Sentiments Still Weak

• The FBM KLCI slid lower in the final hour ahead of the holiday-thinned trading session. All the lower liners - the FBM Fledgling (-0.8%), the FBM Small Cap (- 1.4%) and the FBM Ace (-0.1%) tumbled, alongside the majority of the broader market. The Technology (-3.5%) sector was the worst hit on concerns of worsening growth outlook of major semiconductors following a trade ban on Huawei by the U.S. last Friday.

• Market breadth was dampened as decliners exceeded the advancers on a ratio of 604-to-215 stocks. Traded volumes, meanwhile, dwindled to 1.80 bln (-5.8%) shares on the back of a broad selldown across global equities.

• Key-index decliners were Malaysia Airports (-20.0 sen), IHH Healthcare (- 16.0 sen), Genting (-12.0 sen), Petronas Gas (-10.0 sen) and Digi (-8.0 sen). Other broader market underperformers, meanwhile, include BAT (-66.0 sen), United Plantations (-56.0 sen), Malaysian Pacific Industries (-40.0 sen), Apex Healthcare (-25.0 sen) and Pentamaster (-24.0 sen).

• In contrast, broader market winners were Sam Engineering (+19.0 sen), Aeon Credit (+14.0 sen), YNH Property (+12.0 sen), Rapid Synergy (+11.0 sen) and Oriental (+8.0 sen). Top performers on the Main Board include giant glovemakers like Top Glove (+11.0 sen) and Hartalega (+10.0 sen), followed by Nestle (+80.0 sen), RHB Bank (+14.0 sen) and Hong Leong Financial Group (+12.0 sen).

• Key regional indices eked-out gains as investors take a breather from the ongoing trade tensions after U.S. temporary eased the trade restrictions on Huawei. The Nikkei rose marginally after a volatile session, albeit weighed down by losses in Suzuki Motor. The Hang Seng Index also advanced in the eleventh hour, although the Shanghai Composite ended lower amid lingering fears of a full-blown trade war. ASEAN equities, meanwhile, closed mixed.

• U.S. benchmark bourses were splashed in the red as the earnings season rolls on. The Dow (-0.4%) closed in the negative territory, weighed down by Apple on expectations of weaker growth outlook and losses in giant retailers. Tech-laden indices like S&P500 (-0.3%) and Nasdaq (-0.5%) also followed suit and ended lower on Wednesday’s close.

• London equities closed with meagre gains after rebounding from its earlier losses, following U.K. Prime Minister Theresa May’s offer to vote for a second referendum on Brexit. The FTSE inched higher, although gains were capped by losses in Marks and Spencer on downbeat quarterly earnings. The DAX also rallied, although the CAC (-0.1%) declined amid the weakness in banks and autos-related stocks.

The Day Ahead

• Amid the continuing uncertainties in the global market, we see further near-term weakness on Bursa Malaysia as sentiments are also feeble. As it is, overall market sentiments remain dour amid the heightening U.S.-Sino trade war that is no closer to a resolution.

• While there have been bouts of support on the index-linked stocks, the support has be flimsy at best with selling into strength options sending most stock lower. At the same, market interest remains thin amid the ongoing market uncertainties that will also lead to lesser support. Domestically, there are also few noteworthy leads to help shore up sentiments. Therefore, the weakness on the FBM KLCI is likely to persist that could see the key index breach the 1,600 support to the 1,595 and 1,593 levels. The resistances, meanwhile, are at 1,610 and 1,620 respectively.

• The weak sentiments are also sending more retail players to the sidelines and this will prolong the ongoing downtrend streak. As it is, there is increased selling into strength activities of late amid the increasingly challenging market environment and we see few signs of the trend abating for now. COMPANY BRIEF

• KUB Malaysia Bhd is targeting to dispose more than 2,270 ha. of plantation land and a mill in Sarawak to increase its cash flow. The group is currently in advance stage for the disposal. The loss making firm has been disposing its non-core assets including some its investment properties and entire interest in food and beverage businesses A&W Malaysia for RM34.0 mln in 2018. (The Star Online)

• IOI Corp Bhd’s 3QFY19 net profit plunged 88.1% Y.o.Y to RM245.8 mln after the inclusion of disposal gains that saw RM1.6 bln recorded from the divestment of a 70% equity interest in resourcebased manufacturing business, Loders Croklaan Group B.V in 1Q2018. Revenue for the quarter, however, increased 8.6% to RM1.90 bln.

