May Still Head Higher

• The FBM KLCI (+0.1%) extended its gains after trading in a choppy manner on the firmer Ringgit against the U.S. Dollar, coupled with the higher crude palm oil prices. The lower liners, however, closed mostly lower as the FBM Small Cap (-0.2%) and FBM ACE (- 0.9%) retreated, while the consumer products & services (+0.03%), financial services (+0.3%) and utilities (+0.6%) sector outperformed the negative broader market.

• Market breadth turned negative as decliners outshone advancers on a ratio of 469-to-328 stocks. Traded volumes declined 1.4% to 2.27 bln shares as investors remained cautious on the weak market sentiment.

• More than half of the key index components advanced, led by Hong Leong Financial Group (+40.0 sen), followed by PPB Group (+18.0 sen), Nestle (+10.0 sen), CIMB (+6.0 sen) and Public Bank (+6.0 sen). Among the biggest winners on the on the broader market include Carlsberg (+36.0 sen), Time dotCom (+16.0 sen), DKSH (+14.0 sen), Mesiniaga (+13.0 sen) and Mudajaya (+13.0 sen).

• Meanwhile, MPI (-36.0 sen), BAT (-26.0 sen), Unisem (-13.0 sen) and Syarikat Takaful (-12.0 sen) slipped on the broader market. Bursa Malaysia declined 11.0 sen after reporting a weak set of quarterly earnings. Key losers on the FBM KLCI were Malaysia Airport Holdings (-16.0 sen), Sime Darby Plantations (-9.0 sen), KLK (-6.0 sen), DIGI (-2.0 sen) and Genting (-2.0 sen).

• Asian benchmark indices finished lower as the Nikkei (-0.6%) snapped a sevenday winning streak on profit taking activities. The Shanghai Composite declined 0.5% as doubts over the prospects of a U.S.-China trade deal resurfaced, while the Hang Seng Index ended 0.4% lower. ASEAN equities, meanwhile, closed mostly lower on Wednesday.

• U.S. stockmarkets rallied overnight as investors cheered on the U.S. Federal Reserve move to cut its benchmark interest rate for the third time this year and signals a more dovish stance on future interest rate direction, allowing the Dow to rise 0.4%. On the broader market, the S&P 500 (+0.3%) finished at a fresh record high level, while the Nasdaq added 0.3%.

• European benchmark indices closed mostly higher as the FTSE and CAC climbed 0.3% and 0.5% each as the former saw confirmation of a general election on 12th December 2019. The DAX, however, slipped 0.2% on weakness in Deutsche Bank (-8.0%) after the bank reported a net loss of €832.0 mln in 3Q2019.

The Day Ahead

• The broad market environment is still one of indifference even as the key index managing to haul itself into the positive territory towards the end of yesterday’s trading session. As it is, the market undertone is still showing signs of tentativeness with few available corporate catalysts to entice more fresh buying.

• Although market conditions have become choppier and mixed, the uptrend looked to have been preserved and this could be a prelude for further near term upsides for the FBM KLCI as it attempts to fortify its position around the 1,580 level. The positive performance on Wall Street – cheering the interest rate cut, could also support the sustained gains on the FBM KLCI and could also allow the key index to break out of its rangebound trend.

• Nevertheless, we think that the near term gains are likely to be mild as the buying strength is still on the meek side with the key index poised for targets at 1,583 and 1,590 respectively. The supports, on the other hand, are at 1,577 and 1,570 respectively.

• The FBM Small Cap and Technology indices were undergoing an overdue consolidation spell, but may see some near term reprieve amid the improved market undertone with the return of bouts of trading and rotational buying interest.

COMPANY BRIEF

• Widad Group Bhd is offering a higher offer price of RM5.3 bln in cash, from RM3.0 bln previously, to acquire the entire stake in PLUS Malaysia Bhd. In addition to the cash consideration, the group will give a compensation waiver of RM3.04 bln and debt assumption of RM30.0 bln, bringing the total enterprise value of the offer to RM38.34 bln.

• The revised offer also included waiver of the RM11.0 bln sukuk guarantee by the Government and a new option for the Government to buy back PLUS after 10 years based on market valuation.

• To recap, Khazanah holds a 51.0% stake in PLUS Malaysia, while The Employees Provident Fund owns the remaining 49.0% stake. (The Star Online)

• Eagle US 2 LLC (Eagle US) has exercised its call option to buy an additional 34.8% equity stake in LACC LLC for US$816.5 mln (RM3.41 bln). LACC LLC is a jointventure (JV) that owns an ethane cracker plant in Louisiana State, in which Lotte Chemical Titan Holding Bhd (LCT) holds an effective 35.2% stake. The plant carries an annual capacity to produce 1.0 mln tonnes of ethylene.

• Upon completion of the transaction, Eagle US’ shareholding in LACC LCC will increase to 46.8%, while LC USA is left with the remaining 53.2%. LCT holds a 40.0% equity interest in LC USA and LCT’s parent Lotte Chemical Corp holds the remaining 60.0% stake in the LC USA. (The Edge Daily)

• AME Elite Consortium Bhd is planning to buy a piece of land in Kulai, Johor, measuring approximately 6.1 ha. for RM25.0 mln to develop units of industrial buildings with a gross development value of RM120.0 mln. The project will commence in 2Q2020 and be completed within 18 months. (The Edge Daily)

• Mudajaya Group Bhd, announced that its unit, Mudajaya Corp Bhd has been granted a Worldwide Mareva Injunction up to the value of RM49.3 mln and Ancillary Orders prohibiting its former employee and three other individuals from any dissipation of assets.

• This order is also to prohibit any third party from knowingly assisting or permitting a breach of the order until the disposal of the full trial. The court has fixed case management on 21st November 2019. (The Edge Daily)

• Guocoland (Malaysia) Bhd 1QFY20 net loss widened to RM10.0 mln, from RM1.2 mln in the previous year’s corresponding quarter, marking its sixth consecutive quarter in the red. The weaker performance was in-line with the 38.0% Y.o.Y fall in revenue to RM48.3 mln, from RM77.8 mln a year earlier, due to lower sales of completed units. (The Edge Daily)

• Caring Pharmacy Group Bhd’s 1QFY20 net profit inched higher by 2.3% Y.o.Y to RM4.2 mln compared to RM4.1 mln in the same period a year ago – helped by higher number of sales outlet, while revenue grew 8.9% Y.o.Y to RM163.3 mln, from RM150.0 mln. (The Edge Daily)

• LKL International Bhd remains upbeat on its prospects in light of the higher allocation for healthcare services announced in the recently-tabled 2020 Budget.

• The group believes that it is strategically positioned to capitalise on new opportunities that are set to arise from the Government’s pro-healthcare measures, backed by its wide product portfolio with new medical accessories and devices. (The Star Online)   

Source: Mplus Research - 31 Oct 2019