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Author: MalaccaSecurities   |   Latest post: Fri, 20 Sep 2019, 9:44 AM

 

Mplus Market Pulse - 21 Aug 2019

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Cautious Recovery Ahead

  • The FBM KLCI rebounded, taking cue from the positive sentiment on Wall Street overnight, boosted by gains in Petronas-related heavyweights. Meanwhile, mild profit-taking resulted in most of the lower liners retreating, with the exception of the FBM Small Cap (+0.2%). The majority of the broader market shares, however, closed higher at Tuesday’s close.
  • Market breadth was negative as losers beat the winners on a ratio of 400-to- 369 stocks, while traded volumes fell by 6.8% 2.06 bln shares as investors retreat to the sidelines amid concerns of slowing global growth and rising trade protectionism.
  • Significant outperformers were Petronas Dagangan (+44.0 sen), Petronas Gas (+22.0 sen), Malaysia Airports (+17.0 sen), CIMB (+14.0 sen) and IOI Corporation (+6.0 sen). Other notable broader market winners, meanwhile, include Guan Chong Bhd (+38.0 sen) after the cocoa processor reported stellar quarterly earnings growth, alongside MBM Resources (+30.0 sen), Mintye (+25.0 sen), Hengyuan Refining (+19.0 sen) and MFCB (+16.0 sen).
  • On the downside, losing stocks were United Plantations (-62.0 sen), Widetech (-15.0 sen), UMW Holdings (-14.0 sen), Batu Kawan (-12.0 sen) and Naim (-10.0 sen). Meanwhile, less than half of the benchmark constituents were in the red, including Nestle (-70.0 sen), Hong Leong Financial Group (-14.0 sen), Petronas Chemicals (-12.0 sen), Hong Leong Bank (-8.0 sen) and Sime Darby (- 3.0 sen).
  • Chinese stocks were mainly in the red as the Shanghai Composite (-0.1%) finished with meagre losses as investors digest China’s latest interest rate reforms. The Hang Seng Index faltered in the eleventh hour and also closed lower, although the Nikkei rose 0.6%, while ASEAN equities were mixed.
  • U.S. equities lingered mostly in the red and finished lower overnight ahead of the release of the Federal Reserve meeting minutes. The Dow ended its three-day consecutive gains, albeit cushioned by Home Depot on expectations of positive growth momentum. The S&P 500 (-0.8%) and the Nasdaq (-0.7%), meanwhile also weakened. • Earlier, European stockmarkets posted losses amid low trading volumes as investors digested fresh political news. The CAC fell 0.5% on the back of the political upheaval in Italy following Prime Minister Conte’s resignation and breakdown in Italy’s ruling coalition. The FTSE and the DAX, meanwhile lost 0.9% and 0.6% respectively.

THE DAY AHEAD

  • After a few false starts, the FBM KLCI managed to inch higher yesterday to possibly commence an overdue rebound from its bout of oversold. It also helps that the key index is finding support around the 1,600 points level that could also provide a springboard for the recovery.
  • However, the overnight weakness on key global indices could throw a spanner into the key index’s near term recovery, albeit we think that the recovery is still likely to progress due to the oversold conditions. Hence, we see some tempering of the recovery prospects and renewed volatility could still be a near term feature. Under the prevailing environment, we think the near term upsides could be limited with the 1,610 level becoming the near term resistance. The other resistance is at 1,620 level, while below the 1,600 support the other support is at the 1,590 level.
  • Elsewhere, we also think that the lower liners and broader market shares will continue their rebound, but with increased volatility as profit taking activities could set in. Nevertheless, we still see mild upsides over the near term as bouts of bargain hunting activities will provide some aiding factors.

COMPANY UPDATE

  • AWC Bhd has secured an IFM contract from the Ministry of Health worth approximately RM113.0 mln. The contract is valid from 1st September, 2019 until 31st August 2022 and involved hospital support services for the National Cancer Institute.

Comments

  • As the latest contract win was within our orderbook replenishment target, we maintain our BUY recommendation on AWC with an unchanged target price of 95.0 sen as AWC’s earnings growth remains on-track, driven by consistent revenue stream from the IFM segment and substantial orderbook size of around RM1.02 bln. Our target price is based on an unchanged target PER of 10.0x to AWC’s FY19 EPS of RM9.6 sen. Our target PER also remains at a discount to its closest peer, UEM Edgenta Bhd, mainly due to AWC’s smaller market capitalisation.
  • Meanwhile, we continue to like the group’s steady and recurring income from IFM projects, as well as strong balance sheet position; AWC continued to be net cash for the past three years.

