• Despite recovering most of its intraday losses, the FBM KLCI (-0.3%) turned lower after lingering in the negative territory for the entire trading session on Wednesday. The lower liners closed mostly higher as the FBM Small Cap (+0.3%) and FBM Fledgling (+0.3%) and FBM ACE gained ground, while the broader market closed mostly higher.

• Market breadth turned higher as advancers overtook decliners on a ratio of 426-to-411 stocks, while 409 stocks traded unchanged. Traded volumes gained 8.3% to 2.90 bln.

• Key losers on the FBM KLCI were Petronas Gas (-24.0 sen), Petronas Chemicals (-15.0 sen), Hong Leong Financial Group (-14.0 sen), Malaysia Airport Holdings (-10.0 sen) and Tenaga (-10.0 sen). Notable decliners on the broader market were G3 Global (-20.0 sen), Pharmaniaga (-19.0 sen), Bintulu Port (-15.0 sen), Petron Malaysia (-11.0 sen) and Yinson Holdings (-11.0 sen).

• Amongst the biggest gainers on the broader market were Guan Chong (+28.0 sen), Dayang (+18.0 sen), TSH (+17.5 sen), YSP South East Asia (+17.0 sen) and Allianz (+12.0 sen). Meanwhile, Nestle (+RM1.80), MISC (+4.0 sen), PBB Group (+4.0 sen), and IOI Corporation (+2.0 sen) advanced on the local bourse. KLK surged RM1.10 after delivering a strong set of quarterly earnings.

• Asia’s benchmark indices closed in the red as investors turned cautious on the latest Sino-U.S. trade developments. The Nikkei (-0.6%) extended its losses after exports data fell for the 11th consecutive month in October 2019, falling 9.2% Y.o.Y. The Shanghai Composite slipped 0.8%, while the Hang Seng Index (-0.7%) finished below the 27,000 psychological level. ASEAN stockmarkets, meanwhile, closed mostly lower yesterday.

• U.S. stockmarkets extended their losses as the Dow declined 0.4% on reports that U.S. and China may not be able to reach a partial trade agreement this year. On the broader market, the S&P 500 slipped 0.4%, but the Nasdaq closed 0.5% lower.

• Earlier, European benchmark indices – the FTSE (-0.8%), CAC (-0.3%) and DAX (- 0.5%) all retreated. The weakness was due to renewed trade war concerns after U.S. lawmakers passed legislation to support Hong Kong civil rights.
  
  THE DAY AHEAD

• The generally mixed market conditions looks to persist as market players now seek fresh leads for a new direction after the recent gains have left Malaysian equities overbought. Despite yesterday’s pullback, conditions are still largely on the toppish side as the consolidation has been mild, even as the optimism over the U.S-China trade talks has ebbed and geopolitical concerns have risen with the U.S. siding with the Hong Kong protestors that is drawing the ire of China.

• This leads us to think that the sideway consolidation is still unfolding with the key index attempting to build up a base around the 1,590-1,610 levels. The ongoing corporate results reporting season continues to see mixed earnings performance and these results are the near term market leads.

• Meanwhile, the downside risk has also risen over the near term which could send the key index lower to the 1,590-1,596 levels which we consider as still a holding pattern for now. Apart from the 1,610 resistance, the other resistance is at the 1,620 level.

• The lower liners and broader market shares, however, appears to be firming up as following on these stocks are picking up on rotational plays. Nevertheless, with their conditions also toppish, we think that the near term upsides will be limited amid increased profit taking activities.
  
  MACRO BRIEF

• Malaysia’s October 2019 inflation rate, measured by the Consumer Price Index (CPI) increased 1.1% Y.o.Y to 122.0, driven by a 2.2% Y.o.Y increase in the index of alcoholic beverages & tobacco and miscellaneous goods & services (+2.2% Y.o.Y). The inflation rate was slightly higher than the 1.0% Y.o.Y increase forecast by economists in a Reuters poll and exceeded RAM Ratings' forecast of 0.9% Y.o.Y.

• On a monthly basis, CPI rose by 0.2% Y.o.Y. The CPI for the period of January to October 2019 increased 0.6% Y.o.Y. (The Star Online)
  
  COMPANY UPDATE

• Teo Seng Capital Bhd’s 3Q2019 net profit surged 157.2% Y.o.Y to RM18.0 mln, lifted by higher production and sale of chicken eggs, higher average selling prices (ASP) of chicken eggs and improved demand for animal health products. Revenue for the quarter gained 10.5% Y.o.Y to RM138.4 mln.

• For 9M2019, cumulative net profit soared 245.2% Y.o.Y to RM45.2 mln. Revenue for the period added 19.6% Y.o.Y to RM410.1 mln.

