdings Bhd's securities may be suspended from Monday 10th August 2020, if the company does not submit its outstanding 2019 annual report on or before 7th August 2020. (The Edge)

The trading of Oversea Enterprise Bhd’s securities will be suspended today from 9.00am until 5.00pm, pending a material announcement. (The Edge)

 

Source: Mplus Research - 6 Aug 2020

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Mplus Market Pulse - 5 Aug 2020

Author: MalaccaSecurities   |  Publish date: Wed, 5 Aug 2020, 11:14 AM


Market Review

Malaysia: The FBM KLCI (+0.2%) managed to recover its intraday losses mainly spurred by the second trading session gains in Top Glove (5.5%) yesterday. The lower liners marched higher, while the broader market closed mixed with healthcare (+4.8%) and technology (+3.3%) sectors continue to outperform on the back of expectation of worsening pandemic and technology fuelled rally in US.

Global markets: US stockmarkets climbed as the Dow gained 0.6% mainly driven by Apple, coupled with the ongoing negotiation on the stimulus package offsetting the rising US-China tension. European stockmarkets edged higher following the release of July Eurozone PMI, signalling a stronger-than-expected recovery. Asia stockmarkets finished mostly higher driven by gains in tech stocks.

The Day Ahead

Expectedly, market sentiment was stabilised by the bargain hunting activities in selected index heavyweights yesterday. Still, investors are wary ahead of the upcoming batch of quarterly earnings results that kicked off this week. Elsewhere, we see rotational play amongst the lower liners to dominate the market sentiment with trading volumes rising to fresh record high again.

Sector focus: While we reckon that the technology and healthcare sector will continue their upbeat momentum, commodity players under the plantation and energy sector may share some spotlight with CPO prices rising towards RM2,800/MT, while crude oil prices hovers near 5-months high. The breakthrough of US$2,000 on gold prices may also see gold-related players on the move.

FBMKLCI Technical Outlook

The FBM KLCI has formed a hammer candle after recovering all its intraday losses, suggesting for a potential recovery from the two-day pullback. A strong recovery, however, remains premature with 1,600 serving as the immediate resistance, followed by 1,615. The immediate support remains pegged at 1,560, followed by 1,530. Indicators are still weak with the MACD Histogram extended another red bar and remains below the Signal Line, while the RSI is slightly above 50

Market Scorecard

Source: Mplus Research - 5 Aug 2020

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Hartalega Holdings Berhad- Still on expansion drive

Author: MalaccaSecurities   |  Publish date: Wed, 5 Aug 2020, 11:12 AM


Summary

  • Hartalega’s 1QFY21 net profit jumped 133.6% Y.o.Y to RM219.7m owing to the combination of higher sales volumes by 38.5% YoY and higher average selling prices (ASPs). Revenue for the quarter rose 43.7% Y.o.Y to RM920.1m.
  • The reported earnings accounted for 19.1% our estimates of RM1.15bn and 16.4% against consensus forecast of RM1.34bn. Although the reported figures made up to less than a quarter of our forecast, we reckon that earnings is in line on the expectations that earnings growth to accelerate in subsequent quarters amid the rising ASPs and firm demand over the foreseeable future.
  • To fulfill the heighten demand; all 12 lines under Plant 6 of NGC is expect to be fully operational by end-2020, whilst the construction of Plant 7 of the NGC is slated to commence thereafter. Upon completion in 2022, the total annual installed capacity would increase to 44.00bn pieces. Beyond that, recent acquisition of 95.0-ac. of land will house NGC 2.0 comprises 82 production lines with total installed capacity of 32.00bn pieces, bringing total production capacity to 76.00bn pieces per annum.
  • The average plant utilisation rate has improved to above 85% in FY20 which we see the uptick to continue to hit beyond 90% for existing capacities. Going forward, the rising number of infections from Covid-19 (2nd wave in several countries across the globe) will keep demand for healthcare related products at elevated level and we see Hartalega will continue to capitalise on the pandemic.
  • Meanwhile, MARGMA expects the Malaysian rubber glove exports to jump to 220.00bn pieces of gloves valued at RM21.80bn in 2020 which accounts to about two-third of the global supply. Already 1Q2020 saw 55.00bn pieces of gloves sold.
  • We expect the imposition of windfall tax on glovemakers companies to not materialise as medical gloves are deemed as one of the essential products. We think that the imposition of windfall tax may bring delay to the glovemakers expansion plan, which poses a threat in delay of supply for current orders

 

 

Source: Mplus Research - 5 Aug 2020

Labels: HARTA
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Mplus Market Pulse - 4 Aug 2020

Author: MalaccaSecurities   |  Publish date: Tue, 4 Aug 2020, 6:39 PM


Weakness prevails

Market Review

Malaysia: The FBM KLCI (-1.9%) was downbeat as the key index languished in the negative territory, dragged down by concerns over the potential rise in impairment loans post moratorium period, coupled with the rising number of Covid-19 cases that may derail the economy recovery. The lower liners, however, rebounded, while the technology (+4.9%) and health care sector (+4.4%) outperformed the negative broader market.

