More Of The Same

• The local key-index (+0.6%) locked-in gains on Tuesday after lingering in the positive territory for the entire intra-day session amid stronger crude oil prices and pullback in the Greenback. All the lower liners- the FBM Small Cap (+1.0 %), the FBM Fledgling (+0.2%) and the FBM Ace (+0.4%) advanced, alongside the broader market, which closed positively.

• Market breadth turned positive as advancers overturned the decliners on a ratio of 576-to-328 stocks. Traded volumes also rose 19.2% to 2.53 bln shares, amid the prevailing positive backdrop in the global stockmarkets.

• Amongst the notable blue chip gainers were Petronas Gas (+38.0 sen), Nestle (+30.0 sen), Press Metal (+20.0 sen), Digi (+19.0 sen) and KLCC (+19.0 sen), while broader market chart-toppers include plantations-linked stocks like Far East Holdings (+70.0 sen), BLD Plantations (+38.0 sen) and United Plantation (+38.0 sen), alongside BAT (+58.0 sen) and KESM Industries (+36.0 sen).

• On the contrary, notable decliners were Padini (-21.0 sen), Pos Malaysia (-19.0 sen), Ata IMS (-13.0 sen), Khind Holdings (-12.0 sen) and G3 Global (-10.5 sen). Only three big board members underperformed, mainly Malaysia Airports (-45.0 sen), MISC (-6.0 sen) and Dialog (-3.0 sen).

• Key offshore stockmarkets snapped previous losing streaks, following a pullback in U.S. Dollars and stronger crude oil prices. The Nikkei rose 0.7% to close above the 22,600 psychological level, while the Hang Seng Index added 1.5%, boosted by gains in property giants. Mainland China’s blue-chip gauge the Shanghai Composite (+2.7%), meanwhile, rebounded with solid gains as energy and industrials-related counters rally. The ASEAN bourses followed suit, closing broadly in the positive territory.

• All three major U.S. bourses - the Dow (+0.5%), the Nasdaq (+0.3%) and the S&P500 (+0.3%) finished on an upbeat mood as solid corporate earnings update continues to fuel buying-interest. Meanwhile, gains on technology giants like the Amazon, Alphabet and Microsoft also contributed to Tuesday’s rally.

• Key European benchmark indices gained momentum yesterday amid recovery in the Asean stockmarkets and solid gains in the U.S. stockmarkets on Tuesday. Being heavily commodity-weighed, the FTSE rose 0.7%, in-tandem with gains in copper, platinum and crude oil prices. Similarly, the DAX (+0.4%) shrugged off weak industrial data, offset by gains in automakers, while the CAC (+0.8%) also advanced.

The Day Ahead

• We maintain our view that there are few impetuses for Malaysian stocks to make significant headway amid an indifferent market environment and lack of fresh leads to drive investor interest. Overseas leads are also drying up amid a waiting game on the trade dispute between the U.S. and China and only the spate of stronger-than-expected U.S. corporate results that drove some of the recent gains.

• The recent gains have left valuations on the lofty range and provide little room for Malaysian stocks to march higher. However, there are also few reasons for renewed selling as well and as a consequent, it appears that the rangebound trend is likely to continue for longer with the 1,780 level still serving the near term support and resistance for now. Beyond the above level, the other key support and resistance levels are at 1,760 and 1,800 respectively.

• Meanwhile, the low market following is most pronounced among the lower liners and broader market shares with the few trading catalysts and this trend is set to continue for now to leave the above listed shares to also drift for longer.

Company Update

• Hartalega posted a 29.6% Y.o.Y jump in its net profit to RM124.9 mln in 1QFY19, from RM96.4 mln in 1QFY18. The improvement in its bottomline was mainly due to higher sales orders and production capacity. Meanwhile, lower raw materials and operational cost also contributed to Hartalega’s earnings growth. Revenue for the quarter was 17.5% Y.o.Y higher at RM706.3 mln, compared to RM601.0 mln in the last corresponding year.

Comments

• Both the reported earnings and revenue were broadly within our forecasts, accounting to 21.6% and 22.7% of our expected full year net profit of RM577.5 mln and RM3.12 bln respectively.

• As the 1QFY19 results came in broadly within our full-year estimated net profit and revenue of RM577.5 mln and RM3.11 bln respectively, we kept our forecast largely unchanged, with the exception of minor tweaks to its earnings of about 1.0% to account for lower tax rates due to re-investment allowances. FY20 earnings were also marginally higher due to the aforementioned reasons.

• We maintain our HOLD recommendation on Hartalega with a higher target price of RM6.25 (from RM6.20) based on an unchanged target PER of 35.6x to the group’s FY19 EPS of 17.5 sen. We are still positive on Hartalega’s growth prospects, underpinned by resilient demand for nitrile gloves, ongoing capacity expansion and experienced management leaders.

