The FBM KLCI erased all its intraday gains to finish lower as the key index extended its losses, falling 0.2% last Friday. Despite that, the FBM KLCI snapped a four consecutive weekly decline to close 0.9% W.o.W higher. The lower liners also ended mostly lower as the FBM Fledgling and FBM ACE slipped 0.1% and 0.2% each, while the broader market ended mixed.

• Market breadth remained slightly bearish as decliners pipped advancers on a ratio of 432-to-401 stocks. Traded volumes, however, rose 26.8% to 2.96 bln shares on rotational play among the broader market.

• Key losers on the local bourse were IOI Corporation (-15.0 sen), KLK (-12.0 sen), Hong Leong Financial Group (-10.0 sen), MISC (-8.0 sen) and Press Metal (-8.0 sen). Notable decliners on the broader market were Carlsberg (-96.0 sen), Genting Plantations (-28.0 sen), QL Resources (-22.0 sen), United Plantations (-22.0 sen) and Amway (- 20.0 sen).

• In contrast, major winners include Aeon Credit (+80.0 sen), Scientex (+43.0 sen), Heineken (+22.0 sen) and Fraser & Neave (+20.0 sen). KIP REIT added 1.5 sen after delivering a strong set of quarterly earnings. Meanwhile, Hong Leong Bank (+16.0 sen), Malaysia Airport Holdings (+9.0 sen), Ambank (+7.0 sen), Petronas Chemicals (+4.0 sen) and Tenaga (+4.0 sen) anchored the FBM KLCI winners list.

• Asian benchmark indices remain mostly in the red as the Hang Seng Index and Shanghai Composite fell 0.5% and 1.3% respectively after erasing all their intraday gains – the latter was bogged down by the sluggish 3Q2019 GDP data that expanded 6.0% Y.o.Y – the slowest pace since 1Q1992. The Nikkei, however, rose 0.2% after the Japanese Yen weakened against the Greenback. ASEAN equities, meanwhile, finished mostly lower last Friday.

• U.S. stockmarkets retreated as the Dow fell 1.0%, dragged down by reports on U.S. Department of Transportation is investigating whether Boeing (-6.8%) withheld information during the 737 Max's certification process. Likewise, the S&P 500 slipped 0.4%, while the Nasdaq declined 0.8%.

• European equities - the FTSE (-0.4%), CAC (-0.7%) and DAX (-0.2%), all slipped as U.K. president Boris Johnson faces an uphill task to getting a Brexit deal past British lawmakers. Market sentiment was also affected by the weak Chinese data.

The Day Ahead

• Market conditions were weaker-thanexpected last Friday that saw the key index heading south again to leave the market in an indifferent mode. The start of the week is unlikely to see much difference in the overall market conditions with the tentativeness still a feature for now.

• As it is, the market environment could remain mixed with the index heavyweights likely to continue seeing low following, but conditions elsewhere could be more upbeat with the increased following on the broader market shares as trading activities are still prevalent.

• Therefore, we see the key index poised for further sideway trend as institutional players dither on their moves with the key index potentially trapped between the narrow range of 1,568 and 1,577 levels for now, which is where it lingered over the past few sessions. Beyond the above support and resistance levels, the others are at 1,562 and 1580 respectively.

• The lower liners and broader market shares could continue to see firm following at the start of the week as the rotational interest are still firm that could continue to draw retail participation. However, we also think that there will be continued quick profit taking activities that may cap the near term upsides.

Company Update

• Econpile Holdings Bhd inked a RM43.0 mln contract to undertake demolition, earthworks, piling and substructure works for the Tropicana Gardens mixed development in Kota Damansara – which is to last 16 months. The project will focus on the mixed development which is composed of a 42-storey commercial block that sits on top of an 11-storey podium block and a basement car park. (The Edge Daily).

Comments

• This marks the second major contract secured by Econpile in FY20, bumping year-to-date orderbook replenishment to RM73.0 mln. The latest contract amounts to 13.3% of our orderbook replenishment assumption of RM550.0 mln for FY20. Moving forward, Econpile’s unbilled orderbook of approximately RM850.0 mln will provide earnings visibility over the next two years.

• As the orderbook replenishment falls within our assumption, we made no changes to our earnings forecast. Consequently, we maintained our HOLD recommendation on Econpile with an unchanged target price at RM0.79. Our target price is derived by ascribing a target PER of 13.0x to its FY20 EPS of 6.1 sen. pace since 1Q1992. The Nikkei, however, rose 0.2% after the Japanese Yen weakened against the Greenback. ASEAN equities, meanwhile, finished mostly lower last Friday.