Global markets: US stockmarkets extended their gains overnight as the Dow climbed 0.9% on the optimism over the upcoming stimulus bill which offset the rising geopolitical tension with China. European stockmarkets were buoyed by the solid IHS Purchasing Managers data that rose to 51.8 in July 2020 – the first expansion since February 2019, but Asia stockmarkets closed mixed.

The Day Ahead

We reckon that the FBM KLCI will remain in the consolidation mode with mild bargain hunting activities to take precedence. Any weakness is likely to be cushioned by gains in glove heavyweights. On the other hand, the lower liners, particularly FBM ACE stocks will be spurred by the record high trading volumes.

Sector focus: The rising number of Covid-19 cases which sent several countries or states across the globe re-imposing lockdowns will continue to spur demand for healthcare-related products. We also continue to favour the technology stocks following the record closing on Nasdaq overnight, while plantation stocks should take pace with CPO prices rising back above RM2,700 per tonne.

The FBM KLCI gapped down and subsequently closed below the daily EMA9 level after lingering mostly in the negative territory. We now see the 1,600 as the immediate resistance, followed by 1,615. With the 1,585 level fails to hold, the immediate support is revised downwards to 1,560, followed by 1,530. Indicators are turning weaker with the MACD Histogram extended another red bar and remains below the Signal Line, while the RSI has tripped below 50.

Company Brief

AirAsia Group Bhd plans to resume flights between Malaysia and Singapore in mid-August, following news that both Malaysia and Singapore have agreed on the Reciprocal Green Lane scheme to allow essential business and official travelling between the two countries. This will be followed by other international destinations, subject to approvals from authorities. (The Edge)

Boustead Holdings Bhd’s delay in RM9.0b warship project that was awarded to a unit of the company in 2011 has resulted in the intention of the Ministry of Defence to salvage at least two of six littoral combat ships (LCS) construction. The ministry is considering allocating the contract balance of up to RM3.0bn to either instruct Boustead Naval Shipyard Sdn Bhd (BNSSB) to complete two of the six vessels, or to have two vessels completed by vessel designer France's Naval Group, via a deed of assignment with BNSSB. The ministry intends to issue a letter of demand and to fine BNSSB in relation to the project (The Edge)

Sunway Real Estate Investment Trust’s (REIT) net property income (NPI) for 4QFY20 fell 30.2% YoY to RM77.6m on the back of lower revenue following the government's implementation of the different stages of the Movement Control Order. Revenue for the quarter fell 28.8% to RM104.9m. For 2HFY20, it is proposing a distribution per unit (DPU) of 2.38 sen. (The Edge)

Tasek Corp Bhd's controlling shareholder Hong Leong Asia Ltd now has a 97.2% stake in the company at the close of the unconditional voluntary takeover offer (VGO). The VGO at RM5.80 per share, which was launched by Hong Leong Asia's investment vehicles HL Cement (Malaysia) Sdn Bhd and Ridge Star Ltd, was to pave way for a privatisation exercise. Tasek Corp shares will be suspended on 11th August 2020. (The Edge)

TDM Bhd's (TDM) US$50.0m disposal of its loss-making subsidiaries PT Rafi Kamajaya Abadi and PTA Sawit Rezeki to PT Aragon Agro Pratama has fallen through. TDM decided to withdraw its acceptance of the offer, which expired on 31st July 2020, after considering that the execution deadline for the conditional sale and purchase agreement had been extended several times since the offer was accepted on 28th August 2020, and the uncertainties posed by the Covid-19 pandemic that had affected the buyer, PT Aragon Agro Pratama, from finalising the deal. (The Edge)

Unisem (M) Bhd's (Unisem) net profit 2QFY20 has jumped more than twofold to RM34.0m, driven by higher sales volume and foreign exchange gains. Revenue rose to RM310.1m. An interim dividend of two sen per share, payable on 3rd September 2020 was declared. (The Edge)

 

Source: Mplus Research - 4 Aug 2020

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