Still Lack Of Leads

• The FBM KLCI closed almost unchanged after recovering most of its intraday losses in the eleventh hour amid the prevailing bearish sentiment across the region. The majority of the lower liners retreated with the exception of the FBM Fledgling index.

• Market breadth was negative with 503 decliners against 359 winners, while traded volumes narrowed by 9.9% to 1.99 bln shares, mainly helped by the extended buying-interest in the lower liners.

• Nestle (-50.0 sen) topped the Main Board losers’ list, followed by Hong Leong Financial Group (-14.0 sen), IHH Healthcare (-11.0 sen), Hartalega (-8.0 sen) and MISC (-6.0 sen). Other decliners were Panasonic Manufacturing (-52.0 sen), BAT (-28.0 sen), Scientex (-21.0 sen), Malaysian Pacific Industries (-18.0 sen) and Amway (-15.0 sen).

• On a more positive note, United Plantations (+46.0 sen), Petron Malaysia Refining (+30.0 sen), Dufu Technology (+15.0 sen), Riverview Rubber (+15.0 sen) and Hengyuan Refining (+13.0 sen) advanced. Significant blue-chip gainers, meanwhile, include Petronas Dagangan (+28.0 sen), Nestle (+10.0 sen), Genting (+5.0 sen), IOI Corporation (+4.0 sen) and KLCC (+4.0 sen).

• Asian equities were mostly lower as investors shunned risky-assets following higher U.S. interest rates and the rising animosity between the U.S. and China. The Nikkei (-1.0%) ended in the red as investors monitor developments from the U.S.-Japan bilateral trade dispute, while the Shanghai Composite fell 0.5% to 2,791.8 points. The Hang Seng Index also declined with most of its sub-sectors in the red, alongside the bulk of the ASEAN stockmarkets.  Major U.S. stockmarkets - The Dow (+0.2%) the S&P 500 (+0.3%) and the Nasdaq (+0.7%) eked-out gains on the back of a stronger ahead of consumerrelated economic data due Friday.

• European equities finished mostly in the positive territory, despite weakness in banking stocks ahead of Italy’s upcoming budget announcement. The FTSE added 0.5%, following the devaluation of the Sterling. Meanwhile, the DAX rose 0.4%, while the CAC (+0.5%) ended above the 5,500 psychological level.

The Day Ahead

• True to form, the key index went nowhere yesterday amid the lack of fresh leads that prompted some profit taking activities, while fresh buying took a backseat. Going into the last trading day of the week, we think the market environment is still tentative as there remain few leads to entice fresh buying, while the trade issue between the U.S. and China that remains unresolved that will continue to cast a wary spell on market players.

• Therefore, we think the rangebound trend is likely to persist for longer and the key index is likely to trend within the 1,795 and 1,805 zones for now. The other support is at the 1,790 level, while the other resistance is at 1,810 points.

• Although the lower liners and broader market shares retreated yesterday, we think that the pullback is likely to be shortlived as their undertone is still firm for now. As it is, the broader market shares are still on a recovery trend from their bout of oversold, which we think will sustain on the back of the sustained mild bargain hunting activities. COMPANY BRIEF

• Kim Loong Resources Bhd’s 2QFY19 net profit sank 54.3% Y.o.Y to RM12.0 mln, dragged down by lower fresh fruit bunches (FFB) production from the plantation segment, lower average selling prices and decline in crude palm oil (CPO) production. Revenue for the quarter decreased 19.3% Y.o.Y to RM210.3 mln, mainly due to lower FFB average selling prices.

• For 1HFY19, cumulative net profit decreased 35.7% Y.o.Y to RM32.1 mln. Revenue for the period slipped 13.4% Y.o.Y to RM446.8 mln. The results came in below expectations with its net profit only amounting to 35.5% of our previous full-year forecast of RM90.5 mln, while its revenue also came below our forecast, amounting to 46.9% of our estimate of RM952.1 mln.

Comments

• Following the weaker-than-expected results, we trimmed our net profit forecast by 13.0% and 11.4% to RM78.6 mln and RM89.3 mln for FY19 and FY20 respectively to account for the lower FFB and CPO average selling prices.

• Despite that, we maintain our HOLD recommendation on KLR with an unchanged target price of RM1.35 as we rolled over our valuation metrics to FY20. Our target price is derived by ascribing an unchanged target PER of 14.0x to its FY20 EPS of 9.5 sen. The ascribed target PER is in line with the industry average of around 13.5x-15.5x.

COMPANY BRIEF

• Daya Materials Bhd has bagged a RM20.0 mln contract to build a factory and warehouse in Seberang Perai Tengah, Penang. The project will be for a period of 10 months, to start on 9th October 2018 and be completed by or before 9th August 2019. (The Edge Daily)

• Malaysia Smelting Corp Bhd (MSC) has teamed up with its parent, The Straits Trading Company Ltd, to jointly explore options to unlock the value of land owned by both parties in Butterworth, Penang. Straits Trading also owns a neighboring land in Butterworth totaling 26.2 ac. in addition to the 13.9 ac. on which MSC's tin smelting plant is located. On a combined basis, the land amounts to a sizeable 40.1 ac. (The Edge Daily)

• Crescendo Corp Bhd's 2QFY19 net profit fell 36.7% Y.o.Y to RM11.0 mln, due to higher sales of affordable housing, which has a lower profit margin. Revenue for the quarter, however, rose 9.2% Y.o.Y to RM94.9 mln.

• For 1HFY19, cumulative net profit dropped 32.7% Y.o.Y to RM14.2 mln. Revenue for the period, however, grew 10.8% Y.o.Y to RM149.4 mln. An interim dividend of 3.0 sen per share, payable on 22nd November 2018 was declared. (The Edge Daily)

• Hiap Teck Venture Bhd’s 4QFY19 net loss narrowed to RM20.0 mln, from RM137.9 mln recorded in the previous corresponding quarter, due to reduced operating costs. Revenue for the quarter rose 42.5% Y.o.Y to RM325.3 mln.

• For FY19, cumulative net profit stood at RM28.0 mln vs. a net loss of RM103.0 mln recorded in the previous year. Revenue for the year grew 5.1% Y.o.Y to RM1.13 bln. (The Edge Daily)

• Harrisons Holdings (Malaysia) Bhd has confirmed its venture into the retail business in Singapore via the acquisition of the Famous Amos cookies business for S$5.7 mln. Upon completion of the deal, Amos will become a 68.0% indirect subsidiary of Harrisons. (The Edge Daily)

• The external auditor of Perisai Petroleum Teknologi Bhd has warned of a material uncertainty concerning the group's financial statements for the second year running. Messrs Baker Tilly Monteiro Heng issued the "Material Uncertainty Related to Going Concern" statement in respect of Perisai's audited results for the financial year ended 30th June 2018. (The Edge Daily)

• Tropicana Corp Bhd plans to jointly develop two plots of land it owns in Selangor into a residential development. Its wholly-owned unit Tropicana Harapan Sdn Bhd (THSB), which holds the title to the plots, together with THSB's unit Vivascape Sdn Bhd, has inked a joint venture agreement with Matrimont Development Sdn Bhd, under which Matrimont will take a 49.0% stake in Vivascape and THSB 51%.0. (The Edge Daily)  

Source: Mplus Research - 28 Sept 2018