• The FBM KLCI (-0.1%) started off the week on a dour note after lingering mostly in the negative territory for the entire trading session as the buying support from the U.S.-China trade progress were quickly fizzled out. Despite that, rotational play amongst the lower liners kept the FBM Small Cap higher, rising 0.6%, while the broader market finished mixed.

• Market breadth turned negative as decliners outmuscled advancers on a ratio of 453-to-376 stocks. Traded volumes fell 22.0% to 2.29 bln shares as buying momentum subsides.

• Key decliners on the FBM KLCI were Nestle (-30.0 sen), KLK (-20.0 sen), Petronas Dagangan (-14.0 sen), Tenaga (-12.0 sen) and Hartalega (-8.0 sen). Amongst the biggest decliners on the broader market losers were consumer products stocks like Fraser & Neave (- 76.0 sen), Dutch Lady (-52.0 sen) and Atland Holdings (-17.0 sen), while Bintulu Port and BLD plantations shed 28.0 sen and 14.0 sen respectively.

• On the flipside, Panasonic (+RM2.82), QL Resources (+23.0 sen), Ajinomoto (+20.0 sen) and Allianz (+18.0 sen) trended higher on the broader market. Gamuda gained 5.0 sen after delivering stronger quarterly earnings. Key winners on the FBM KLCI were Petronas Gas (+46.0 sen), MISC (+23.0 sen), PPB Group (+8.0 sen), RHB Bank (+8.0 sen) and Top Glove (+6.0 sen).

• Asia benchmark ended on a mixed noted as the Nikkei fell 0.3% amid uncertainty over the next phase of U.S.-China trade deal. The Shanghai Composite (+0.6%) extended its gains after the industrial production data rose 6.2% Y.o.Y in November 2019 – five months high, but the Hang Seng Index (-0.4%) snapped a three-day winning streak as political unrest over the weekend took center stage. ASEAN equities, meanwhile, closed mixed on Monday.

• U.S. stockmarkets finished at fresh record high levels on reports that the partial U.S.-China trade deal will be signed in January 2020. The Dow rose 0.4%. On the broader market, the S&P 500 added 0.7% with ten of the eleven major sectors in the green, while the Nasdaq finished 0.9% higher.

• Earlier, European benchmark indices – the FTSE (+2.3%), CAC (+1.2%) and DAX (+0.9), all extended their gains, building onto gains from the dovish European Central Bank’s stance on future interest rate direction. This came as investors brushed off the Eurozone’s IHS Markit manufacturing purchasing managers index fell that to a 2-month low in December 2019 at 50.6.
  
   THE DAY AHEAD

• The cloudy details surrounding the “Phase One” of U.S.-China trade deal capped the gains on the FBM KLCI yesterday as quick profit taking activities emerged. As it is, we think that the FBM KLCI may march higher as investors continue to bargain hunt pn beaten down stocks. Gains however, will be mild as foreign funds continue to offload Malaysian equities which already marked six consecutive weeks of foreign fund outflow.

• We think that the key index will consolidate, ranging between the 1,558- 1,579 levels over the foreseeable future. In the meantime, the 1,550 level will remain as the key support. Should the 1,579 level cleared, mild window dressing activities may spur the key index towards the next resistance located at the 1,590 level.

• In the meantime, we also think the lower liners and broader market shares may continue to see sustainable trading interest. However, we do caution that the recent rally amongst the lower liners has turned slightly toppish and could be due for a pullback.
  
  COMPANY UPDATE

• Comfort Gloves Bhd‘s 3QFY20 net profit rose 4.9% Y.o.Y to RM7.4 mln, from RM7.1 mln a year ago, in-line with higher sales revenue, which grew 5.9% Y.o.Y to RM134.5 mln, from RM127.0 mln last year. Subsequently, cumulative 9MFY20 also jumped 23.9% Y.o.Y to RM22.9 mln compared to RM18.5 mln earlier, while revenue increased 8.4% Y.o.Y to RM372.1 mln, from RM343.3 mln in 9MFY19. Comment

• The latest earnings were broadly in-line with our estimated net profit, although revenue outperformed our expectations and accounted for 81.2% of our previous estimated revenue of RM458.4 mln, mainly due to higher-than-expected ASPs.

