M+ Online Research Articles

Author: MalaccaSecurities   |   Latest post: Tue, 24 Nov 2020, 10:33 AM


Mplus Market Pulse - 28 Aug 2019

Author:   |    Publish date:

Looking Downbeat

  • The FBM KLCI (-0.6%) erased all its intraday gains to extend its losses as the key index underperformed the mostly positive performance across its regional peers on Tuesday. The lower liners– the FBM Small Cap (-0.2%), FBM Fledgling (-0.3%) and FBM ACE (-0.5%) all remain downbeat, while the broader market closed mostly negative with the property sector (-1.1%) taking the heaviest beating.
  • Market breadth remained negative as losers outpaced gainers on a ratio of 471-to-293 stocks, while 402 stocks traded unchanged. Traded volumes fell 4.4% to 2.11 bln shares amid the negative market sentiment.
  • Hong Leong Financial Group (-74.0 sen) led the local bourse decliners list, followed by Petronas Dagangan (-68.0 sen), Hong Leong Bank (-50.0 sen), Petronas Gas (-34.0 sen) and MISC (- 24.0 sen). Notable decliners on the broader market were BAT (-46.0 sen), Petron (-26.0 sen), Aeon Credit (-24.0 sen) and Bursa (-15.0 sen). Alliance Bank sank 33.0 sen after reporting a weak set of corporate earnings.
  • Among the biggest gainers on the broader market include Vitrox (+39.0 sen), Shangri-La (+31.0 sen), Panasonic (+28.0 sen), Genting Plantations (+22.0 sen) and MPI (+18.0 sen). Meanwhile, Nestle (+30.0 sen), Petronas Chemicals (+8.0 sen), Hartalega (+3.0 sen) and IHH (+3.0 sen) advanced on the key index. RHB Bank gained 10.0 sen after delivering a strong set of quarterly earnings
  • Asian benchmark indices finished mostly higher as the Nikkei gained 1.0%, mirroring the positive sentiment on Wall Street overnight. The Shanghai Composite (+1.4%) closed marginally above the 2,900 psychological level, but the Hang Seng Index fell 0.1%. ASEAN equities, meanwhile, closed mostly higher yesterday.
  • U.S. stockmarkets endured a choppy trading session before erasing all their intraday gains as the Dow fell 0.5% after China questioned U.S. President Donald Trump on his statement to restart trade negotiations. On the broader market, both the S&P 500 and Nasdaq declined 0.3% each with the former dragged down by the financials sector (-0.7%).
  • Earlier, European benchmark indices closed mostly higher as the CAC and DAX extended their gains by 0.7% and 0.6% respectively on gains in automotive stocks after China looks to ease credit support for purchase of new energy vehicles and home appliances. The FTSE, however, fell 0.1% after lingering the negative territory for the entire trading session.


  • Malaysian stocks bucked the regional uptrend yesterday as sentiments failed to improve despite the firmer market conditions from last Friday’s positivity in global equities. It appears that much firmer improvements in sentiments are required for Malaysian equities to push up as fresh buying interest remains indifferent.
  • Meanwhile, the near term outlook is little changed with the downside bias still prevalent after Wall Street and key global indices retreated overnight. Investor sentiments are still frail over the U.SChina trade spate and the ongoing results reporting season is also providing little cheer and impetus for a firmer recovery.
  • Therefore, the odds of further consolidation among FBM KLCI listed stocks remains high and we think that the 1,590 level is likely to give way and the supports are now lowered to the 1,580 and the 1,572 levels. On the upside, the 1,600 points level is the immediate hurdle, followed by the 1,610 level.
  • The lower liners and broader market shares are also likely to remain skittish as most retail players remain wary of the ongoing market conditions that will keep them on the sidelines for longer. This will also prolong the FBM Small Cap, FBM Fledgling and FBM ACE indices subdued for now.


