Christmas Came Early

• The FBM KLCI started off the week on a solid note after recovering all its’ intraday losses, climbing into the positive territory to close 0.3% higher, buoyed by gains in selected banking and oil & gas heavyweights. The lower liners – the FBM Small Cap (+0.6%), FBM Fledgling (+0.3%) and FBM ACE (+0.8%), all extended their gains, while the broader market ended mixed.

• Market breadth stayed positive as advancers pipped decliners on a ratio of 432-to-424 stocks. Traded volumes, however, fell 9.8% to 1.96 bln shares as we approach the mid-week holiday break.

• Once again, Nestle (+40.0 sen) led the local bourse’s winners list, followed by Hong Leong Bank (+36.0 sen), Petronas Dagangan (+36.0 sen), Public Bank (+22.0 sen) and KLK (+20.0 sen). On the broader market, plantations stocks like United Plantations (+86.0 sen), Genting Plantations (+30.0 sen) and Batu Kawan (+20.0 sen) advanced, while BAT added 46.0 sen. Pestech climbed 4.0 sen after bagging a contract at Papua New Guinea.

• In contrast, notable decliners on the broader market were QL Resources (- 20.0 sen), Fraser & Neave (-18.0 sen), Southern Acids (-17.0 sen), Aeon Credit (-10.0 sen) and Quality Concrete (-10.0 sen). Key losers on the FBM KLCI were IOI Corporation (-22.0 sen), Petronas Chemicals (-17.0 sen), PPB Group (-14.0 sen), Top Glove (-4.0 sen) and Hartalega (-2.0 sen).

• Asia benchmark indices closed mixed as the Nikkei gained 0.02%, taking cue from gains on Wall Street on last Friday. The Shanghai Composite (-1.4%) extended its’ losses on selloff in technology shares after China’s statebacked semiconductor fund revealed plans to reduce holdings in some tech firms, but the Hang Seng Index added 0.1%. ASEAN stockmarkets, meanwhile, closed mostly lower on Monday.

• U.S. stockmarkets trended higher for the third straight session as the Dow (+0.3%) finished at another fresh record high level as the year-end rally continue on the optimism over Sino-U.S. trade deal. On the broader market, the S&P 500 added 0.1%, while the Nasdaq ended 0.2% higher.

• Major European indices advanced as the FTSE and CAC climbed 0.5% and 0.1% respectively, spurred by the de-escalation of trade war, coupled with the weaker British Pound against the Greenback. The DAX, however, fell 0.1% after lingering mostly in the negative territory.

The Day Ahead

• Despite displaying some weakness at the start of the trading bell, the FBM KLCI continue to march higher, backed by the on-going year-end window dressing activities, coupled with the positive sentiment on Wall Street. We think the key index may continue to play catch-up with the gains across regional peers for the year as the local bourse is still in the negative territory year-to-date.

• The buying momentum on the FBM KLCI appears not be easing anytime soon. The key index is likely to trend higher, charging towards the 1,621 level, followed by the 1,637 level as we approach the mid-week holiday break. In the interim, we reckon that a pullback is due as the key index is hovering in the overbought zone. A pullback will be healthy for investors to digest their recent gains with the support pegged at the 1,595 level.

• Rotational play remained on the table as the lower liners looks to extend their winning streak. We believe that the positive sentiment may prolong till yearend in absence of negative news. Despite that, the thinning trading volumes suggests that gains are hard to come by as investors have already started to retreat towards the sidelines.

Company Update

• Econpile Holdings Bhd’s unit Econpile Sdn Bhd has been served a countersuit of RM346.0 mln by Maju Holdings Sdn Bhd’s ASM Development (KL) Sdn Bhd (ASMDKL) for the failure to carry out work for at the latter’s Maju Kuala Lumpur project. ASMDKL is alleging that Econpile failed to carry out piling works for the project worth RM280.0 mln and declared self-determination in early March 2019 — listing 13 claims and damages following Econpile’s failure to complete the project. Econpile initially claimed in March that ASMDKL failed to issue relevant interim certificates for progress claims amounting to RM80.1 mln. (The Edge Daily)

Comments

• We reckon that the move may potentially damage Econpile’s reputation as one of the piling specialist in Malaysia. Nevertheless, we made no changes pending the decision of lawsuit by the High Court. Consequently, we maintained our HOLD recommendation on Econpile with an unchanged target price at RM0.79. Our target price is derived by ascribing a target PER of 13.0x to its FY20 EPS of 6.1 sen.

COMPANY BRIEF

• Aeon Co (M) Bhd‘s Managing Director (MD) Shinobu Washiwaza is retiring effective 31st December, 2019 and will be replaced by Aeon Asia Sdn Bhd’s Chief Strategy Officer Shafie Shamsuddin. The latter will also assume the role of director at Aeon Bid (M) Sdn Bhd. To recap, Washizawa was appointed as Aeon Co’s MD on 25th October, 2016 and has been serving AEON Group of Companies for 40 years. (The Star Online)

• GSB Group Bhd is expecting a turnaround in its FY20 profits, driven by the sales of its ongoing Bloomsvale, Straits Residence and Kaleidoscope projects. Moving forward, the group will continue to focus on residential property development, as well as explore other types of developments.

• The three aforementioned projects are all asset injections from main shareholders; Datin Toh Siew Chuon, her husband Kerjaya Prospek Group Bhd Chairman Datuk Tee Eng Ho and Tee’s brother and GSB executive director Tee Eng Seng. (The Edge Daily)

• Three London Biscuits Bhd shareholders who claim to hold a 10.0% equity stake are planning an EGM on 31st January, 2020, to remove directors Mahadir Manap and Tan Meng Hui.

• Concurrently, Lai Yee Voon, Mak Siew Wei and Koo Kien Yoon are proposing the election of Mazlan Mohamad, Mak Siew Wei and Koo as directors at the EGM. To recap, Mahadir joined the group’s board on 26th July, 2019 while Tan was appointed on 10th September, 2019. (The Edge Daily)

• Malakoff Corp Bhd’s and Touch Meccanica Sdn Bhd’s special purpose vehicles (SPVs) — Batu Bor Hidro Sdn Bhd (BBH) and Lubuk Paku Hidro Sdn Bhd (LPH) have each secured a Feedin Tariff small hydropower tender through the Sustainable Energy Development Authority of Malaysia (SEDA). The two SPVs were 65.0% owned by Malakoff, while the remaining stake was held by Meccanica.

• Moving forward, the companies will signed a renewable energy power purchase agreement with Tenaga Nasional Bhd (TNB) for small hydropower projects located in peninsular Malaysia for 21 years. BBH would have an installed capacity of 30 megawatts (MW) while LPH is granted with 25MW. (The Star Online)

• Poh Kong Holdings Bhd’s 1QFY20 net profit more than doubled to RM8.1 mln, from RM3.2 mln a year ago, on the back of improved profit margins amid higher gold prices, despite the 20.7% Y.o.Y drop in revenue to RM205.0 mln, from RM258.4 mln last year. (The Star Online)  

Source: Mplus Research - 24 Dec 2019