• The FBM KLCI (+0.4%) ended the week on stronger footing as crude palm oil prices trended higher after hitting record highs. On a weekly basis, the key-index also extended its gains for the fourthstraight week, while the lower liners ended mostly stronger, with the exception of the FBM ACE (-0.5%). Similarly, the broader market also advanced, with the Plantation and Energy sectors in the lead.
   
• Market breadth was also positive as winners beat the losers on a ratio of 512-to-325 stocks. Traded volumes also gained 17.6% to 2.24 bln shares amid post-holiday trading.
   
• Significant winners include Nestle (+RM1.00), Public Bank (+20.0 sen), IHH Healthcare (+16.0 sen), IOI Corporation (+8.0 sen) and Hartalega (+7.0 sen). Broader market advancers, meanwhile, were Dutch Lady (+RM1.20), Carlsberg (+44.0 sen), Allianz (+40.0 sen), Fraser & Neave (+38.0 sen) and Sarawak Oil Palms (+28.0 sen).
   
• On the other hand, Panasonic Manufacturing (-20.0 sen), Aeon Credit (-12.0 sen), UMS (-10.0 sen), Ideal United (-8.0 sen) and Saudee Group (- 7.5 sen). There were only four heavyweights losers on Friday, mainly Petronas Gas (-32.0 sen), Tenaga Nasional (-12.0 sen), Maybank (-3.0 sen) and Petronas Chemicals (-2.0 sen).
   
• Meanwhile, Japan’s key-index; the Nikkei finished lower after the country’s industrial output fell for the second straight month, renewing concerns of weakening consumer demand. The Shanghai Composite (-0.1%) also closed marginally lower, albeit losses were capped by gains in liquor maker Kweichow Moutai amid favorable growth prospects. The Hang Seng Index (+1.3%), however, gained as investors return from the holidays, alongside majority of the ASEAN stockmarkets.
   
• Meanwhile, U.S. equities were mostly lackluster as investors retreat to the sidelines amid the year-end holidays. The Dow and the S&P 500 flatlined after a volatile session, while the Nasdaq (-0.2%) finished in the red.
   
• The FTSE (+0.2%) made a last-minute rebound and closed a hairline above the 1644.0 psychological level, weighed down by strong gains in the Pound. Similarly, the DAX (+0.3%) and the CAC (+0.1%) also closed higher, tracking the gains in mining and energy shares.

• Once again, the bout of window dressing activity sent the FBM KLCI higher. Going into the last two trading day of the year, we see further window dressing activities as the market looks to take advantage the buoyant global market environment to help the key index end the month on a flourish note. Gains will also be supported by the elevated CPO prices that surged above the RM3,000 per tonne, whilst crude oil prices (WTI) advanced to three-month high.
   
• With the key index nearing the 1,621 resistance level, we think it should be breached with relative ease with the continuing strong institutional support. Further upsides are seen at the 1,635 level. Meanwhile, the immediate support lies at 1,600 psychological level, followed by the 1,590 level.
   
• There is no change in our view that the lower liners and broader market shares may continue to head higher on rotational play. Both the plantation and energy sector may also continue to see firm trading interest amid the elevated commodity prices.

• Kim Loong Resources Bhd’s 3QFY20 net profit fell 18.1% Y.o.Y to RM13.8 mln, dragged down by the lower production in the plantation segment, coupled with the fall in average selling prices (ASP) of fresh fruit bunches (FFB) and crude palm oil (CPO) in the palm oil mill segment. Revenue for the quarter declined 23.0% Y.o.Y to RM175.3 mln.
   
• For 9MFY20, cumulative net profit slipped 21.0% Y.o.Y to RM38.7 mln. Revenue for the period contracted 26.1% Y.o.Y to RM498.6 mln.
   

• The results came in below expectations with its net profit only amounting to 62.9% of our previous full-year forecast of RM61.5 mln, while its revenue also came below our expectations, amounting to 63.0% of our previous FY20 estimate of RM791.2 mln. The bottom line’s variance is due to the lower production and weak ASP of CPO.

• As the reported earnings came below our expectations, we trimmed our net profit forecast by 16.1% and 14.6% to RM51.5 mln and RM65.4 mln for FY20 and FY21 respectively to account for the lower production.
   