  • Suria Capital Holdings Bhd’s 2Q2019 net profit fell 5.3% Y.o.Y to RM14.4 mln due to a higher effective tax rate at 31.1% vs. 23.4% recorded in 2Q2018. Revenue for the quarter slipped 27.2% Y.o.Y to RM70.0 mln due to lower contribution in relation to the upgrading and construction of ports infrastructure and facilities. For 1H2019, cumulative net profit gained 2.0% Y.o.Y to RM30.1 mln. Revenue for the period, however, decreased 37.7% Y.o.Y to RM139.3 mln.


  • The reported earnings came slightly below our expectations, making up to 47.6% of our net profit estimate of RM63.3 mln. The reported revenue, however, fell short of our expectations, amounting to only 39.7% of our full-year forecast of RM351.0 mln. The variation in its topline is due to the additional construction service.
  • Although the reported earnings coming slightly below our estimates, we made no changes to our earnings forecast and we maintain our BUY recommendation on Suria with an unchanged target price of RM1.70 as we believe that earnings recovery to set-in moving into 2H2019.
  • We value Suria through a sum-of-parts (SOP) approach as we valued both its port operations and property development segments on a discounted cash flow approach (key assumptions include a WACC of 8.5%, terminal growth rate of 1.5%) to reflect its ability to generate recurring revenues and steady earnings growth over the longer term. Meanwhile, we ascribed a 10.0x (unchanged) target PER to both its logistics and bunkering contract as well as engineering and ferry terminal operations businesses, based on their potential earnings contribution in 2020 (unchanged).
  • AWC Bhd’s 4QFY19 net profit plunged by almost 100.0% to a mere RM38,000, from RM4.4 mln previously, attributed to several one-offs; cost overruns, deferred revenue recognition due to MFRS 15, in addition to an amortisation charge from intangible assets following the acquisition of Trackwork. Revenue also fell 15.3% Y.o.Y to RM79.7 mln, from RM94.2 mln in the same period last year. The group has also declared a final single-tier dividend of 1.0 sen per share, payable on a date to be announced later.
  • The weak 4QFY19 results dragged down the full-year net profit to RM20.0 mln (- 6.2% Y.o.Y), from RM21.4 mln last year, despite recording a higher revenue of RM323.1 mln (+6.3% Y.o.Y), from RM304.0 mln previously.
  • Although revenue was in-line with our forecast revenue, coming in at 99.7% of RM323.9 mln, we were disappointed to see that full-year net profit was significantly below expectations; contributing only 71.4% of our estimated FY19 net profit. The variation was mainly due to the aforementioned one-offs, as well as a spike in depreciation charges due to the amortisation charge from intangible assets.
  • Subsequently, we trimmed our FY20 earnings assumptions by 18.3% to RM25.0 mln, but increased our revenue estimates slightly to RM354.2 mln (+3.3%). The latest adjustments reflect our more cautious EBITDA margins assumption, in-tandem with increasing costs and prolonged weakness from the engineering segment amid decreasing revenue contribution. We also introduce our FY21 net profit and revenue forecast at RM21.7 mln and RM329.6 mln respectively.
  • Despite the weak performance in the latest quarter, we maintain our BUY call on AWC with lower target price of 75.0 sen after rolling forward our valuation to FY20 as its near-term revenue growth story remains intact; backed by a strong orderbook, albeit at a slower pace, and still strong balance sheet, pending an analysts’ briefing later.
  • Our target price is based on a lower target PER of 9.0x (from10.0x) to AWC’s FY20 EPS of 8.3 sen. We have revised our target PER to match its latest three-year mean and uncertain cash outflows from previous project delays.
  • Our target PER also remain at a discount to its closest peer, UEM Edgenta Bhd, mainly due to AWC’s smaller market capitalisation.


