Delayed Recovery Still In The Offing

• The FBM KLCI lingered mostly in the negative territory before closing lower at the end of the session, weighed down by losses in selected heavyweights and the subdued mood in regional stockmarkets. Most of the lower liners were painted red amid the broad decline in the broader market. Defensive sectors like the Consumer Products and Services, REITs, Healthcare, and Telecommunication and Media, however, bucked the general downtrend.

• Market breadth was negative as decliners outrun the winners on a ratio of 447-to-318 stocks, while traded volumes inched lower by 3.1% 2.0 bln shares as investors await the conclusion of the U.S. Federal Reserve’s meeting tomorrow.

• More than half of the FBM KLCI constituents fell, dragged down by Petronas Gas (-38.0 sen), Hong Leong Bank (-20.0 sen), Kuala Lumpur Kepong (-20.0 sen), Petronas Dagangan (-14.0 sen) and MISC (-13.0 sen). Notable decliners on the broader market were Malaysian Pacific Industries (-15.0 sen), Focus Lumber Bhd (-12.0 sen), Batu Kawan (-10.0 sen), Can-One (-8.0 sen) and Ken Holdings (-8.0 sen).

• In contrast, the biggest gainers on the broader market include Heineken Malaysia (+RM1.16), Allianz (+78.0 sen), Carlsberg (+50.0 sen), United Plantations (+48.0 sen) and MBM Resources (+33.0 sen) after the group’s net profit grew more than 100.0% in the 2Q2019. Meanwhile, Nestle (+80.0 sen), Genting Malaysia (+4.0 sen) and Axiata (+3.0 sen) topped the key index’s winners list.

• Japanese equities tumbled amid ongoing geopolitical uncertainties as the Nikkei fell 0.3%, weighed down by Softbank Group. The Shanghai Composite meanwhile, closed mostly unchanged, despite the minor gains on the Hang Seng Index (+0.2%). Most ASEAN stockmarkets retreated on Wednesday.

• Retailers led the gainers in major U.S. indexes after retail chain operators like Target and Lowe outperformed analysts’ earnings expectations. Consequently, the Dow (+0.9%), the S&P 500 (+0.8%) and the Nasdaq (+0.9%) all closed higher. • European equities rebounded as investors shrugged off the political uncertainties in Italy on hopes of additional government stimulus ahead of the Jackson Hole symposium. The FTSE, the DAX and the CAC added 1.1%, 1.7% and 1.3% respectively.

THE DAY AHEAD

• The key index’s recovery stalled yesterday and keeping it in the oversold position and pushing it further below the 1,600 psychological level. However, with global equities continuing to make amends, it will be difficult to ignore the positivity and we think that Malaysian equities are already due for a near term rebound.

• While we think the improvements in the global market environment could aid the overdue rebound, the recovery could be measured due to the lack of fresh buying impetuses. As it is, market conditions are little changed from its cautious state due to the ongoing trade disputes and growing fears of a slowing global economy. Hence, we now think that the 1,600 points level will be the immediate hurdle, followed by the 1,610 level. The 1,590 level is still the near term support, followed by the 1,580 level.

• The lower liners and broader market shares are also dithering amid the still uncertain market outlook and we continue to think that much stronger catalysts are required to provide the much needed lift. Still, we think there could be bouts of upsides amid the mildly improved sentiments that could prompt some bargain hunting activities over the near term.

COMPANY BRIEF

• Freight Management Holdings Bhd’s 4QFY19 net profit sank 74.3% Y.o.Y to RM1.1 mln, mainly due to higher share of losses from an associate in tug and barge services and impairment of its assets. Revenue for the quarter, however, rose 10.1% Y.o.Y to RM143.0 mln.

• For FY19, cumulative net profit declined 30.9% Y.o.Y to RM13.6 mln. Revenue for the year, however, gained 6.6% Y.o.Y to RM545.4 mln. (The Star Online)

• MSM Malaysia Holdings Bhd’s 2Q2019 net loss stood at RM67.3 mln vs. a net profit of RM14.3 mln recorded in the previous corresponding quarter, dragged down by rising cost, decline in selling prices of refined products, increase in finance cost, as well as the commercialisation cost of its factory in Johor that includes depreciation, contributed to the losses. Revenue for the quarter fell 17.3% Y.o.Y to RM474.0 mln.

• For 1H2019, cumulative net loss stood at RM74.3 mln, compared to a net profit of RM30.1 mln posted in the previous corresponding period. Revenue for the period dropped 14.5% Y.o.Y to RM959.5 mln. (The Star Online)

• Berjaya Assets Bhd’s (BAssets) 4QFY19 net loss widened to RM83.1 mln, from a net loss of RM30.2 mln registered in the previous corresponding quarter as a result of higher deferred taxes provision, mainly on fair value changed in investment properties amounting to RM59.3 mln, following the recent increase in Real Property Gains Tax (RPGT) tax rates. Revenue for the quarter, however, jumped 110.9% Y.o.Y to RM102.3 mln.

• For FY19, cumulative net loss widened to RM82.6 mln, from a net loss of RM33.0 mln recorded in FY18. Revenue for the year, however, increased 5.8% Y.o.Y to RM330.7 mln. (The Edge Daily)

• Amway (Malaysia) Holdings Bhd’s 2Q2019 net profit jumped 147.9% Y.o.Y to RM18.5 mln due to higher sales and lower import costs on the back of the favourable foreign exchange impact. Revenue for the quarter inched up 1.3% Y.o.Y to RM230.8 mln.

• For 1H2019, cumulative net profit grew 88.6% Y.o.Y to RM29.1 mln. Revenue for the period climbed 3.3% Y.o.Y to RM478.3 mln. An interim dividend of five sen per share, payable on 26th September 2019, was declared. (The Edge Daily)

• Jaks Resources Bhd’s 2Q2019 net profit surged 192.7% Y.o.Y to RM37.3 mln as it recorded higher earnings in its construction division, contributed by engineering, procurement and construction works in Vietnam. Revenue for the quarter rose 85.6% Y.o.Y to RM315.4 mln.

• For 1H2019, cumulative net profit jumped 115.5% Y.o.Y to RM65.9 mln. Revenue for the period increased 64.6% Y.o.Y to RM613.2 mln. (The Edge Daily)

• Sasbadi Holdings Bhd has inked a Memorandum of Understanding (MoU) with a publication under China’s Ministry of Education to develop Special Education Teaching Materials to be used in Malaysia and a Situational English Learning Programme to be used by learners in China. (The Edge Daily)

• Box-Pak (M) Bhd’s 2Q2019 net loss widened to RM7.4 mln, from a net loss of RM1.7 mln recorded in the previous corresponding quarter, hurt by its Myanmar operations and doubtful debts. Revenue for the quarter, however, rose 5.9% Y.o.Y to RM157.7 mln.

• For 1H2019, cumulative net loss stood at RM13.8 mln, against a net loss of RM7.7 recorded in the previous corresponding period. Revenue for the period, however, added 7.1% Y.o.Y to RM307.6 mln. (The Edge Daily)

Source: Mplus Research - 22 Aug 2019