• Although KLR’s share price has rallied to close at 52-weeks high and surpassed our fundamental target value, we maintained our HOLD recommendation on KLR with target price of RM1.41. We think that potential re-rating is on the horizon should CPO prices continue to hold at the elevated level over the foreseeable future. Our target price is derived by ascribing a higher target PER of 20.0x (from 18.0x) to its revised FY21 EPS of 7.0 sen. The ascribed target PER is in line with the industry average that rose to around 18.5x-21.5x.
  
  COMPANY BRIEF
• Taliworks Corp Bhd has successfully sold the receivables due from Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) and Pengurusan Air Selangor Sdn Bhd (Air Selangor), marking the first securitisation of water receivables undertaken in Malaysia post the water restructuring in Selangor.
   
• This comes as part of the termination and settlement agreement dated 24th May 2019 that was entered into between Taliworks’ wholly owned-subsidiary Sungai Harmoni Sdn Bhd, Splash, Air Selangor and Starbright Capital Bhd. (The Star Online)
   
• Pestech International Bhd’s unit Pestech Sdn Bhd has received a contract with a total value of about RM111.7 mln from the operator of the state-power grid of the Philippines. The contract is in relation to upgrading works at the substations in South Luzon and comprises an offshore portion valued at US$16.6 mln (RM68.7 mln) and an onshore portion worth 528.8 mln Philippine pesos (RM43.0 mln). 
   
• Under the project, Pestech will be furnishing, supplying, replacing, hauling, installing, testing and commissioning existing 230kV and 69kV electrical equipment including the associated equipment and materials in the San Juan, Lumban and Daraga substations, it said in a statement yesterday.
   
• The project is scheduled for completion 450 days from its commencement date, which is yet to be determined. (The Star Online)
   
• 7-Eleven Malaysia Holdings Bhd is injecting RM7.5 mln into Dego Ride owner Myinteractive Sdn Bhd (MSB). The convenience store operator will be subscribing 490,030 new shares at RM15.33 per share, giving it a 46.5% stake in the enlarged issued share capital of MSB.
   
• The group investment into MSB would allow for MSB to revive Dego Ride and use the transport app to deliver goods from 7-Eleven stores. Dego Ride was banned by the previous government. (The Edge Daily)
   
• ARB Bhd is setting up a 51:49 JV with Orange Social Media Sdn Bhd (OSM) to develop and implement an enterprise resource planning (ERP) system platform. ARB will act as the sole contractor, consultant and manager to handle all relevant resources, as well as provide the ERP system software, software customisation and other relevant operations. OSM will market the platform to business owners and provide the JV with access to relevant information and documents. (The Edge Daily)
   
• Atrium REIT has acquired a factory building in Shah Alam from Pemodalan Nasional Bhd (PNB) for RM45.0 mln. The purchase price represents a discount of RM800,000 or 1.8% to the property’s appraised market value of RM45.8 mln. The property consists of single-storey factory building and ancillary area, including a single-storey office cum canteen. The purchase will be funded via 20.0% internallygenerated funds and 80.0% borrowings. (The Edge Daily)
   
• The Energy Commission Malaysia has assented to two of Gas Malaysia Bhd’s wholly-owned units providing services to the implementation of third-party access (TPA) of Malaysia’s regasification and gas distribution facilities, starting 1st January 2020. Gas Malaysia Distribution (GMD) has been granted a 10-year shipping license, while Gas Malaysia Energy & Services Sdn Bhd (GME) has been awarded a 20-year shipping license. GMD is to operate and maintain the distribution pipeline to deliver gas through the distribution pipeline. (The Edge Daily)
   
• Two Seacera Group Bhd shareholders who allegedly control at least a 10.0% stake in the tile manufacturer — Asiabio Capital Sdn Bhd and Tan Sik Eek have called for an EGM to be convened on 16th January 2019 to elect Dr Azirul Salihin Anuar, Chua Yeong Lin and Mah Soon Chai to the group’s board.
   
• Meanwhile, three more directors: non independent and non-executive director Datuk Chong Loong Men and independent and non-executive directors Yong Ket Inn, Chu Chee Peng and Shi’aratul Akmar Sahari, have resigned following a recent suit made by shareholder Yap Suet Heng. (The Edge Daily)
   
• YGL Convergence Bhd is proposing to undertake a private placement of up to 23.8 mln shares to raise RM3.1 mln. This represents 10.0% of its total issued shares. It is planning to use RM1.0 mln in process for business expansion purposes, RM1.0 mln for research and development, and up to RM1.0 mln for working capital and RM90,000 to defray the expenses associated with the listing. The exercise is expected to be completed 1Q2020. (The Edge Daily)

Source: Mplus Research - 30 Dec 2019