Still Tilted To The Downside

• The FBM KLCI could not build-on its previous two sessions momentum as the key index erased all its intraday gains before closing 0.2% lower yesterday. The lower liners – the FBM Small Cap (+0.5%), FBM Fledgling (+0.9%) and FBM ACE (+0.9%), however, all trended higher, while the broader market finished on a mixed note.

• Market breadth turned positive as winners beat losers on a ratio of 491-to- 400 stocks. Traded volumes climbed 19.4% to 4.77 bln shares as trading interest were centered towards the lower liners.

• More than half of the key index constituents fell, dragged down by Nestle (-50.0 sen), followed by Petronas Dagangan (-18.0 sen), Axiata (-6.0 sen), Maybank (-6.0 sen) and Tenaga (-6.0 sen). Amongst the biggest decliners on the broader market include Fraser & Neave (-26.0 sen), Ayer Holdings (-20.0 sen), BAT (-20.0 sen), KESM Industries (- 19.0 sen) and Far East Holdings (-17.0 sen).

• In contrast, significant gainers on the broader market were Dutch Lady (+30.0 sen), United Plantations (+18.0 sen), Hap Seng Plantations (+13.0 sen) and KKB Engineering (+18.0 sen). Destini jumped 7.0 sen after bagging a Pan Malaysia Petroleum Arrangement Contractors’ (PAC Operators Drilling programme) contract. Key winners on the local bourse were Top Glove (+8.0 sen), Press Metal (+7.0 sen), Malaysia Airport Holdings (+6.0 sen), Hartalega (+5.0 sen) and RHB Bank (+4.0 sen).

• Asia benchmark indices closed mostly lower as the Nikkei slipped 0.02% after falling into the negative territory in the final trading hour. The Shanghai Composite (-1.2%) extended its losses after China’s industrial production data for February 2019 only rose 5.3% Y.o.Y – the slowest expansion in 17 years, but the Hang Seng Index added 0.2%. ASEAN stockmarkets, meanwhile, closed mixed on Thursday.

• Wall Street closed on a mixed note after enduring a choppy trading session overnight as the Dow chalked up 0.03% gains amid the stalled trade deal between U.S. and China after a meeting between U.S. President Donald Trump and Chinese President Xi Jinping will be delayed until at least April 2019. On the broader market, the S&P 500 fell 0.1%, dragged down by the basic materials sector (- 0.8%), while the Nasdaq closed 0.2% lower.

• Earlier, major European indices – the FTSE (+0.4%), CAC (+0.8%) and DAX (+0.1%), all advanced as sentiment turned upbeat after British parliament voted to remove a key source of uncertainty by rejecting a no-deal Brexit. The decision paves a way for a delay to Brexit beyond the current 29th March 2019 deadline, whilst higher commodity prices also boosted the positive sentiment in the region.

The Day Ahead

• FBM KLCI listed stocks may continue to dither amid the lack of new catalysts to nudge stock prices higher. As it is, interest on the key index stocks remain under water from both local and foreign sources that are still tepid on their nearto-medium term outlook, particularly as earnings growth remains challenging. At the same time, there are renewed doubts over the U.S.-China trade talks that could keep the wary spell on the key index stocks for longer.

• As a result, we think the key index is set to end the week meekly with the downside bias still in play. However, we do not think that the selling pressure is immense and we think the supports at the 1,670 and 1,666 levels could provide a footing for the FBM KLCI over the near term. The resistances, meanwhile, are at 1,680 and 1,680 levels.

• While the key index stocks continue to be directionless, the FBM Small Cap, Fledgling and ACE Market stocks are bucking the generally weak market trend on Bursa Malaysia to head higher. After the gains yesterday, however, we think that profit taking activities may set-in ahead of the weekend. Still, we do not see this as a reversal as yet and we think that there are more gradual upsides on the above listed stocks as we think they will continue to benefit from bouts of bargain hunting activities.

COMPANY BRIEF

• Poh Kong Holdings Bhd’s 2QFY19 net profit rose 40.4% Y.o.Y to RM6.8 mln, from RM4.8 mln a year earlier, thanks to higher gold prices. Revenue, however, only inched marginally higher to RM273.1 mln, from RM270.0 mln last year. (The Star Online)

• Pesona Metro Holdings Bhd has secured a contract from MCT Bhd for the construction of three blocks of apartments in Cyberjaya, together with mechanical and electrical works, for RM238.5 mln. The 27-month project includes the construction of two blocks of buildings of 862 units and a third block containing 449 units. (The Edge Daily)

• Utusan Melayu (M) Bhd has sold two adjoining semi-detached factories in Taman Shamelin Perkasa, Cheras for RM13.5 mln to Berjaya Sports Toto Bhd. The original cost of investment for the two factories in 1994 was RM4.3 mln. (The Edge Daily)

• Berjaya Food Bhd has recorded a 3QFY19 net profit of RM9.0 mln, from a net loss of RM10.9 mln in the previous corresponding year, owing to higher profit contributions from its Starbucks operations as well as improved performance from its Kenny Rogers Roasters outlets. Subsequent to the improved performance, BFood declared a third interim dividend of one sen per share, payable on 26th April 2019. (The Edge Daily)

• Uzma Bhd was awarded a two-year contract for the provision of directional drilling services from Indonesia’s Pertamina Hulu Energi Onshore North West Java (PHE-ONJW). The contract was secured by Uzma’s 95.0%-owned indirect subsidiary PT Cougar Drilling Solutions Indonesia, is for two years till 25th February 2021, with an extension option.

• The contract amount and execution of the contract depends on work orders to be issued from time to time at the discretion of PHE-ONWJ. (The Edge Daily)

• Priceworth International Bhd, whose logging operations had been affected by a verification exercise, expects to restart operations at its plywood mill in Sandakan after it secured the return of 11,099 cu.m. of logs from the Sabah Forestry Department (SFD).

• In the meantime, Priceworth is also in the midst of completing their acquisition of Forest Management Unit 5 (FMU5). The company has agreed to pay the royalty, premium, conservation fee and related costs for the logs. (The Edge Daily)

• Revenue Group Bhd has obtained a money lending licence to operate as a money lender under the Moneylenders Act 1951 will be issued upon payment of the licence fee within 30 days. (The Edge Daily)

• Nestle (Malaysia) Bhd has been sued for RM139.3 mln by Mad Labs Sdn Bhd over unauthorised use of its QR code on Nestle’s products and packaging. Mad Labs is also seeking an order and injunction for Nestle to remove the said QR code from all of its products and packaging as well as to cease and desist from using and printing the code. Nestle is planning to contest the claim on grounds that the claims are unjustifiable. (The Edge Daily)  

Source: Mplus Research - 15 Mar 2019