May See Quick Rebound, But Upsides Limited

• The FBM KLCI slumped 0.8% to 1,597.2 points, rattled by the ongoing geopolitical tensions in Hong Kong and President Donald Trump’s threats of more tariffs. The lower liners – the FBM Small Cap (-0.6%), the FBM Fledgling (- 0.2%) and the FBM Ace (-0.6%) also retreated, taking cue from the key-index, alongside nine-of-twelve sectors in the broader market.

• Market breadth was bearish as losers more than doubled the winners, while traded volumes were beaten down to 2.14 bln (-13.9%) as investors dump riskier stocks, in favor of defensive shares amid the rising trade uncertainties.

• Top underperformers on Wednesday include Petronas Chemicals (-42.0 sen) after it reported weaker earnings, followed by Kuala Lumpur Kepong (-16.0 sen), Maybank (-14.0 sen), Genting (- 13.0 sen) and Axiata (-11.0 sen). In the broader market, losers were Dutch Lady (-38.0 sen), Hong Leong Industries (- 24.0 sen), Carlsberg (-14.0 sen), KESM Industries (-12.0 sen) and Pharmaniaga (-8.0 sen).

• On the flipside, Cycle & Carriage Bintang (+44.0 sen) continues to gain ground on its privatisation plan, followed by Malaysian Pacific Industries (+22.0 sen), Heineken Malaysia (+20.0 sen), Westports (+20.0 sen) and Fraser & Neave (+18.0 sen). Petronas-linked shares like Petronas Dagangan (+14.0 sen) and Petronas Gas (+8.0 sen) were amongst the key-index gainers, together with Nestle (+30.0 sen), Tenaga Nasional (+10.0 sen) and Malaysia Airports (+5.0 sen).

• Hong Kong equities retreated as fears of worsening anti-government protests that kept investors on the sidelines. The Hang Seng index (-1.8%) was beaten down, together with the Shanghai Composite (-0.3%) ahead of China’s retail and production data releases. The Nikkei, meanwhile, also erased 0.9%, together with majority of the ASEAN equities.

• Wall Street indexes notched record highs as investors shrugged off news that U.S. and China has hit an impasse on their attempts to secure a trade deal. The Dow delivered steady gains, backed by Disney following the strong sign-up rate of the media giant’s newly launched streaming service. The S&P 500 (+0.1%) also closed positively, although the Nasdaq inched lower due to a last-minute selldown.

• European shares were painted red, despite recovering most of the session’s losses as investors digested fresh corporate earnings announcement and U.S. Federal Reserve Chairman Jerome Powell’s testimony to Congress. Consequently, major indices like the FTSE (-0.2%), the DAX (-0.4%) and the CAC (- 0.2%) retreated on Wednesday.

The Day Ahead

• Yesterday’s pullback was more severe than expected after the key index slipped below the 1,600 points level, which was seen as a major psychological level after recent institutional supports helped the FBM KLCI to remain above the level.

• After an extended overbought streak, yesterday’s pullback is leaving the key index at the crossroads with the technical indicators suggesting more downside bias over the near term. However, we think that fresh support could emerge as we see institutions undertaking mild bargain hunting activities on some of the losing stocks that could allow the key index to recoup some of yesterday’s losses. With the possible rebound in the offing, the key index could retest the 1,600 points level, albeit we think the next resistance of 1,605 is a tad out of reach for now. The supports are at 1,590 and 1,580 respectively.

• Similarly, we think that the lower liners and broader market shares may mount a quick rebound after yesterday’s weakness, but we also see limited gains due to the still toppish conditions that could still see bouts of profit taking activities tempering the upsides for now.

COMPANY BRIEF

• Petronas Chemicals Group Bhd's 3Q2019 net profit slumped 54.1% Y.o.Y to RM553.0 mln, on lower product prices along with the declining price of crude oil. Revenue for the quarter declined 24.0% Y.o.Y to RM3.70 bln.

• For 9M2019, cumulative net profit slipped 34.6% Y.o.Y to RM2.47 bln. Revenue for the period decreased 16.4% Y.o.Y to RM12.14 bln. (The Star Online)

• KNM Group Bhd's unit, FBM-KNM FZCO has accepted an additional purchase order from PSS Netherlands B V Sharjah Branch worth US$5.2 mln (RM21.5 mln) for the supply of shell and tube heat exchangers for the Clean Fuels Project in Thailand. Todate, KNM has received a total of RM95.2 mln in contract awards from PSS Netherlands for the project in Sriracha in the Thai province of Chonburi. (The Star Online)

• S P Setia Bhd’s 3Q2019 net profit jumped 67.1% Y.o.Y to RM108.9 mln, on the back of higher property development revenue. Revenue for the quarter, however, slipped 6.1% Y.o.Y to RM932.1 mln as it had last year completed and handed over its Australian project Maison Carnegie, of which the revenue and profits were recognised on completion basis.