COMPANY BRIEF

  • Kuantan Flour Mills Bhd’s 3QFY19 net losses stood at RM511,000 vs. a net profit of RM33,000 in the previous corresponding period due to higher raw material costs and production overheads. Revenue for the quarter, however, increased 31.7% Y.o.Y to RM15.1 mln.
  • For 9MFY19, cumulative net loss narrowed to RM1.7 mln against a net loss of RM2.4 mln recorded in the previous corresponding period. Revenue for the period improved 55.7% Y.o.Y to RM42.2 mln. (The Star Online)
  • Hibiscus Petroleum Bhd has successfully completed the St Joseph infill drilling contract in the 2011 North Sabah enhanced oil recovery production sharing contract (PSC). The contract involved the drilling and completion of three infill oil producers.
  • The first infill well was brought online on 19th July 2019 and achieved a stabilised production flowrate of above 1,000 barrels (bbls) per day. The second infill well was completed on 25th July 2019 and brought online with a stabilised production flowrate of over 1,300 bbls per day. The combined increase in production from the three infill wells for the St Joseph Infill Drilling campaign of over 3,200 bbls per day has exceeded pre‐drill expectations of approximately 2,600 bbls per day.
  • Separately, Hibiscus 4QFY19 net profit plunged 75.0% Y.o.Y to RM24.7 mln on higher operating expenses. Revenue for the quarter, however, expanded 28.4% Y.o.Y to RM237.1 mln.
  • For FY19, cumulative net profit grew 12.9% Y.o.Y to RM230.0 mln. Revenue for the period jumped 150.6% Y.o.Y to RM988.3 mln. (The Star Online)
  • Genting Malaysia Bhd is proceeding with its related party transaction (RPT) deal involving the acquisition of Empire Resorts Inc and a subsequent delisting of the company via a planned merger. Its indirect wholly-owned Genting (USA) Ltd (GenUSA) and its Chairman Tan Sri Lim Kok Thay’s Kien Huat III (KH) have received 49.0% and 51.0% stakes in Hercules Topco LLC respectively, to undertake the US-based casino operator Empire's planned delisting. Hercules Topco had inked an agreement plan with Hercules Merger Subsidiary Inc and Empire to effect the merger, which will see Hercules Topco acquiring Empire's remaining shares from minority shareholders at US$9.74 each. (The Edge Daily)
  • Heineken Malaysia Bhd's 2Q2019 net profit grew 19.7% Y.o.Y to RM65.7 mln, thanks to higher beer sales. Revenue for the quarter expanded 21.6% Y.o.Y to RM512.6 mln.
  • For 1H2019, cumulative net profit gained 14.3% Y.o.Y to RM118.5 mln. Revenue for the period rose 21.3% Y.o.Y to RM1.04 bln. The brewery declared an interim dividend of 42 sen per share, payable on 25th October 2019. (The Edge Daily)
  • Press Metal Aluminium Holdings Bhd’s 2Q2019 net profit slipped 35.9% Y.o.Y to RM102.9 mln on lower topline growth. Revenue for the quarter fell 12.5% Y.o.Y to RM2.13 bln.
  • For 1H2019, cumulative net profit declined 30.0% Y.o.Y to RM218.0 mln. Revenue for the period contracted 5.7% Y.o.Y to RM4.30 bln. A second interim single tier dividend of 1.25 sen per share, payable on 24th September 2019, was declared. (The Edge Daily)
  • Kuala Lumpur Kepong Bhd’s has warned of reduced profit for FY19 as the group reports a 65.0% Y.o.Y slump in its 3QFY19 net profit to RM48.6 mln due to lower palm products prices realised, besides a corporate loss of RM123.1 mln, which included a provision of RM145.3 mln for impairment of an estate located in Sinoe County, Liberia. Revenue for the quarter fell 14.5% Y.o.Y to RM3.70.
  • For 9MFY19, cumulative net profit slid 8.1% Y.o.Y to RM442.5 mln. Revenue for the period decreased 17.3% Y.o.Y to RM11.73 bln. (The Edge Daily)
  • Pos Malaysia Bhd’s 1QFY20 net loss stood at RM15.1 mln, compared with a net profit of RM5.0 mln recorded in the previous corresponding quarter on weak postal services results, hit by the decline in traditional mail volume due to electronic substitution. Revenue for the quarter slipped 3.0% Y.o.Y to RM573.0 mln. (The Edge Daily)
  • Gamuda Bhd announced that a suit filed by Tenaga Nasional Bhd (TNB) has been withdrawn following the full payment of settlement sum totalling RM91.1 mln. The settlement sum constitutes full and final settlement of the dispute between Gamuda’s 80.0%- owned unit Gamuda Water Sdn Bhd and TNB. (The Edge Daily)
  • Utusan Melayu (M) Bhd will continue its operations by publishing two of its publications Utusan Malaysia and Kosmo!, despite financial challenges faced. However, trading of the Practice Note 17 (PN17) company's shares on the Main Market of Bursa Malaysia will be suspended from 28th August 2019 onward. If Utusan submits an appeal against the delisting to Bursa Securities on or before 27th August 2019, the removal of the company's securities from Bursa on 30th August 2019 shall be deferred, pending the decision on the company's appeal. (The Edge Daily)
  • MBM Resources Bhd’s 2Q2019 net profit jumped 114.3% Y.o.Y to RM74.0 mln, mainly lifted by a one-off RM24.8 mln gain on disposals. Revenue for the quarter rose 15.4% Y.o.Y to RM558.1 mln.
  • For 1H2019, cumulative net profit increased 83.6% Y.o.Y to RM123.7 mln. Revenue for the period rose 15.2% Y.o.Y to RM1.08 bln. A first interim dividend of six sen per share, payable on 19th September 2019, was declared. (The Edge Daily)

Source: Mplus Research - 21 Aug 2019

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