• 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

COMPANY BRIEF

• MISC Bhd's 2Q2018 net profit sank 42.3% Y.o.Y to RM321.2 mln, impacted by the weaker liquefied natural gas transport performance. Revenue for the quarter declined 7.0% Y.o.Y to RM2.14 bln.

• For 1H2018, cumulative net profit fell 48.7% Y.o.Y to RM631.8 mln. Revenue for the period decreased 21.2% Y.o.Y to RM4.16 bln. An interim dividend of 7.0 sen per share was declared. (The Star Online)

• Dufu Technology Corporation Bhd’s 2Q2018 net profit rose 71.7% Y.o.Y to RM11.8 mln, boosted by strong demand for hard disc drives components. Revenue for quarter gained 43.3% Y.o.Y to RM58.7 mln.

• For 1H2018, cumulative net profit added 33.2% Y.o.Y to RM17.6 mln. Revenue for the period grew 27.6% Y.o.Y to RM111.5 mln. (The Star Online)
• Uzma Bhd was awarded a work order for the provision of well abandonment integrated services for Pulai-A field from Petronas Carigali Sdn Bhd for an undisclosed value. The tenure of the work order is from 2nd July 2018 until the completion of abandonment of the 22 firm wells. (Bernama)

• Frontken Corporation Bhd’s 2Q2018 net profit jumped 107.6% Y.o.Y to RM12.1 mln, mainly due to improved business performance of the group’s subsidiaries in Taiwan, Singapore, Malaysia and the Philippines. Revenue for the quarter grew 16.0% Y.o.Y to RM81.8 mln.

• For 1H2018, cumulative net profit gained 69.5% Y.o.Y to RM18.4 mln. Revenue for the quarter added 11.0% Y.o.Y to RM152.7 mln. (The Edge Daily)

• Tien Wah Press Holdings Bhd’s 2Q2018 net profit stood at RM3.8 mln vs. a net loss of RM14.5 mln in the previous corresponding quarter that was impacted by the closure of its Australian printing operations, one-off redundancy expenses and an asset impairment loss. Revenue for the quarter, however, fell 15.0% Y.o.Y to RM92.0 mln.

• For 1H2018, cumulative net profit stood at RM1.4 mln vs. a net loss of RM10.3 mln recorded in the previous corresponding period. Revenue for the period, however, declined 20.7% Y.o.Y to RM173.5 mln. (The Edge Daily)

• Inta Bina Group Bhd has bagged an RM62.6 mln contract to construct 79 bungalows, two Tenaga Nasional Bhd substations and two guard houses in Beranang, Hulu Langat, Selangor for Eco Majestic Sdn Bhd. The proposed project will have a contract period of 20 months, commencing 15th August 2018. With this contract, the group’s unbilled order book stands at RM826.0 mln. (The Edge Daily)
• Advancecon Holdings Bhd has bagged a RM27.3 mln contract from Sime Darby USJ Development Sdn Bhd to upgrade two rivers in Klang, Selangor. The work scope of the one-year contract, that will begin on 20th August 2018, includes the upgrading of the rivers, namely Sungai Puloh and Sungai Parit Enam, using permanent concrete sheet pile with capping beam, as well as the creation of a diversion channel and temporary earth drains, a sediment fence and related works. (The Edge Daily)

• Three-A Resources Bhd's 2Q2018 net profit fell 42.3% Y.o.Y to RM5.3 mln as product margins were impacted by a surge in raw material prices. Revenue for the quarter declined marginally by 1.0% Y.o.Y to RM101.4 mln.

• For 1H2018, cumulative net profit decreased 40.9% Y.o.Y to RM11.5 mln. Revenue for the period fell marginally by 0.8% Y.o.Y to RM203.8 mln. (The Edge Daily)

• KKB Engineering Bhd’s 2Q2018 net profit stood at RM1.8 mln as compared with a net loss of RM7.2 mln in the previous corresponding quarter due to higher revenue recognition from both the engineering and manufacturing sectors, in particular from the civil construction, steel fabrication and steel pipe manufacturing divisions. Revenue for the quarter jumped 98.8% Y.o.Y to RM93.2 mln.

• For 1H2018, cumulative net profit stood at RM3.1 mln vs. a net loss of RM8.7 mln recorded in the previous corresponding period. Revenue for the period grew 75.7% Y.o.Y to RM157.8 mln. (The Edge Daily)

• Versatile Creative Bhd's shares will be suspended from trading from 8th August 2018 following its failure to submit its annual report on time for its financial year ended 31st March 2018 (FY18). The suspension will only be uplifted upon issuance of the annual report, together with the FY18 audited financial statements, unless otherwise determined by Bursa Securities. Versatile Creative was unable to release the annual report on time as the company has yet to finalise its ongoing forensic audit. (The Edge Daily)  

Source: Mplus Research - 8 Aug 2018