Little Change In Market Direction

• The FBM KLCI (-0.1%) turned marginally lower after lingering mostly in the negative territory after trading in a lackluster manner last Friday. Consequently, key index fell 0.1% W.o.W. The lower liners, however, finished mostly higher as the FBM Fledgling and FBM ACE rose 0.2% and 0.3% respectively, while the Property (+0.1%) and Plantations (+0.5%) sectors outperformed the negative broader market.

• Market breadth remained negative as decliners outmuscled advancers on a ratio of 429-to-322 stocks. Traded volumes fell 2.2% to 2.06 bln shares ahead of the extended weekend Deepavali break.

• Key losers on the FBM KLCI were Hong Leong Financial Group (-22.0 sen), Hong Leng Bank (-10.0 sen), Nestle (-10.0 sen), Maxis (-6.0 sen) and Malaysia Airport Holdings (-4.0 sen). Notable decliners on the broader market were BAT (-58.0 sen), MPI (-30.0 sen), Aeon Credit (-24.0 sen) and Heineken (-22.0 sen). Vitrox sank 48.0 sen after reporting a weak set of quarterly earnings.

• Major gainers on the broader market include Ayer Holdings (+48.0 sen), Syarikat Takaful (+18.0 sen), Country Heights Holdings (+12.0 sen), Amway (+11.0 sen) and JF Technology (+11.0 sen). Meanwhile, Petronas Gas (+8.0 sen), Sime Darby Plantations (+8.0 sen), IHH (+7.0 sen), Genting Malaysia (+4.0 sen) and Public Bank (+4.0 sen) advanced on the local bourse

• Asia benchmark indices - the Nikkei (+0.3%), Hang Seng Index (+0.8%) and Shanghai Composite (+0.9%), all advanced after China reported that parts of the text for the first phase of a trade deal with the U.S. reached a consensus in areas including standards used by agricultural regulators. Asia equities, meanwhile, closed higher on Monday

• Wall Street started off the week on a buoyant mode as the Dow rose 0.5% amid optimism surrounding the U.S.-China trade negotiations. The positive sentiment bumped the S&P 500 (+0.6%) to close at fresh all-time high at the 3,039.24 level, while the Nasdaq jumped 1.0%.

• European benchmark indices finished higher as the FTSE (+0.1%) advanced, but gains were capped by the downbeat corporate earnings from HSBC PLC (- 3.8%). Meanwhile, both the CAC and DAX rose 0.2% and 0.4% respectively after recovering all their intraday losses after the European Union granted three-month extension to the Brexit deadline until endJanuary 2020.

The Day Ahead

• The broad market condition on Bursa Malaysia is still one of tentativeness amid the dearth of domestic catalysts to ensure sustained buying. This is likely to leave the key index to continue drifting on lacklustre following - a trend we see continuing as there is still little inkling on the change of the market’s direction and availability of fresh leads.

• The rangebound trend will also likely see the FBM KLCI continuing to decouple from the performance of key global equities as they continue to make headway on renewed optimism over the trade negotiations between the U.S. and China. Nevertheless, the sideway trend could also provide the impetus for the key index to build up a base for a potential year end window dressing action that could lift the key index above the 1,600 points level, in our opinion. In the interim, we see the rangebound trend keeping the key index within the 1,564 and 1576 levels for now.

• The lower liners and broader market indices are also perched in the overbought zone after their recent upsides. Although there are still few signs of a pullback as yet, a consolidation is already due that could keep their upsides in check as we see more bouts of profit taking activities and lower following due to the overbought conditions.

COMPANY BRIEF

• Gagasan Nadi Cergas Bhd announced that it will be suspending the trading of its shares today, pending a material announcement. (The Edge Daily)

• Unisem (M) Bhd posted a 3Q2019 net loss of RM3.2 mln, from a net profit of RM35.2 mln a year ago, following higher expenses arising from the closure of its Batam unit, PT Unisem, on top of lower sales volume. Quarterly revenue was also down by 10.8% Y.o.Y to RM316.3 mln, from RM354.7 mln in the previous corresponding period. Even so, the group recommended a second interim dividend of two sen, payable on 10th January, 2020.

• Consequently, 9M2019 net profit plunged 76.0% Y.o.Y to RM17.3 mln vs. RM72.3 mln last year, while revenue fell 8.6% Y.o.Y to RM931.4 mln, from RM1.02 bln previously. (The Star Online)

• Sarawak Consolidated Industries Bhd has secured five engineering, procurement, construction and commissioning (EPCC) contracts worth RM175.4 mln. Three contracts worth about US$28.0 mln (approximately RM117.2 mln) are based in Indonesia, Qatar and Oman, while another two, worth RM58.2 mln, are for work in Malaysia. (The Edge Daily)

• Ekovest Bhd’s 30.4%-owned associate company, PLS Plantations Bhd, is planning to raise up to RM1.05 bln via a renounceable rights issue with free warrants to expand its durian plantation business. The latter has proposed to undertake the rights issue involving up to 1.05 bln new Redeemable Preference shares at an illustrative issue price of RM1.00 per RPS on a two-for-one basis. It also proposed to issue 175.4 mln new free warrants, on the basis of one warrant-for-every two ordinary shares.

• Separately, Ekovest has also announced that it has provided an irrevocable undertaking to subscribe in full all of its rights entitled under the proposed rights issue by PLS, which means it will be injecting at least another RM213.0 mln into its associate company. (The Star Online)

• Berjaya Media Bhd has failed to secure a white knight to regularise its financials, leading to the suspension of its shares trading activities from 5th November 2019. The group also said that it could potentially be delisted on 7th November 2019 unless an appeal against the delisting is submitted before the date of suspension. (The Edge Daily)

• Greenyield Bhd is planning to diversify into rubber plantations, in a bid to reduce its reliance on its current core business as well as improve its earnings and shareholder value. The new segment is expected to contribute at least a quarter of its net profit in the future. (The Edge Daily)

• Luster Industries Bhd is acquiring a 51.0% equity stake for RM17.9 mln in a local private company — Jade Classic Sdn Bhd — that is jointly developing a plot of land in Sepang, Selangor, into a mixed development with an estimated gross development value (GDV) of RM900.0 mln.

• The project is estimated to generate a gross profit of about RM190.0 mln and Luster expects to recover the return to investment from Phase 1 of the project, which has an estimated GDV of RM230.0 mln and a gross profit of about RM57.0 mln. (The Star Online)

• IOI Corp Bhd has assured that there will be minimal impact to the group if India decides to ban the import of Malaysia palm oil to the country, as the south Asian nation is not a direct customer of the group. Any sales to India will be an indirect sale and in small percentages via sales to selected big traders, which inturn may sell to India. (The Edge Daily)

• Asia Media Group Bhd has announced that there is a significant variation between its audited and unaudited 2018 financial results, following the discovery of impairment losses and provisions for litigation claims amounting to RM22.9 mln that were not accounted for by the previous management.

• The variation resulted in Asia Media’s 2018 net loss widening to RM26.5 mln vs. RM3.1 mln reported previously, on the back of revenue of RM13.4 mln.

• Asia Media also revealed that it has triggered the Practice Note 17 criteria as its shareholders' equity on a consolidated basis of less than RM40.0 mln is now 25.0% or less of its issued capital. (The Edge Daily)  

Source: Mplus Research - 29 Oct 2019