  • Sime Darby Bhd is looking to grab the new contract to supply Government vehicles once the current contract ends in December. The group concurred that it is the largest fleet owner aside from the current Government fleet, and probably have the best coverage in terms of branches and workshops throughout the country.
  • The lucrative contract to supply vehicles to the Federal Government was previously awarded to Spanco Sdn Bhd, whose 25-year concession ended in December 2018. Spanco was given a 12-month extension up to December 2019. (The Edge Daily)
  • Axiata president and Group Chief Executive Officer, Tan Sri Jamaludin Ibrahim said that the discussion on the proposed merger between Axiata Group Bhd and Norway's Telenor ASA is still ongoing, but declined to provide further clarifications on the news report that the group is reportedly facing difficulties in the merger discussion. (The Edge Daily)
  • Affin Bank Bhd’s 2Q2019 net profit more than doubled to RM156.0 mln, from RM73.3 mln a year ago, backed by a write-back of credit impairment losses. Affin Bank has reported a writeback of credit impairment losses of RM26.3 mln compared with the provision of RM91.9 mln in the previous corresponding period. The growth in bottomline was also contributed by higher net gains on financial instruments which stood at RM83.9 mln. Quarterly revenue growth, however, was flat at RM497.9 mln, compared with RM494.2 mln in 2Q2018. (The Edge Daily)
  • Cahya Mata Sarawak Bhd’s 2Q2019 net profit more than halved to RM41.3 mln vs. RM91.6 mln, despite posting stronger revenue pf RM399.2 mln, from RM395.3 mln in 2Q2018. The weaker performance was mainly due to higher imported clinker cost and coal cost for its cement division, besides the arrears received for works in its construction and road maintenance division.
  • Cumulative 1H2019 net profit also fell 37.0% Y.o.Y to RM82.1 mln, from RM130.6 mln in the previous corresponding period, while revenue rose 8.9% Y.o.Y to RM817.4 mln, compared to RM750.3 mln previously. (The Edge Daily)
  • Yong Tai Bhd recorded a 4QFY19 net loss of RM62.9 mln, from a net profit of RM5.5 mln in the previous corresponding period, dragged down by the weak performance from Terra Square, a one-off impairment loss on inventories and receivables totalling RM59.9 mln and long outstanding receivables arising from the disposal of the dyeing business segment in FY17. Revenue for the quarter, meanwhile, plunged 65.0% Y.o.Y to RM10.0 mln, from RM28.3 mln a year ago.
  • Consequently, the group posted its first annual net loss in five years; full-year net loss came up to RM79.3 mln, compared to a net profit of RM15.5 mln in FY18, mainly due to losses incurred at its Encore Melaka theatre and a oneoff impairment loss in relation to the Terra Square retail mall. Revenue also fell 23.0% Y.o.Y to RM100.4 mln, from RM130.1 mln. (The Edge Daily)
  • TIME dotCom Bhd’s 2Q2019 net profit jumped 42.0% Y.o.Y to RM92.5 mln, on the back of stronger revenue (RM277.8 mln/+16.0% Y.o.Y), in-tandem with the growth across all core product segments, improved cost efficiencies and a higher share of profit from investment in associates.
  • 1H2019 net profit rose 22.0% Y.o.Y to RM155.6 mln, while cumulative revenue rose 15.0% Y.o.Y to RM540.4 mln, from RM470.6 mln last year. (The Star Online)
  • MMC Corp Bhd’s 2Q2019 net profit more than tripled to RM67.2 mln, from RM20.1 mln in the corresponding quarter last year, boosted by higher contribution from PTP, lower operating cost at Johor Port Bhd and Northport Malaysia Bhd, as well as a gain on disposal of an asset held for sale, as well as lower administrative costs across the group. Revenue also inched higher by 2.5% Y.o.Y to RM1.23 bln, from RM1.2 bln a year earlier.
  • It said that profit would have been higher if not for the finance cost and depreciation due to the adoption of the Malaysian Financial Reporting Standard 16 (MFRS 16) Leases. (The Star Online)

Source: Mplus Research - 28 Aug 2019

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