• Moving forward, we revised our FY20- FY21 revenue upwards by 10.5% and 12.1% to RM506.4 mln and RM538.1 mln respectively, on the back of stronger ASPs, while net profit estimates remains unchanged after some minor housekeeping in our margins, depreciation and net interest assumptions.

• Subsequently, we maintain our BUY recommendation on CGB with an unchanged target price of RM0.95 by ascribing to a target PER of 17.0x to CGB’s FY20 EPS of 5.6 sen, as we continue to believe in its solid revenue growth and earnings recovery prospects, after overcoming the FDA issue last year.

• The ascribed target PER remains at a discount to the PER of industry bellwethers like Hartalega Holdings Bhd and Top Glove Corporation Bhd due to CGB’s smaller market capitalisation and capacity. Potential downside risks to our call include labour abuse allegations, unexpected fluctuations in latex prices and forex movements. COMPANY BRIEF

• Crest Builder Holdings Bhd has secured a contract worth RM316.0 mln from Inter Sky Development Sdn Bhd, a member of the JL99 Group, to build the 99 Residence project in Taman Wahyu. The 35-month contract will commence from 1st July, 2020 to 31st May, 2023. (The Star Online)

• Titijaya Land Bhd is partnering Japan's Tokyu Land Corp to jointly build and promote the RM1.5 bln Riveria City development in Brickfields, Kuala Lumpur, to Malaysian and foreign markets. The group had inked a shareholders’ agreement on 13th December, 2019 with Tokyu Land's overseas subsidiary Tokyu Land Asia Pte Ltd (TLA), and Riveria City Sdn Bhd (RCSB) — a unit of Titijaya, to regulate the affairs of RCSB and the respective rights of Titijaya and TLA as shareholders of RCSB, and to jointly participate in the development.

• Subsequently, TLA will invest RM80.0 mln in RCSB, of which RM40.0 mln is for equity participation, while another RM40.0 mln will be utilised for project financing. (The Edge Daily)

• Brahim's Holdings Bhd has clarified that the voluntary resignation of PricewaterhouseCoopers PLT (PwC) as its external auditor with immediate effect, was in-line with good corporate governance. To recap, PwC has been the auditor for Brahim's SATS Food Services Sdn Bhd (BSFS) – the major revenue contributor of the group, for more than 15 years. (The Edge Daily)

• River Retreat Sdn Bhd (RRSB), a company indirectly owned by Khazanah Nasional Bhd and Iskandar Waterfront Holdings Sdn Bhd, is disposing a piece of land in Iskandar Puteri, Johor, to Eco World Development Group Bhd for RM304.9 mln.

• The group has also paid about RM20.0 mln nomination fee to Permodalan Darul Ta'zim Sdn Bhd (PDT), the investment arm of the Johor state government, for the latter's agreement to nominate EcoWorld’s subsidiary Melia Spring Sdn Bhd to purchase the land. The acquisition is expected to be financed via internal funds.

• Additionally, EcoWorld is required to pay PDT 20.0% of Melia Spring's net profit from each phase of the proposed development. (The Star Online)

• T7 Global Bhd has been awarded contracts for manpower jobs from Mubadala Petroleum's entity, MDC Oil & Gas (SK320) Ltd, and an engineered product job from Shell's entity, Sarawak Shell Bhd/Sabah Shell Petroleum Co Ltd.

• The first of two contracts from MDC, dated 17th October, 2019 was for the provision of third-party manpower services in support of MDC's technical, production operations and its 'Health, Safety, Security and Environment' requirements.

• Meanwhile, the second job is for the provision of third-party manpower services, in support of MDC's drilling and exploration requirements and was awarded 4th November, 2019. (The Edge Daily)

• Eduspec Holdings Bhd has signed a collaboration agreement with Matlamat Wawasan Sdn Bhd (MWSB) to facilitate the implementation of science, technology, engineering and mathematics (STEM) programmes with computer science for primary schools, and with robotics for secondary schools, under the Ministry of Education (MoE). MWSB is principally engaged in the provision of electronic equipment, and other education-related solutions and services. (The Edge Daily)

Source: Mplus Research - 17 Dec 2019