On The Ascend

• Stocks on Bursa Malaysia recovered in tandem with the gains in regional indices after the U.S and China agreed on a gradual removal of tariffs on each other’s goods if the trade agreement is reached. This allowed the key index to inch higher towards the end of the day after flip flopping within the negative and positive zones for most of the day. Similarly, the lower liners and broader market shares also tipped higher at the close, except for the Property index.

• Market breadth turned positive with gainers beating losers on a ratio of 456 stocks-to-382 stocks. Traded volumes, however, eased slightly 2.62 bln shares done, compared to 2.71 bln shares traded a day earlier.

• Key index movers were plantation giant KL Kepong (+60.0 sen), followed by Genting (+15.0 sen), Hong Leong Financial Group (+28.0 sen) and Petronas Gas (+18.0 sen). In the broader market, the leading gainers were United Plantation (+88.0 sen), Carlsberg (+52.0 sen), K Power (+19.0 sen) and Gadang (+2.5 sen) as it looks to boost its contract wins on upcoming infrastructure projects.

• On the losers side, F&N (-40.0 sen) was among the biggest loser, followed by Perstima (-14.0 sen), Salute (-9.0 sen) and Teck Guan (-7.0 sen). On the FBM KLCI, there were only five losing stocks, led by IOI Corp (-0.4 sen), followed by CIMB (-2.0 sen) and Digi (-2.0 sen). Hartalega (-3.0 sen) continues to lose ground after reporting weaker earnings.

• Regional stocks were broadly higher on optimism over the potential rollback of tariffs on U.S. and China goods as the two countries looks to seal an initial trade agreement. Despite the development, most Asian equities ending the day with modest gains. The Nikkei rose 0.1%, while the Shanghai Composite closed unchanged. The Hang Seng rose 0.6% with most ASEAN indices also closing higher.

• Wall Street scaled new highs as investors cheered potential tariffs rollbacks in Phase 1 of the U.S.-China trade agreement. The Dow gained 0.7% on gains in materials and energy-linked heavyweights, while both the S&P 500 and Nasdaq grew 0.3% each.

• Earlier, European markets also rallied on trade hopes. The FTSE closed up by 0.1%, supported by a weaker Pound following expectations of lower interest rates, while the CAC and the DAX rose 0.4% and 0.8% respectively.
  
  THE DAY AHEAD
• We think that Malaysian stocks could still tip higher over the near term amid the more positive market undertone that is bolstered by the impending trade agreement between the U.S. and China. This is likely to keep the key index on an extended overbought run as the near term positivity will provide more near term trading opportunities, in our view.
• The extended overbought streak, however, may keep the upsides measured as the FBM KLCI’s technical indicators are already toppish. At the same time, the buying interests among the key index stocks are still relatively benign with most foreign players on the sidelines. Therefore, we still think that the bouts of buying could still be tempered by mild profit taking activities ahead of the weekend. On the upside, we think the key index could re-challenge the 1,610 level, with the next resistance at the 1,620 level. The supports, on the other hand, remains at 1,600 level, followed by the 1,590 level.

• We also think that the lower liners and broader market shares will continue to gain ground, riding on the coat-tails of the ongoing positivity of global indices. The gains will also extend the already overbought conditions for longer, similar to the key index stocks.
  
  COMPANY BRIEF

• Public Bank Bhd’s 3Q2019 net profit fell marginally by 1.5% Y.o.Y to RM1.36 bln, from RM1.38 bln a year earlier, due to the negative effect of Overnight Policy Rate (OPR) reduction of 0.25% in May 2019. Revenue was also flat at RM5.61 bln, compared to RM5.62 bln previously.

• Cumulative 9M2019 net profit also inched lower by 1.9% Y.o.Y to RM4.11 bln against RM4.19 bln, despite improved revenue contribution of RM16.78 bln (+2.3% Y.o.Y), from RM16.41 bln earlier. (The Edge Daily)

• GDB Holdings Bhd was awarded its maiden contract in East Malaysia to build the five-star Hyatt Centric hotel in Kota Kinabalu, Sabah, for a provisional contract value of RM213.3 mln, from Hap Seng Consolidated Bhd’s unit, Sunhill Ventures Sdn Bhd. The 22-storey development includes 222 guestrooms. (The Edge Daily)

• Pentamaster Corp Bhd’s 3Q2019 net profit jumped 25.6% Y.o.Y to RM21.5 mln, from RM17.1 mln in the previous corresponding period, backed by stronger revenue from the automated test equipment (ATE) operating segment, while revenue grew 15.1% Y.o.Y to RM124.6 mln, from RM108.3 mln previously.

• For the cumulative 9M2019, net profit surged 58.3% Y.o.Y to RM60.6 mln, from RM38.3 mln last year, on the back of a 17.5% Y.o.Y growth in revenue at RM364.1 mln, from RM310.0 mln earlier. (The Star Online)

• Ranhill Holdings Bhd’s 3Q2019 net profit rose 7.0% Y.o.Y to RM17.6 mln, from RM16.5 mln a year ago, on the back of improved contribution from its environment segment, while revenue was flat at RM409.1 mln (+1.8% Y.o.Y), from RM401.9 mln in the same period last year. The group has declared a second interim dividend of two sen per share at a payment date that will be fixed later.

• Cumulative 9M2019 net profit also climbed 15.0% Y.o.Y to RM57.7 mln vs. RM50.1 mln in the corresponding period last year, while revenue grew by about 9.0% Y.o.Y to RM1.24 bln, from RM1.14 bln last year. (The Star Online)

• Sentoria Group Bhd’s 75.0%-owned unit, Sentoria Langkawi Sdn Bhd plans to sell off part of a plot of land, measuring 35 ac. on its Langkawi Geopark Resort City project for RM49.5 mln to I Strada Sdn Bhd. (The Edge Daily)

• EcoFirst Consolidated Bhd has received a court order to pay a judgement sum of RM10.4 mln in respect of the rescinded sale and purchase agreements involving 12 units. Of the judgement sum, RM1.5 mln is out of pocket expenses, RM2.3 mln is a loan sum according to loan agreement, RM4.8 mln is derived from the 10.0% interest rate on the total amount of out of pocket expenses and loan agreement, from the date of breach of sale and purchase agreements until 3rd December, 2010 and RM1.7 mln derived from the 5.0% interest rate from the sum of out of pocket expenses and loan agreement, from 4th December, 2010 until 17th September, 2019.

• The High Court has allowed the plaintiffs Chan Yoke Heng and 23 others’ claim against the group on 17th September, 2019. (The Edge Daily)

• SYF Resources Bhd is planning to raise up to RM85.8 mln via a renounceable rights issue with free warrants to finance its existing and future property development projects. The money raised will also be used to pare bank borrowings. As at 6th November 2019 the principal amount of its borrowings stood at about RM76.4 mln.

• The cash call will be undertaken on the basis of one rights share with one free warrant-for-every two existing SYF Resources shares held at an entitlement date to be fixed. The exercise will involve up to 451.7 mln right shares and a corresponding amount of free detachable warrants. (The Edge Daily)

Source: Mplus Research - 8 Nov 2019