• For 9MFY19, cumulative net profit sank 80.7% Y.o.Y to RM585.1 mln. Revenue for the period declined marginally by 0.6% Y.o.Y to RM5.65 bln. (The Star Online)

• SAM Engineering & Equipment (M) Bhd’s 4QFY19 net profit rose 44.8% Y.o.Y to RM22.4 mln, on higher aerospace revenue and after the company's equipment segment registered gain on disposal of land and buildings. Revenue for the quarter climbed 16.2% Y.o.Y to RM195.8 mln.

• For FY19, cumulative net profit added 24.8% Y.o.Y to RM78.5 mln. Revenue for the year improved 22.0% Y.o.Y to RM755.0 mln. (The Edge Daily)

• Sunway Bhd’s 1Q2019 net profit rose 13.8% Y.o.Y to RM136.4 mln on stronger contributions from most business segments except quarry and trading & manufacturing. Revenue for the quarter, however, retreated 12.3% Y.o.Y to RM1.12 bln. (The Edge Daily)

• MAA Group Bhd clarified that the offer price made by Melewar Industrial Group Bhd to privatise MAA is not set in stone as the rules of the Takeover Code issued by the Securities Commission do not impose any restriction on offer price revisions under the proposed selective capital reduction.

• As such, the joint offerors may, at their discretion, propose a revised offer price, if all parties involved (including the independent adviser and the shareholders of the company) are given sufficient time to consider the revised offer price, prior to the extraordinary general meeting. (The Edge Daily)

• Barakah Offshore Petroleum Bhd faces yet another setback as its wholly-owned major subsidiary, Kota Laksamana 101 Ltd (KL101) has defaulted on its instalment payments to the ExportImport Bank of Malaysia Bhd (Exim Bank). On 17th May 2019, KL101 received a notice of demand for the outstanding US$2.7 mln (approximately RM11.1 mln) owing under a 2014 facility agreement. (The Edge Daily)

• UMW Holdings Bhd’s 1Q2019 net profit rose 16.8% Y.o.Y to RM86.5 mln on stronger contributions from all three of its core business segments. Revenue for the quarter rose 14.5% Y.o.Y to RM2.77 bln. (The Edge Daily)

• Dagang NeXchange Bhd’s (DNeX) 1Q2019 net profit fell 26.5% Y.o.Y to RM11.9 mln, on lower earnings from its core business segments. Revenue for the quarter decreased 3.0% Y.o.Y to RM69.0 mln. (The Edge Daily)

• Multi Sports Holdings Ltd has entered into a Memorandum of Understanding (MoU) with construction firm, Southern Score Sdn Bhd (SSSB) on 21st May 2019 which will entail the transferance of its listing status to a new entity to be set up by both parties. This is part of Multi Sport’s proposed restructuring plan to regularise its financial position. (The Edge Daily)

• Seacera Group Bhd has been a served a letter of demand for payment of RM19.3 mln by AmBank Islamic Bhd in respect of total amount outstanding and due payable under the Murabahah Tawarruq Term Financing-I and Cashline-i.

• It is required to make the full settlement within seven days from 15th May 2019, failing which the bank shall proceed with necessary actions against the company. (The Edge Daily)

• Pos Malaysia Bhd’s 4QFY19 net loss stood at RM141.1 mln vs. a net profit of RM29.0 mln recorded in the previous corresponding quarter due to widening losses in its mail segment and RM39.6 mln of impairment charges from the loss of goodwill in Pos Logistics. Revenue for the quarter fell 8.9% Y.o.Y to RM594.7 mln.

• For FY19, cumulative net loss stood at RM165.8 mln vs. a net profit of RM93.3 mln recorded in FY18. Revenue for the year declined 4.8% Y.o.Y to RM2.36 bln. (The Edge Daily)

• Perdana Petroleum Bhd’s 1Q2019 net loss narrowed to RM32.9 mln, from RM66.7 recorded in the previous corresponding quarter, thanks to higher utilisation rate of its vessels and a foreign exchange (forex) gain. Revenue for the quarter rose 53.2% Y.o.Y to RM25.7 mln. (The Edge Daily)

• Velesto Energy Bhd’s 1Q2019 net loss stood at RM22.2 mln vs. a net profit of RM5.0 mln registered in the previous corresponding quarter, as it only booked a net foreign exchange gain of RM18.2 mln arising from an early settlement of a revolving credit in 1Q2018. Revenue for the quarter, however, gained 4.3% Y.o.Y to RM127.0 mln. (The Edge Daily)  

Source: Mplus Research - 23 May 2019