Delayed Reaction To Positivity Of Global Equities

• The FBM KLCI experienced a short-lived boost only to give back the gains by the end of the session, weighed down by selling-pressure in selected heavyweights. The lower liners – the Small Cap (+0.6%), the FBM Fledgling (+0.6%) and the FBM Ace (+0.7%) finished higher, while the broader market was mostly positive.

• Market breadth was positive as winners maintained the upper hand with 468 stocks against 340 decliners. Traded volumes, however, inched lower by 2.4% to 2.63 bln shares on mild profit-taking activities.

• Blue-chip gauge underperformers include Nestle (-60.0 sen), IOI Corporation (-8.0 sen), PPB Group (-8.0 sen), Malaysia Airports (-5.0 sen) and Axiata (-5.0 sen). Laggards on the broader market were sin stocks like BAT (-82.0 sen) and Carlsberg (-18.0 sen), followed by Fraser & Neave (- RM1.34), Batu Kawan (-52.0 sen) and UMS (-14.0 sen).

• On the positive side, United Plantations (+26.0 sen), Heineken Malaysia (+18.0 sen), Malaysian Pacific Industries (+14.0 sen), Formosa Prosonic Industries (+13.0 sen) and Choo Bee Metal (+10.0 sen) rallied. Meanwhile, FBM KLCI gainers were IHH Healthcare (+10.0 sen), Press Metal (+9.0 sen), Hong Leong Bank (+8.0 sen), Petronas Chemicals (+7.0 sen) and Hong Leong Financial Group (+6.0 sen).

• Asian equities ended mostly on an upbeat note as investors digested the latest political news from the U.S. and the possibility of Washington postponing its proposed tariffs hikes on China goods, which is set for 2nd March. The Nikkei (+1.3%) closed near its two-month high – led by gains in Inpex after the latter raise its earnings forecast. The Shanghai Composite rallied 1.8%, boosted by IT linked stocks on expectations of more government support for core technology and innovation. The Hang Seng Index (+1.2%) also ended in the green, alongside the majority of ASEAN stockmarkets.

• U.S. stockmarkets advanced on hopes that the U.S. and China could hammer out a deal to end the protracted trade war. The Dow added 0.5% with the energy sector at the forefront, while the S&P 500 and Nasdaq closed higher by 0.3% and 0.1% respectively.

• Major European stockmarkets - The FTSE (+0.8%), the CAC (+0.4%) and DAX (+0.4%) extended their winning streak, taking cue from the positive global equity sentiment, fresh corporate earnings results and gains in mining stocks.

The Day Ahead

• Stocks on the FBM KLCI defied the region’s firmer performance as well as our expectation of tipping higher yesterday to leave it in a dour note at the close. It appears that stronger impetuses are needed to haul the key index higher, which remains few at the current juncture.

• Nevertheless, we think that key index could attempt to make some headway over the near term in tandem with the positivity in global equities that are buoyed by the prospects of a trade agreement between the U.S. and China. However, we still think that any upsides will be mild as fresh buying interest remains thin. Therefore, we continue to see the 1,690 level as the immediate resistance level, followed by the psychological 1,700 points level.

• It is a different scenario among the lower liners and broader market shares as they continue to make headway and recovering from their steep losses last year. However, the recent gains may have been overdone and we think that further upsides could be limited that could also set the stage for a consolidation for the gains to be digested.

COMPANY BRIEF

• Malaysia Marine and Heavy Engineering Holdings Bhd’s 4Q2018 net losses stood at RM25.2 mln vs. a net profit of RM28.1 mln recorded in the previous corresponding quarter, dragged down by the close-out of a significant project, lower conversion works and compressed margins in dry docking activities. Revenue for the quarter, however, increased 10.2% Y.o.Y to RM273.2 mln.

• For 2018, cumulative net loss stood at RM122.7 mln vs. net profit of RM34.2 mln recorded in the previous corresponding year. Revenue for the year, however, rose 1.8% Y.o.Y to RM974.4 mln. (The Star Online)

• HLB Ler Lum has served a notice to Vertice Bhd to resign as the external auditor of in line with the group’s policy to periodically rotate its auditors. The policy was adopted as a matter of good corporate governance to benefit from fresh perspective and views of another professional audit firm and thus, further enhance the value of audit. HLB Ler Lum has been the auditor of Vertice for over 10 years. (The Edge Daily)

• CB Industrial Product Holding Bhd (CBIP) has bagged four contracts worth a combined RM131.7 mln to build two palm oil mills, a palm kernel crushing plant and a biogas power generator plant. The contracts were awarded by Indonesian plantation companies PT Sanjung Makmur and PT Kodeco Agrojaya Mandiri.

• Sanjung Makmur awarded a RM44.8 mln contract to build a palm oil mill, with processing capacity of 45 tonnes of fresh fruit bunches (FFB) per hour within 18 months. Meanwhile, Kodeco Agrojaya Mandiri awarded three contracts totalling RM87.0 mln to build a palm oil mill with processing capacity of 60 tonnes of FFB per hour, a kernel crushing plant with processing capacity of 200 tonnes per day and a 1,600-kW biogas power generator plant. (The Edge Daily)

• KNM Group Bhd has secured a contract to supply a Dutch-based firm with PMEpressure vessels-separators for US$6.5 mln (RM26.4 mln). The contract is from Single Buoy Moorings Inc (SBM) and to be used for SBM’s Liza Unity floating production storage and offloading (FPSO) engineering, procurement, construction and installation project in the Starbroek block in Guyana, South America.

• The supply and delivery duration of the goods is for a period of 13 months, commencing from the date of the purchase orders respectively. (The Edge Daily)

• RHB Bank Bhd’s recently-launched US$300.0 mln senior unsecured notes, which is the third issuance under its US$5.00 bln Euro Medium Term Note (EMTN) programme, has been oversubscribed by six times. The order book at the final price guidance stood at over US$1.8 bln.

• The bank expects to complete the issuance of the senior notes by 19th February 2019. They will be listed on the Singaporean stock exchange and Labuan International Financial Exchange Inc. The senior notes are rated A3 by Moody’s Investors Service Inc. (The Edge Daily)

• Scomi Group Bhd and its wholly-owned subsidiary, Scomi Rail Bhd have collectively defaulted their RM315.9 mln bank facilities due to Malayan Banking Bhd (Maybank).

• Scomi Rail had received a notice of demand from Maybank for a sum of RM201.9 mln as the latter had failed to repay the bank facilities. Scomi Group also received a notice of demand owing to its failure to repay RM114.0 mln to Maybank.

• The bank is reserving the right to dispose of the shares of a subsidiary that was secured against the bank facilities, in the event the amount demanded is not paid. Both groups are in the process of negotiating a resolution with Maybank. (The Edge Daily)

• Utusan Melayu (Malaysia) Bhd is appealing a High Court ruling in favour of media company, Redberry Sdn Bhd which is seeking the return of an RM8.5 mln deposit paid to Utusan in April 2018. Utusan’s is appealing to the Court of Appeal against the High Court's decision in Redberry’s favour on 11th February 2019. (The Edge Daily)  

Source: Mplus Research - 14 Feb 2019