Surprise Breakout, Looks To Head Higher

• The FBM KLCI extended its gains for the second consecutive session, mainly due to the strong rally in Petronas Chemicals. The lower liners maintained its upward momentum – led by the FBM Small Cap (+0.7%), while the broader market closed positively, with all of its twelve sectors in the green.

• Market breadth was bullish with 517 winners against 385 losers, while traded volumes was flattish at 2.81 bln (+2.0%) shares due to the lack of trading catalysts.

• On the FBM KLCI, key winners include Petronas Chemicals (+33.0 sen), Tenaga Nasional (+32.0 sen), Kuala Lumpur Kepong (+26.0 sen), Hong Leong Bank (+18.0 sen) and Top Glove (+15.0 sen). Significant advancers on the broader market were Heineken Malaysia (+60.0 sen), Dutch Lady (+58.0 sen), Hong Leong Industries (+28.0 sen), Fraser & Neave (+24.0 sen) and MI Technovation (+22.0 sen).

• In contrast, BAT (-98.0 sen), Aeon Credit (-38.0 sen), Southern Acids (-10.0 sen) and DKLS Industries (-9.0 sen) topped the broader market decliners list, alongside Guan Chong (-15.0 sen) following its cash call proposal. Meanwhile, Nestle (-30.0 sen), Press Metal (-6.0 sen), Maxis (-5.0 sen), Petronas Dagangan (-4.0 sen) and Dialog (-3.0 sen) were the biggest losers on the local bourse.

• Japanese shares rose on Tuesday – mostly on gains in defensive stocks as investors turned cautious amid the ongoing U.S.-China trade talks. The Nikkei gained 0.1% but its regional peers like the Hang Seng index (-0.4%) and the Shanghai Composite (+0.1%) remained pressured by slowing economic growth in China.  Main U.S. indices posted marginal gains after a volatile session, owing to the gains in retailers while investors monitor the FOMC minutes due Wednesday. The S&P 500 rose 0.2%, boosted by Walmart following stronger-than-expected quarterly earnings, while the Nasdaq closed higher for the seventh-day running. The Dow also eked out gains on Tuesday’s close.

• Earlier, European stocks were mainly downward pressured, weighed down by the weakness in HSBC due to disappointing earnings performance. The FTSE was 0.6% lower as London remains shrouded in Brexit woes, on top of soft wages data and a stronger Pound. The CAC (-0.2%) also retreated, although the DAX beat the regional trend and closed slightly higher.

The Day Ahead

• The FBM KLCI performed better-thananticipated yesterday after renewed buying on selective index linked stocks lifted it past the 1,700 points level. While we continue to think that the gains were largely superficial and not on fundamental gains, we think that key index is attempting to build up momentum to break out of its rangebound trend over the past two months.

• The breakout of the 1,700 points level could signal further gains ahead, albeit on a cautious note, as market players also react to the prospects of a trade agreement between the U.S. and China, albeit there remains no significant change to Malaysia’s equity market fundamentals.

• Nevertheless, we see construction and construction related stocks poised for a positive response to the potential revival of the East Coast Rail Link after the government said that the project could be revived and built at a lower cost. In the interim, the FBM KLCI is likely to face hurdles at the 1,708 and 1,718 levels, while the 1,700 points level will serve as the main support for now, followed by the 1,693 level.

• The lower liners and broader market shares, meanwhile, are still looking toppish after their gains over the past two months. Hence, we continue to think that their upsides will be limited as fresh buying is likely to wane.

COMPANY BRIEF

• Sunway Construction Group Bhd has secured a RM781.3 mln contract from Tenaga Nasional Bhd for the power giant's phase two of the headquarters campus development in Bangsar. The project is for 26 months from the date of commencement which will be determined by the parties. This latest award increased SunCon’s outstanding order book to RM6.00 bln. (The Star Online)

• Boustead Holdings Bhd is disposing its Royale Chulan Bukit Bintang Hotel business to Singapore-based Hotel Royal Ltd for RM197.0 mln. As part of the terms, Hotel Royal is granted an exclusivity period of one month to conduct a due diligence on the hotel. (The Edge Daily)

• Hup Seng Industries Bhd’s 4Q2018 net profit fell 11.4% Y.o.Y to RM12.7 mln as a result of higher cost of sales and weaker margins. Revenue for the quarter declined marginally by 0.4% Y.o.Y to RM85.9 mln.

• For 2018, cumulative net profit slipped 3.4% Y.o.Y to RM43.0 mln. Revenue for the year, however, rose 2.6% Y.o.Y to RM307.4 mln. (The Edge Daily)

• Asia Brands Bhd has aborted its plan to undertake a private placement exercise, which would have seen it issuing up to 20.0% of its enlarged share capital to new investors to raise RM23.3 mln. It will not proceed with the implementation of the private placement as the company had achieved its objective to raise funds from the rights issue for the repayment of the Islamic Medium Term Notes (Tranche 1, Series 3) of RM40.0 mln due on 18th March 2019. (The Edge Daily)

• Hibiscus Petroleum Bhd's 2QFY19 net profit soared 353.9% Y.o.Y to RM50.1 mln, on additional contribution from its recently-acquired North Sabah assets and higher production efficiency at its Anasuria Cluster in the UK. Revenue for the quarter jumped 117.1% Y.o.Y to RM165.2 mln.

• For 1HFY19, cumulative net profit surged 587.6% Y.o.Y to RM150.1 mln. Revenue for the period expanded 291.0% Y.o.Y to RM525.1 mln. (The Edge Daily)

• Pesona Metro Holdings Bhd has bagged a contract worth RM408.8 mln from Malaysian Resources Corp Bhd (MRCB) for superstructure works for a mixed development in Seksyen 98.

• Separately, it said its Pembinaan KaleighPesona Metro joint venture (JV) has mutually terminated another project worth RM371.4 mln in relation to the civil works for Section 6 of the Kapar Interchange to Asam Jawa Interchange of the privatisation of the West Coast Expressway.

• The termination comes with a settlement sum of RM7.2 mln payable by the main contractor — Konsortium Kontraktor Sdn Bhd-Pembinaan Kaliegh JV to the Pembinaan Kaleigh-Pesona Metro JV. (The Edge Daily)

• KPJ Healthcare Bhd’s 4Q2018 net profit fell 12.5% Y.o.Y to RM53.3 mln due to higher effective tax rate and losses from the discontinued Australian operations. Revenue for the quarter, however, rose 3.6% Y.o.Y to RM863.4 mln.

• For 2018, cumulative net profit climbed 10.8% Y.o.Y to RM179.4 mln. Revenue for the year added 4.0% Y.o.Y to RM3.31 bln. (The Edge Daily)

• GHL Systems Bhd has entered into a merchants and aggregator transaction acceptance agreement with Bank Negara Indonesia (BNI). The agreement will enable GHL Indonesia to manage merchant transactions and allow them to receive electronic payments through EDC terminals (electronic data capture), QR (mobile payments), mPOS (mobile sales points) or other acceptance methods as determined by both parties. (The Edge Daily)

• WCE Holdings Bhd’s 3QFY19 net profit grew 7.4% Y.o.Y to RM10.3 mln on lower taxation. Revenue for the quarter, however, fell 19.9% Y.o.Y to RM123.3 mln.

• For 9MFY19, cumulative net profit fell 21.7% Y.o.Y to RM21.7 mln. Revenue for the period declined 9.2% Y.o.Y to RM493.1 mln. (The Edge Daily)  

Source: Mplus Research - 20 Feb 2019