Mplus Market Pulse - 1 Jun 2018

Date: 01/06/2018

Source  :  Malacca Securities
Stock  :  HARTA       Price Target  :  6.10      |      Price Call  :  HOLD
        Last Price  :  5.30      |      Upside/Downside  :  +0.80 (15.09%)

Trade War Risk To Stifle Market

  • Tracking the recovery in Wall Street overnight, coupled with the strong quarterly earnings from several banking giants, the FBM KLCI (+1.5%) recouped almost half of its previous session’s losses yesterday. The lower liners – FBM Small Cap (+0.3%), FBM Fledgling (+0.4%) and FBM ACE (+0.5%) all rebounded, while the construction sector (-1.3%) underperformed the positive broader market, falling for the third straight session.
  • Market breadth turned positive as advancers outdone decliners on a ratio of 581-to-409 stocks. Traded volumes climbed 27.8% to 4.61 bln shares on bargain hunting activities in beaten down stocks.
  • More than two-thirds of the key index constituents rose, led by Nestle (+RM1.20), followed by Petronas Gas (+62.0 sen), Hong Leong Bank (+58.0 sen), MISC (+52.0 sen) and Hong Leong Financial Group (+40.0 sen). Topping the broader market winners list were Fraser & Neave (+80.0 sen), Heng Yuan (+39.0 sen), BAT (+34.0 sen), Aeon Credit (+30.0 sen) and Padini (+29.0 sen).
  • Notable decliners on the broader market include Carlsberg (-66.0 sen), Far East Holdings (-54.0 sen), Time dotCom (+47.0 sen), United Plantations (+28.0 sen) and Scientex (-23.0 sen). Meanwhile, Public Bank (-12.0 sen), IOI Corporation (-7.0 sen), KLCC (-3.0 sen) and KLK (-2.0 sen) were the only decliners on the local bourse.
  • Asian benchmark indices rebounded as concern political woes in Italy and Spain faded. The Nikkei (+0.8%) bounced from six-week low on gains in mining and automotive shares. The Hang Seng Index jumped 1.4%, while the Shanghai Composite (+1.8%) snapped the streak of six straight sessions of decline, boosted by strong NBS Manufacturing PMI data in May at 51.9 – the highest level since September 2017. ASEAN indices, meanwhile, closed mostly higher yesterday.
  • U.S. stockmarkets rebounded as the Dow (+1.2%) advanced overnight as concerns over Italy’s political unrest faded, coupled with the recovery in crude oil prices. On the broader market, the S&P 500 rose 1.3% with all 11 major sectors finishing in the positive territory, while the Nasdaq (+0.9%) recovered all its previous session’s losses.
  • European benchmark indices mostly higher as the FTSE and DAX chalked in 0.8% and 0.9% gains respectively, rebounding from their previous session’s sharp losses. The CAC, however, fell 0.2% to record its sixth straight session of losses despite recouping most of its intraday losses.

The Day Ahead

  • After a decent rebound yesterday, Malaysian stocks are likely to head south again and prolonging the rollercoaster ride amid the heightened risk of a trade war after President Trump renewed his treats to impose tariffs on EU, Mexico and Canadian steel and aluminium as well as on China made goods. The target countries are also threatening to respond with tariffs on U.S. made goods which will result in a sharp fall in global trade in due course. The development has roiled most global stock indices overnight and is also expected to spread to the Malaysian stocks that looks set to end the week on a dour note.
  • With market sentiments turning cautious again, quick profit taking activities are likely to place yesterday’s gains at risk which could see the key index potentially retracing back to its recent low of around 1,720 points. Thereafter, the support is at the 1,700 points level. The near term resistance, meanwhile, is at the 1,750 points.
  • There is also a strong likelihood that profit taking will permeate among the lower liners and broader market shares that will take the shine off yesterday’s rebound.

Company Update

  • Hartalega Holdings Bhd was added to the 30-stock FBM KLCI following the semiannual review of the index yesterday.


  • Hartalega’s debut on the KLCI index following the semi-annual index review did not hit us by surprise as the group was already in the benchmark’s reserve list during the last review, together with Malaysia Airports and Dialog Group. Consequently, we are sanguine on the latest development as it will put Hartalega under the radar of global institutional funds, representing further share price catalyst.
  • As we do not foresee any impact to the group’s earnings from the aforementioned inclusion, we keep our HOLD call on Hartalega with an unchanged target price of RM6.10 based on an unchanged target PER of 35.0x (from 34.5x) on the group’s FY19 EPS of 17.4 sen.
  • Our target PER remains at a premium to its competitors premised on: (i) Hartalega’s solid position as the global market leader in the nitrile glove segment, (ii) superior operational efficiency in terms of production speed and the lower number of workers per glove output, (iii) consistent and high quality control standards, and (iv) solid fundamentals where it commands the highest net profit margin vs. its peers.