• For 9M2019, cumulative net profit decreased 47.2% Y.o.Y to RM300.5 mln. Revenue for the period, however, rose 21.8% Y.o.Y to RM3.13 bln. (The Edge Daily)

• MISC Bhd's 3Q2019 net profit fell 22.0% Y.o.Y to RM266.1 mln due to a loss in its heavy engineering division and other adjustments. Revenue for the quarter dipped 3.6% Y.o.Y to RM2.15 bln.

• For 9M2019, cumulative net profit rose 21.3% Y.o.Y to RM1.18 bln. Revenue for the period added 3.1% Y.o.Y to RM6.59 bln. An interim dividend of 7.0 sen per share, payable on 10th December 2019, was declared. (The Edge Daily)

• OCBC Bank (Malaysia) Bhd has partnered with Revenue Group Bhd to become the first foreign bank in Malaysia to offer allin-one digital payment terminals. The allin-one digital payment terminal, developed by Revenue Group, would simplify the payment acceptance process as it enables physical retail merchants to accept both card and mobile wallet payments using a single digital payment terminal that has a wide range of connectivity. (The Edge Daily)

• AirAsia X Bhd’s (AAX) 3Q2019 net loss widened to RM229.9 mln, from a net loss of RM197.5 mln recorded in the previous corresponding quarter as it recognised depreciation on the assets leased under the Malaysian Financial Reporting Standard 16 (MFRS 16). Revenue for the quarter fell 6.4% Y.o.Y to RM1.01 bln.

• For 9M2019, cumulative net loss widened to RM393.7 mln, from net loss of RM213.4 mln recorded in the previous corresponding period. Revenue for the period declined 6.4% Y.o.Y to RM3.20 bln. (The Edge Daily)
   
• Malayan Flour Mills Bhd’s (MFM) 3Q2019 net profit stood at RM20.7 mln vs. a net loss of RM5.2 mln registered in the previous corresponding quarter, on higher sales in both flour and grains trading and poultry integration segment. Revenue for the quarter rose 9.1% Y.o.Y to RM701.2.

• For 9M2019, cumulative net profit surged 33.9x Y.o.Y to RM40.0 mln. Revenue for the period grew 12.0% Y.o.Y to RM1.96 bln. (The Edge Daily)

• KKB Engineering Bhd’s 3Q2019 net profit jumped 179.1% Y.o.Y to RM19.3 mln, on higher revenue from its steel fabrication and construction divisions, coupled with improved margins in the engineering sector. Revenue for the quarter climbed 47.5% Y.o.Y to RM165.5 mln.

• For 9M2019, cumulative net profit soared 179.4% Y.o.Y to RM28.1 mln. Revenue for the quarter increased 49.3% Y.o.Y to RM403.0 mln. (The Edge Daily)

• Sime Darby Property Bhd has partnered with Mitsui & Co Ltd and Mitsubishi Estate Co Ltd via a joint venture to develop Bandar Bukit Raja Industrial Gateway (BBRIG) which will offer land lease and Built-to-Suit (BTS) services to business owners. Through the JV, both parties will invest a total of RM100.0 mln in the initial stage. (The Edge Daily)

• Daibochi Bhd has appointed Chang Chee Siong as its new Managing Director (MD), replacing Lim Soo Koon who is retiring on 13th December 2019. Lim had been serving the company as its MD since February 2005. (The Edge Daily)

• Mega First Corp Bhd's 51.0% indirect unit, Serudong Power Sdn Bhd is planning to sell its power plant in Tawau and all related assets which will contribute a profit increase of RM9.7 mln to Mega First's financial year ending 31st December 2019. (The Edge Daily)

• BTM Resources Bhd is partnering with Markmore Energy (Labuan) Ltd (MELL), which is controlled by Tan Sri Halim Saad, to participate in the proposed production of liquefied petroleum gas (LPG) using natural gas supplied from the Rakushechnoye Oil and Gas Field. BTM sees it as an opportunity to diversify and expand its source of income. (The Edge Daily)

• NetX Holdings Bhd has inked a Memorandum of Understanding with PUC Bhd to explore a potential collaboration to jointly expand, promote and strengthen their presence in the ecommerce and financial technology (epayment) industry. NetX, through this collaboration, expressed its intention to invest in a micro-financing credit industry. (The Edge Daily)

• Apex Equity Holdings Bhd’s shareholder Pinerains Sdn Bhd, which holds 4.2% stake, is seeking to adjourn the planned extraordinary general meeting (EGM) in relation to the proposed merger of its unit JF Apex Securities Bhd with Mercury Securities Sdn Bhd. The EGM was planned to be held on 18th November 2019. (The Edge Daily)  

Source: Mplus Research - 14 Nov 2019