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Author: MalaccaSecurities   |   Latest post: Mon, 13 Jul 2020, 9:58 AM

 

Mplus Market Pulse - 28 May 2020

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Still On Ascend

  • The FBM KLCI (+1.0%) resumed trading on an upbeat manner following the upward trajectory in glovemakers heavyweights as the number of Covid-19 cases in the country continues to rise. The lower liners - the FBM Small Cap (+1.2%), FBM Fledgling (+0.8%) and FBM ACE (+3.0%), all rebounded, while the technology (-0.5%), financial services (-0.3%) and telecommunications & media (-0.4%) sectors underperformed the positive broader market.
  • Market breadth turned positive as advancers overcame decliners on a ratio of nearly 3-to-2. Traded volumes rose 7.7% to 7.20 bln shares as rotational play continues to take charge.
  • Asia stockmarkets finished mixed as the Nikkei (+0.7%) extended its gains taking cue from the strong performance on Wall Street overnight. Both the Hang Seng and the Shanghai Composite shed 0.5% and 0.3% respectively amid the China’s dour trade relationship with U.S., whilst authorities are also mulling for an overhaul of the former benchmark index for the first time in three decades. Asia stockmarkets, meanwhile, were mostly higher on Wednesday close.
  • U.S. stockmarkets staged another wave of rally as the Dow (+2.2%) extended its gains to close above the 25,000 psychological level buoyed by the optimism surrounding the re-opening of economy. On the broader market, the S&P 500 (+1.5%) finished above the 3,000 psychological level with all eleven major sectors in the green, while the Nasdaq climbed 0.8%.
  • Earlier, major European stockmarkets - the FTSE (+1.3%), CAC (+1.8%) and DAX (+1.3%), all extended their gains on expectations that the European Union will announce a bigger-than-expected €750.0 bln stimulus program in efforts to anchor the region’s recovery. At the same time, European Central Bank President Christine Lagarde warned that the Eurozone economy will likely shrink -8.0% to -12.0% in 2020.

The Day Ahead

  • The FBM KLCI was again powered higher from the gains of glove heavyweights. Already, both Hartalega and Top Glove market capitalisations have exceeded most of the banking stocks as investors continue to pour their funds into healthcare sector. Market sentiment also remains upbeat on the prospects of economy reopening across the globe.
  • With the upbeat momentum still a feature, we see the recovery on the local bourse may extend over the near term. We now see the 1,460 level to be retested, while the 1,480 level will serve as the next resistance level. Any pullback may see the local bourse to be supported at the 1,430 level.
  • Buying momentum on the lower liners and broader market shares seems to have not abated as investors risk appetite remain well in the equities market. At the same time, we see the construction sector to garner firmer trading interest following the new package contract awarded for the East Coast Rail Link (ECRL) project which may see additional packages to be dished out in near future.

