Delayed Rebound

• The FBM KLCI kicked off the week on a subdued tone, owing to the weakness in telco heavyweights on concerns over the potential Telenor-Axiata merger. All of the lower liners – the FBM Small Cap (+0.5%), the FBM Ace (+0.7%) and the FBM Fledgling (+0.1%), however, maintained its upward trajectory, together with the general broader market.

• Market breadth remained positive as gainers maintained its upperhand against the losers on a ratio of 428-to- 349 stocks. Traded volumes, meanwhile, jumped by 23.7% 2.21 bln shares amid rotational play in the lower liners.

• Amongst the top blue-chip losers were Nestle (-70.0 sen), Kuala Lumpur Kepong (-24.0 sen), Axiata (-13.0 sen), Hong Leong Financial Group (-6.0 sen) and Dialog (-5.0 sen). Other laggards include BAT (-22.0 sen), Lafarge Malaysia (-14.0 sen), Advanced Packaging (-10.0 sen), DKLS Industries (-10.0 sen) and Sarawak Oil Palms (- 10.0 sen).

• On the opposite side of the trade, Panasonic Manufacturing (+52.0 sen), Bursa Malaysia (+36.0 sen), Fraser & Neave (+26.0 sen), UMW Holdings (+20.0 sen) and Naim (+18.5 sen) powered higher. Petronas-linked companies like Petronas Chemicals (+13.0 sen) and Petronas Dagangan (+6.0 sen) also rallied, alongside other heavyweights like Hong Leong Bank (+10.0 sen), Top Glove (+5.0 sen) and Malaysia Airports (+3.0 sen) amid its ongoing lawsuit with AirAsia.

• Chinese and Hong Kong stocks continued to rebound strongly, following recovery in bond yields amid after the People’s Bank of China unveiled new monetary reforms in a bid to support its slowing economy. The Shanghai Composite and the Hang Seng Index jumped 2.1% and 2.2% respectively, while the Nikkei gained 0.7%, boosted by Family Mart after the latter announced its plan to raise its stake in its retail chain operator Pan Pacific International. ASEAN equities were also mostly positive.

• The Dow surged more than 200 points amid renewed buying-interest in riskier assets as the results season rolls on and Washington extended a temporary reprieve to China’s Huawei. The S&P 500 and the Nasdaq also gained 1.3% and 1.4% respectively.

• European benchmark indices ended higher as investors look forward to more stimulus from global central banks like. The FTSE rose 1.0% despite the ongoing Brexit uncertainties, while both the DAX and CAC added 1.3%.

THE DAY AHEAD

• While we expected the key index to mount a rebound, the selling was more pronounced yesterday that resulted in the key index staying on the insipid side. Nevertheless, the broader market conditions were generally on the mend and with global indices also tipping higher overnight, we think that the key index could mount a delayed recovery.

• Even as we think that Malaysian equities are due for a recovery after their steep falls recently, we continue to think that market conditions have yet to improve significantly as major market impediments remain. The U.S-China trade dispute has eased slightly, but remains far from resolved. At the same time, the global economic prognosis remains fraught by slowdown fears.

• Therefore, we continue to think that any potential recovery on Bursa Malaysia is likely to remain modest for now and we see the key index continuing to tether around the 1,600 points level, which is its immediate resistances. Up above, the resistances are at the 1,60-1,620 levels. On the other hand, the supports are at 1,590 and 1,580 respectively.

• The broader market shares are faring better than the index-linked stocks and we see their recovery continuing over the near term as retail players capitalise on the more positive near term market undertone to pick-up some of the beaten down stocks. There will also be bouts of quick profit activities that could place a lid on the potential upsides, in our view.

COMPANY BRIEF

• Utusan Melayu (M) Bhd’s 2Q2019 net losses stood at RM3.9 mln vs. a net profit of RM18.9 mln recorded in the previous corresponding quarter, due to reduction in publishing, distribution and advertising contribution. Revenue for the quarter fell 59.4% Y.o.Y to RM25.9 mln.

• For 1H2019, cumulative net losses stood at RM12.1 mln vs. a net profit of RM13.0 recorded in the previous corresponding period. Revenue for the period declined 55.9% Y.o.Y to RM52.7 mln.

• Separately, Utusan will cease publication on tomorrow amid its tight monetary condition and also risk delisting from Bursa Malaysia. (The Star Online)

• Kronologi Asia Bhd's 2Q2019 net profit rose 12.7% Y.o.Y to RM5.1 mln, on the back of higher contribution from its Hong Kong/Taiwan and India operations, and a maiden contribution from the recent Sandz acquisition. Revenue for the quarter gained 28.8% Y.o.Y to RM52.1

• For 1H2019, cumulative net profit grew 34.4% Y.o.Y to RM8.8 mln. Revenue for the period climbed 6.8% Y.o.Y to RM84.6 mln. (The Edge Daily)

• Hock Seng Lee Bhd (HSL) has secured a construction contract worth RM104.5 mln from the Sarawak Public Works Department for a project in Sibu. The scope of works includes piling works, earth/sand filling, geotechnical work, drainage and road pavement. The contract period is 24 months and work is expected to commence in September 2019. (The Edge Daily)

• Icon Offshore Bhd is making a cash call to raise up to RM250.0 mln fresh capital and to restructure RM370.7 mln of debt, partly by issue of new shares. Its single largest shareholder, Ekuinas Nasional Bhd, which holds a 42.3% stake, is committed to subscribe up to RM183.0 mln of the proposed rights issue that is sweetened by free warrants.

• Icon Offshore will also undertake a share consolidation exercise and also restructuring its debt by executing supplemental agreements with its various lenders. (The Edge Daily)

• Guan Chong Bhd’s 2Q2019 net profit rose 41.8% Y.o.Y to RM60.1 mln, thanks to higher sales volume of cocoa products. Revenue for the quarter gained 53.2% Y.o.Y to RM753.1 mln.

• For 1H2019, cumulative net profit grew 38.6% Y.o.Y to RM114.1 mln. Revenue for the period also added 38.6% Y.o.Y to RM1.40 bln. A second interim dividend of 1.5 sen per share, payable on 27th September 2019, was declared. (The Edge Daily)

• OSK Holdings Bhd is partnering Japan’s Marubeni Corp to jointly bid for a large scale solar photovolatic plant in Peninsular Malaysia, under the government’s third cycle of the scheme (LSS3). The two parties signed a term sheet on 19th August 2019, under which OSK holds a 51.0% participating interest and Marubeni the balance 49.0%, to jointly develop, operate and maintain the LSS3 project. (The Edge Daily)

• Mintye Bhd’s controlling shareholder, Yatee & Sons Sdn Bhd has offered to take the group private. Yatee offered to pay shareholders who hold the remaining 24.8 mln shares or a 40.8% stake, a total capital repayment of RM32.3 mln or RM1.30 per share, which is a 35.4% premium to the last closing price of 96 sen last Friday. (The Edge Daily)

• Sunway Construction Bhd’s (SunCon) 2Q2019 net profit fell 7.2% Y.o.Y to RM33.2 mln, on lower revenue from construction segment and higher-income tax expenses. Revenue for the quarter contracted 19.1% Y.o.Y to RM440.2 mln.

• For 1H2019, cumulative net profit dropped 10.3% Y.o.Y to RM64.2 mln. Revenue for the period contracted 17.7% Y.o.Y to RM880.2 mln. (The Edge Daily)

Source: Mplus Research - 20 Aug 2019