Nowhere To Go

• The FBM KLCI ended marginally lower after a volatile session, weighed down by the weakness in energy and banking heavyweights. The FBM Small Cap (+0.3%) extended its gains, although the FBM Ace (-0.3%) and the Fledgling (- 0.03%) slipped into the red. The broader market, meanwhile, closed mixed as losses in the Energy sector offset the gains in Technology sector.

• Market breadth turned positive as advancers overtook the decliners on a ratio of 367-to-352 stocks, albeit trade volumes remained thin at 1.84 bln shares (+0.7%), as investors closely monitor the outcome of the G20 summit in Osaka, Japan.

• Significant key-index decliners were Petronas Gas (-40.0 sen), Petronas Dagangan (-14.0 sen), Tenaga Nasional (-10.0 sen), Hong Leong Bank (-8.0 sen) and Ambank (-6.0 sen), while broader market losers include Panasonic Manufacturing (-40.0 sen), BAT (-40.0 sen), Harrisons Holdings (-9.0 sen), Yinson (-9.0 sen) and UMS Holdings (- 9.0 sen).

• On the other side, broader market outperformers on Thursday were Carlsberg (+20.0 sen), Bursa Malaysia (+19.0 sen), Time DotCom (+13.0 sen), Sam Engineering (+13.0 sen) and Ayer Holdings (+10.0 sen). Key index winners, meanwhile, consists of Public Bank (+14.0 sen), Genting (+6.0 sen), Maxis (+6.0 sen) and MISC (+5.0 sen).

• Leading regional indices rebounded from their recent losses, fuelled by a temporary trade truce between Washington and Beijing as the G20 summit gets underway. The Nikkei snapped a two-day loss and closed up by 1.2% at its session’s high. Meanwhile, the Shanghai Composite and the Hang Seng index also jumped 0.7% and 1.4% higher, together with the broader advance in ASEAN equities.

• Wall Street – the S&P 500 (+0.4%) and Nasdaq (+0.7%) ended mostly higher on hopes easing U.S.-Sino trade conflict and expectations of lower interest rates. The Dow, however, ended marginally in the red, weighed down by Boeing following another safety risk in its Boeing jets.

• U.K. equities finished mostly in the red as the FTSE continued to trade lower amid renewed Brexit concerns, together with the CAC (-0.1%). The DAX, however, rebounded from its intraday low in the later session to close at 12,271.0 points.

THE DAY AHEAD

• We continue to think that the mixed-tolower trend will prevail to the end of the week amid the lack of fresh leads for market players to follow. Attention is now on tomorrow’s meeting between President Trump and President Xi to see if there will be progress in their trade talks.

• Back home, there are also few impetuses to entice fresh buying after the recent gains of about 80 points which is already overdone. This has left the key index at toppish levels and even after the last few sessions’ pullback, conditions remain toppish that could prompt further profit taking activities, in our view. With the mixed conditions likely to continue, the support remains at the 1,670 and 1,660 levels. The resistances, meanwhile, are at 1,680 and 1,690 respectively.

• The mixed conditions are also expected to linger within the lower liners and broader market shares amid the lack of catalysts. This is expected to prolong the sideway trend as retail participation has also thinned substantially with the directionless market condition. The lack of following will further upsides at bay among the lower liner and broader market shares.

COMPANY UPDATE

• Kim Loong Resources Bhd’s 1QFY20 net profit slipped 27.9% Y.o.Y to RM14.5 mln, dragged down by the decline in average selling prices (ASP) of fresh fruit bunches (FFB), coupled with the sharp decline in crude palm oil (CPO) ASP during the quarter. Revenue for the quarter declined 28.6% Y.o.Y to RM169.0 mln.

• The results came in below expectations with its net profit only amounting to 17.3% of our previous full-year forecast of RM83.8 mln, with its revenue also coming below our expectations, amounting to 16.9% of our most recent FY20 estimate of RM1.00 bln.

Comments

• In view of the weaker-than-expected results, we trimmed our net profit forecast by 8.4% and 7.8% to RM76.8 mln and RM79.5 mln for FY20 and FY21 respectively to account for the steeperthan-expected decline in FFB and CPO ASPs.