• U.S. stockmarkets retreated as the Dow fell 1.0%, dragged down by reports on U.S. Department of Transportation is investigating whether Boeing (-6.8%) withheld information during the 737 Max's certification process. Likewise, the S&P 500 slipped 0.4%, while the Nasdaq declined 0.8%.

• European equities - the FTSE (-0.4%), CAC (-0.7%) and DAX (-0.2%), all slipped as U.K. president Boris Johnson faces an uphill task to getting a Brexit deal past British lawmakers. Market sentiment was also affected by the weak Chinese data.

The Day Ahead

• Market conditions were weaker-thanexpected last Friday that saw the key index heading south again to leave the market in an indifferent mode. The start of the week is unlikely to see much difference in the overall market conditions with the tentativeness still a feature for now.

• As it is, the market environment could remain mixed with the index heavyweights likely to continue seeing low following, but conditions elsewhere could be more upbeat with the increased following on the broader market shares as trading activities are still prevalent.

• Therefore, we see the key index poised for further sideway trend as institutional players dither on their moves with the key index potentially trapped between the narrow range of 1,568 and 1,577 levels for now, which is where it lingered over the past few sessions. Beyond the above support and resistance levels, the others are at 1,562 and 1580 respectively.

• The lower liners and broader market shares could continue to see firm following at the start of the week as the rotational interest are still firm that could continue to draw retail participation. However, we also think that there will be continued quick profit taking activities that may cap the near term upsides.

Company Update

• Econpile Holdings Bhd inked a RM43.0 mln contract to undertake demolition, earthworks, piling and substructure works for the Tropicana Gardens mixed development in Kota Damansara – which is to last 16 months. The project will focus on the mixed development which is composed of a 42-storey commercial block that sits on top of an 11-storey podium block and a basement car park. (The Edge Daily).

Comments

• This marks the second major contract secured by Econpile in FY20, bumping year-to-date orderbook replenishment to RM73.0 mln. The latest contract amounts to 13.3% of our orderbook replenishment assumption of RM550.0 mln for FY20. Moving forward, Econpile’s unbilled orderbook of approximately RM850.0 mln will provide earnings visibility over the next two years.

• As the orderbook replenishment falls within our assumption, we made no changes to our earnings forecast. Consequently, we maintained our HOLD recommendation on Econpile with an unchanged target price at RM0.79. Our target price is derived by ascribing a target PER of 13.0x to its FY20 EPS of 6.1 sen
  
  COMPANY BRIEF

• Digi.Com Bhd's 3Q2019 net profit fell to RM356.1 mln, compared to RM392.5 mln in the last corresponding year, in-tandem with weaker revenue, which slipped to RM1.56 bln, from RM1.59 bln last year. Even so, the group has declared a third interim dividend of 4.5 sen, payable on 19th December 2019.
• Cumulative 9M2019 net profit also narrowed to RM1.09 bln, from RM1.17 bln, while revenue worsened to RM4.62 bln, from RM4.85 bln in 9M2018. (The Star Online)

• Icapital.biz Bhd (ICAP) has again requested its UK-based shareholder, City of London Investment Management Company Ltd (CLIM) to reduce its shareholdings to comply with the maximum 20.0% shareholding limit of public offerings for closed-end funds.

• This comes after CLIM allegedly acquired another 159,000 shares on 30th September and 95,500 shares on 16th October, 2019 through DB (Malaysia) Nominee (Asing) Sdn Bhd.

• On the other hand, CLIM had rejected ICAP's claims insisting that it is an investment adviser and does not own any shares in the fund either as nominee or as beneficial owner. (The Edge Daily)

• KNM Group Bhd’s indirect unit, FBM-KNM FZCO has accepted a purchase order worth US$12.3 mln (or RM51.5 mln) from Petrofac Emirates LLC to supply pressure vessels and columns for the development project in the southeast of Algiers, Algeria. (The Star Online)

• Petronas Chemicals Group Bhd’s 50.0%- owned associate, Pengerang Petrochemical Co Sdn Bhd (PPC) has executed the second and final phase of RM1.0 bln project financing to repay PPC’s bridging loan.

• To recap, the latter had obtained the first phase of project financing amounting to US$400.0 mln on 1st April 2019 while the second phase and final financing plan involves US$600.0 mln from various export credit agencies and commercial banks. (The Edge Daily)

• MMAG Holdings Bhd has acquired a piece of land in Penang from Dynaciate Group Bhd for RM41.0 mln, in a bid to expand its logistics segment. The latter will use the sale proceeds to finance its working capital requirements and future acquisitions.

• The land was previously left idle after Dynaciate’s steel manufacturing and trading operations shifted to a smaller facility amid weak steel prices. (The Star Online)  

Source: Mplus Research - 21 Oct 2019