  • IGB Bhd's 1Q2018 net profit more than halved to RM34.1 mln, compared to RM73.2 mln last year, dragged by losses from associates, absence of a one-off disposal gain and write-back of differed tax relating to the disposal. Even so, revenue gained 4.5% Y.o.Y to RM294.2 mln, from RM281.6 mln in the previous corresponding period. (The Edge Daily)
  • Affin Bank Bhd posted a 56.8% Y.o.Y jump in its 1Q2018 net profit to RM141.5 mln, from RM90.2 mln a year ago, mainly due to the increase in net fee and commission income, net gain on financial instruments, Islamic banking income and net interest income.
  • In addition, a write-back of credit impairment losses also contributed to the stronger bottomline, while quarterly operating income grew by 48.0% Y.o.Y to RM476.6 mln, from RM322.0 mln last year. (The Edge Daily)
  • The signing ceremony which was initially scheduled between following the award as a project delivery partner role for the Kuala Lumpur-Singapore High Speed Rail (HSR) project, will be called off following the cancellation of the project.
  • Malaysian Resources Corp Bhd (MRCB) and Gamuda Bhd received confirmation from MyHSR Corp informing them the cancellation of the Kuala LumpurSingapore High Speed Rail (HSR) project by the Malaysian government and all further negotiations on the articles of agreements, conditions of contract and annexures will be suspended. (The Edge Daily)
  • Malaysian Airports Holdings Bhd (MAHB) and Dialog Group Bhd were added to the 30-stock FBM KLCI following the semi-annual review on the index yesterday, replacing YTL Corp Bhd, AMMB Holdings Bhd (AmBank) and Astro Malaysia Holdings Bhd.
  • Meanwhile, the reserve list, which comprises the five highest-ranking nonconstituents of the index by market capitalisation, includes Fraser & Neave Holdings Bhd, Top Glove Corp Bhd, Lotte Chemical Titan Holding Bhd, Westports Holdings Bhd and AirAsia Group Bhd. The aforementioned change will be effective from 18th June 2018 onwards. (The Edge Daily)
  • PPB Group Bhd‘s 1Q2018 net profit narrowed 44.0% Y.o.Y to RM189.5 mln, from RM338.4 mln a year earlier, owing to lower contribution from its 18.5%- owned Wilmar International Ltd, despite an 11.1% Y.o.Y gain in revenue to RM1.15 bln, from RM1.03 bln previously.
  • The group noted that lower profit contribution from its grains and agribusiness, consumer products, and film exhibition and distribution segments also weighed on earnings. (The Edge Daily)
  • Hap Seng Consolidated Bhd's 1Q2018 net profit rose marginally by 2.6% Y.o.Y to RM154.5 mln on improved revenue contribution from all divisions except for the plantation division. Revenue for the quarter, meanwhile, grew 29.8% Y.o.Y to RM1.53 bln, from RM1.18 bln in 1Q2017. At the same time, the group has also declared a first interim dividend of 15.0 sen per share, payable on 28th June 2018. (The Edge Daily)
  • DRB-Hicom Bhd trimmed its 4QFY18 net loss to RM10.3 mln, from RM329.6 mln a year earlier, mainly due to the recognition of a research and development grant and better financial performance of operating companies.
  • For the full year, DRB-Hicom made a turnaround after three years of losses with a net profit of RM498.4 mln, while revenue rose 6.1% Y.o.Y to RM12.8 bln compared with RM12.05 bln previously. (The Star Online)
  • My EG Services Bhd is partnering with AIG Malaysia Insurance Bhd to provide road care assistance to AIG's policyholders, following the signing of a two-year service agreement between both parties. (The Edge Daily)
  • AmBank is targeting loan growth of 6.0% in 2019 as it expects loans to small and medium enterprises (SMEs) and mid-sized corporate firms to continue seeing double digit growth.
  • The group also thinks that the change in direction by government-linked companies could present better opportunities for SMEs and mid-caps moving forward. (The Star Online)
  • Parkson Holdings Bhd made a turnaround after four consecutive lossmaking quarters with a 3QFY18 net profit of RM25.3 mln vs. a net loss of RM33.2 mln in 3QFY17 on the back of its improved China retailing operations. Quarterly revenue, however, was flat at RM1.06 bln in 3QFY18. (The Star Online)
  • Mah Sing Group Bhd's 1Q2018 net profit declined 29.0% Y.o.Y to RM64.2 mln, from RM90.4 mln a year ago, partially due to slower progress billings during the festive season, coupled with unfavourable product mix, while revenue was 19.2% Y.o.Y lower at RM584.8 mln, from RM723.5 mln in the same quarter last year. (The Edge Daily)
  • RHB Bank Bhd posted its record quarterly net profit of RM590.8 mln (18.1% Y.o.Y) in 1Q2018, from RM500.3 mln a year ago, largely driven by higher net fund based and non-fund based income as well as lower allowance for expected credit losses. Quarterly operating income also grew by 6.1% Y.o.Y to RM2.78 bln, from RM2.62 bln a year earlier. (The Edge Daily)  

Source: Mplus Research - 1 Jun 2018

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