COMPANY BRIEF

  • Berjaya Land Bhd’s subsidiary Berjaya (China) Great Mall Co Ltd (GMOC) has succeeded in its legal battle against Beijing SkyOcean International Holdings Ltd to secure payment of 974.1 mln renminbi (RM595.5 mln) from the latter in China. On 8th December 2017, it announced that following the disposal of a mall under construction in Sanhe city, Hebei province to Beijing SkyOcean, the latter had failed to pay the outstanding balance amount owing to GMOC.
  • GMOC issued a notice of demand to Beijing SkyOcean and its guarantors namely, SkyOcean Group Holdings Co., Ltd and Zhou Zheng to pay to GMOC the outstanding balance amount and accrued late payment interest. Following the latest development, the respondents had to pay legal costs of about RM9.7 mln and arbitration costs of RM2.2 mln within 30 days after issuance of the final award. (The Star)
  • Sunway Bhd’s 1Q2020 net profit slipped 42.6% Y.o.Y to RM78.3 mln as its revenue was impacted by lower contributions from most business segments except property development and quarry. Revenue for the quarter decreased by 13.5% Y.o.Y to RM971.4 mln. (The Star)
  • Cocoaland Holdings Bhd’s 1Q2020 net profit fell 39.2% Y.o.Y to RM5.1 mln, mainly attributable to higher factory labour overhead and higher advertising expenditure in tandem with the declining revenue. Revenue for the quarter decreased 6.9% Y.o.Y to RM61.0 mln. (The Star)
  • Southern Steel Bhd and Ann Joo Resources Bhd have mutually terminated their proposed joint venture involving the long product steel manufacturing businesses. Both companies agreed to cancel the MoU with immediate effect due to uncertain market conditions caused by the Covid- 19 pandemic. (The Star)
  • The Royal Malaysian Customs Department (RMCD) has slapped Tan Chong Motor Holdings Bhd’s manufacturing unit — Tan Chong Motor Assemblies Sdn Bhd (TCMA) — with a RM180.1 mln bill for excise duties from 1st November 2016 to 31st October 2019. (The Edge)
  • Malaysia’s armed forces pension fund — Lembaga Tabung Angkatan Tentera (LTAT) is weighing options for its controlling stake in Boustead Holdings Bhd, including taking the conglomerate private. LTAT, which holds a 59.0% stake in Boustead. (The Edge)
  • IOI Corp Bhd’s 3QFY20 net profit tumbled to RM100,000, following a foreign currency translation loss amounting to a RM236.4 mln on borrowings and deposits. Revenue for the quarter, however, added 7.6% Y.o.Y to RM2.03 bln.
  • For 9MFY20, cumulative net profit fell 38.0% Y.o.Y to RM362.6 mln. Revenue for the period, however, rose 2.1% Y.o.Y to RM5.76 bln. (The Edge)
  • Kuala Lumpur Kepong Bhd’s (KLK) 2QFY20 net proit sank 80.5% Y.o.Y to RM27.9 mln on forex losses of RM178.0 mln. Revenue for the quarter slipped 3.5% Y.o.Y to RM3.80 bln. A first interim dividend of 15 sen per share, payable on 4th August 2020 was declared.
  • For 1HFY20, cumulative net profit net profit slipped 50.5% Y.o.Y to RM195.1 mln. Revenue for the period fell 1.9% Y.o.Y to RM7.88 bln. (The Edge)
  • Likewise, KLK's parent Batu Kawan Bhd’s 2QFY20 net profit contracted 79.8% Y.o.Y to RM16.0 mln, mainly due to a sizeable RM201.3 mln of unrealised foreign currency exchange translation losses on bank and inter-company loans. Revenue for the quarter slid 3.4% Y.o.Y to RM3.93 bln. An interim dividend of 15 sen per share, payable on 6th August 2020 was declared.
  • For 1HFY20, cumulative net profit declined 44.7% Y.o.Y to RM119.5 mln. Revenue for the period fell 1.9% Y.o.Y to RM8.13 bln. (The Edge)
  • MSM Holdings Bhd's 1Q2020 net loss widened to RM34.7 mln, from a net loss of RM7.1 recorded in the previous corresponding quarter, due to lower gross margin, higher finance cost and higher depreciation, as a result of the commercialisation of its Johor plant (MSM Johor). Revenue for the quarter, however, rose 5.2% Y.o.Y to RM510.8 mln. (The Edge)
  • GHL Systems Bhd's 1Q2020 net profit declined 79.4% Y.o.Y to RM1.3 mln, due to higher operating expenses and a non-cash RM3.8 mln fair value loss on contingent consideration. Revenue for the quarter slipped 1.7% Y.o.Y to RM85.1 mln. (The Edge)
  • GD Express Carrier Bhd’s (GDeX) 3QFY20 net profit sank 96.1% Y.o.Y to RM210,000, due to supply chain disruptions that started since January 2020 as a result of the Covid-19 outbreak, coupled with the effects of assessments and adjustments it had to make under the MFRS 16 accounting standard. Revenue for the quarter, however gained 13.2% Y.o.Y to RM88.2 mln.
  • For 9MFY20, cumulative net profit net profit slipped 52.0% Y.o.Y to RM10.8 mln. Revenue for the period, however, rose 9.9% Y.o.Y to RM258.7 mln. (The Edge)
  • Padini Holdings Bhd’s 3QFY20 net profit slipped 52.1% Y.o.Y to RM16.6 mln as its sales dropped due to the movement control order (MCO) and accounting adjustments made from the adoption of the Malaysian Financial Reporting Standards 16 (MFRS 16), in relation to leases. Revenue for the quarter fell 26.8% Y.o.Y to RM347.3 mln.
  • For 9MFY20, cumulative net profit fell 13.0% Y.o.Y to RM92.0 mln. Revenue for the period decreased 6.8% Y.o.Y to RM1.18 bln. (The Edge)
  • Ho Hup Construction Company Bhd has bagged two contracts worth a total of RM102.5 mln from China Communications Construction (ECRL) Sdn Bhd for two work packages under Section 6 of the East Coast Rail Link (ECRL). Both jobs are for 30 months starts on 15th June 2020. (The Edge)
  • Lambo Group Bhd’s subsidiary Lambomove Sdn Bhd has been engaged as a fulfillment agent for last mile delivery by online shopping platform operator Presto Mall Sdn Bhd (previously known as 11street Malaysia). Under the deal, LamboMove will daily assign drivers and riders to dedicated warehouses, to facilitate last mile delivery jobs. It will also provide event tracking of parcels during deliveries. (The Edge)  

Source: Mplus Research - 28 May 2020

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