• Despite that, we maintain our HOLD recommendation on KLR, but with a lower target price of RM1.15 (from RM1.26). Our target price is derived by ascribing an unchanged target PER of 14.0x to its revised FY20 EPS of 8.2 sen. The ascribed target PER is in line with the industry average of around 13.5x-15.5x

COMPANY BRIEF

• Gamuda Bhd is in favour of accepting the Federal Government's offer to take over all four toll concessionaires linked to the group for a combined RM6.20 bln at enterprise value. They are Lingkaran Trans Kota Holdings Bhd (Litrak), Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd (Sprint), Kesas Sdn Bhd and Projek SMART Holdings Sdn Bhd.

• Separately, Gamuda’s 3QFY19 net profit fell 14.6% Y.o.Y to RM176.0 mln as the group stopped recognising its share of SPLASH profits following the sale of the water treatment concessionaire at the end of 2018. Revenue for the quarter declined 16.1% Y.o.Y to RM1.04 bln.

• For 9MFY19, cumulative profit decreased 17.8% to RM521.2 mln. Revenue for the period, however, rose 2.3% Y.o.Y to RM3.07 bln. (The Edge Daily)

• Glomac Bhd's 4QFY19 net profit sank 57.6% Y.o.Y to RM10.0 mln due to allowance for foreseeable losses on property development and a write-back of accrued construction cost that was no longer required recorded in the previous corresponding quarter. Revenue for the quarter fell 13.5% Y.o.Y to RM80.9 mln.

• For FY19, cumulative net profit slipped 56.3% Y.o.Y to RM13.6 mln. Revenue for the year contracted 32.1% Y.o.Y to RM273.3 mln. (The Edge Daily)

• United Arab Emirates-based Aabar Investments PJS has ceased to be a substantial shareholder of RHB Bank Bhd after disposing of 231.0 mln shares. Following the disposal, Aabar would be left with a less than 5.0% stake. Following Aabar’s paring of its stake in RHB, the indirect interest held by International Petroleum Investment Company PJSC and Mubadala Investment Company PJSC are also no longer deemed substantial. (The Edge Daily)

• Sapura Energy Bhd’s 1QFY20 net loss narrowed to RM109.1 mln, from net loss of RM135.7 mln recorded in the previous corresponding quarter as it benefited from savings in finance costs after it repaid borrowings following the completion of certain corporate exercises it undertook. Revenue for the quarter jumped 92.9% Y.o.Y to RM1.63 bln. (The Edge Daily)

• Berjaya Corp Bhd’s 4QFY19 net profit stood at RM97.1 mln vs. a net loss of RM95.2 mln recorded in the previous corresponding quarter, thanks to higher profit from operations and a gain on disposal of a joint venture amounting to RM192.0 mln. Revenue for the quarter climbed 5.1% Y.o.Y to RM2.22 bln.

• For FY19, cumulative net loss narrowed to RM1.78 mln, from net loss of RM370.2 mln recorded in the previous year. Revenue for the year, however, declined 3.5% Y.o.Y to RM8.36 bln. (The Edge Daily)

• Icon Offshore Bhd has been slapped with a lawsuit for breach of contract in relation to the construction of a platform supply vessel (PSV). Labuan Shipyard & Engineering Sdn Bhd is seeking general damages, RM13.9 mln in outstanding claims consisting of costs allegedly incurred between 1st October 2014 and 9th March 2015 for the maintenance of the vessel, and claims that ISM had allegedly not made prompt and punctual payments of all milestone payments. (The Edge Daily)

• Eco World Development Group Bhd's 2QFY19 net profit dipped 4.5% Y.o.Y to RM41.2 mln, due to higher administrative and selling and marketing expenses. Revenue for the quarter slipped 1.2% Y.o.Y to RM543.2 mln.

• For 1HFY19, net profit rose 35.1% Y.o.Y to RM71.5 mln. Revenue for the period, however, fell 3.7% Y.o.Y to RM1.03 bln. (The Edge Daily)

Source: Mplus Research - 28 Jun 2019