Comments

• The reported results already make up to 96.9% of our previous net profit estimate of RM46.6 mln. The reported revenue, however, came in slightly below our expectations, amounting to 73.3% of our full-year forecast of RM559.8 mln.

• Following the stronger-than-expected results, we raised our earnings forecast by 24.1% and 17.9% to RM57.9 mln and RM61.8 mln for 2019 and 2020 respectively to account for the recovery in chicken eggs prices.

• Consequently, we also upgrade our recommendation on Teo Seng to BUY (from Hold), with a higher target price of RM1.65 (from RM1.40). We arrive at our target price by ascribing an unchanged target PER of 8.0x to its revised 2020 EPS of 20.6 sen. The ascribed target PER is at a 25% discount to its peers average valuation of 10.7x.
  
  COMPANY BRIEF
• Oriental Interest Bhd is planning to buy a plot of land in Sepang, Selangor, for RM46.8 mln for a development to complement its existing project. (The Star Online)
• AE Multi Holdings Bhd has proposed to raise up to RM9.9 mln via a private placement to fund a palm oil mill construction job. The RM30.9 mln project is located in Sabah and was secured last month. (The Edge Daily)

• Nova MSC Bhd has aborted its proposed private placement to issue up to 30.0% of its share capital, to raise RM35.2 mln. (The Edge Daily)

• Pharmaniaga Bhd’s 3Q2019 net profit plunged 97.0% Y.o.Y to a mere RM0.5 mln, from RM15.1 mln last year, amid inflated operating expenses. Revenue, however, rose 22.0% Y.o.Y to RM716.9 mln, from RM587.7 mln a year ago, on the back of stronger demand from the concession and non-concession businesses.

• Cumulative 9M2019 net profit also fell to RM29.4 mln (-22.6% Y.o.Y), from RM38.0 mln in the previous corresponding period, despite stronger revenue growth to RM2.1 bln, from RM1.79 bln previously. (The Star Online)

• MSM Malaysia Holdings Bhd‘s 3Q2019 net loss has hit a new quarterly high of RM185.1 mln, from a net profit of RM15.9 mln a year ago, due to continuously weak average sugar selling prices coupled with massive impairment. Revenue also fell 5.0% Y.o.Y to RM531.4 mln, from RM561.7 mln earlier.

• Subsequently, cumulative 9M2019 net loss swelled to RM259.5 mln, from a net profit of RM46.0 mln last year, while revenue shed 11.0% Y.o.Y to RM1.49 bln, from RM1.68 bln in the same period last year. (The Star Online)

• Amway (Malaysia) Holdings Bhd’s 3Q2019 net profit decreased 38.1% Y.o.Y to RM10.6 mln compared to RM17.2 mln a year ago, following weaker revenue contribution of RM235.1 mln (-9.7% Y.o.Y) vs. RM260.2 mln in 3Q2018. Even so, the group declared a dividend of five sen per share, payable on 20th December 2019.

• Cumulative 9M2019 net profit, however, grew 21.9% Y.o.Y to RM39.7 mln, from RM32.6 mln last year, mainly due to lower cost of sales, although revenue was marginally lower at RM713.3 mln (-1.4% Y.o.Y), from RM723.3 mln previously. (The Edge Daily)

• Boustead Heavy Industries Corp Bhd’s 3Q2019 net profit plummeted 72.4% Y.o.Y to RM3.3 mln, from RM11.9 mln in the previous corresponding period, following the 40.7% Y.o.Y fall in revenue to RM36.4 mln, from RM61.4 mln a year earlier.

• On a cumulative basis, 9M2019 net profit tumbled 91.9% Y.o.Y to RM1.9 mln, from RM23.6 mln previously, while revenue fell 15.7% Y.o.Y to RM126.6 mln, from RM150.3 mln a year ago. (The Edge Daily)

• KESM Industries Bhd’s 1QFY20 net profit jumped 71.5% Y.o.Y to RM4.5 mln in comparison with RM2.6 mln last year, boosted by lower expenses and higher other income. Revenue, however, fell 11.2% Y.o.Y to RM72.4 mln, from RM81.6 mln before. (The Star Online)

• Thong Guan Industries Bhd’s 3Q2019 net profit spiked 72.6% Y.o.Y to RM17.3 mln, from RM10.1 mln in the last corresponding year, on the back of higher sales and profitability of its stretch film, industrial film and bags, garbage bags and courier bags. Revenue also improved 15.8% Y.o.Y to RM256.6 mln, from RM221.6 mln.

• Subsequently, 9M2019 net profit rose 62.2% Y.o.Y to RM44.0 mln, from RM27.2 mln last year, while revenue gained 9.5% Y.o.Y to RM703.5 mln, from RM642.5 mln during the same period last year. (The Edge Daily)

Source: Mplus Research - 21 Nov 2019