Still Meek

• The FBM KLCI (-0.2%) extended its’ losses alongside with the as the mostly dour market sentiment across Asia region after lingering mostly in the negative territory yesterday. The lower liners finished mostly higher as the FBM Small Cap and FBM Fledgling gained 1.3% and 0.2% respectively, while the broader market closed mostly higher, led by the construction sector (+3.4%).

• Market breadth remained positive as advancers overcame the decliners on a ratio of 452-to-361 stocks. Traded volumes, however, fell 2.8% to 2.74 bln shares as investors were quick to lock in recent gains, particularly from FBM ACElisted stocks.

• More than half of the key index components fell, dragged down by Hong Leong Bank (-30.0 sen) and KLK (-30.0 sen), followed by Nestle (-20.0 sen), Malaysia Airport Holdings (-15.0 sen) and PPB Group (-14.0 sen). BAT sank 72.0 sen after the exclusion from the MSCI Global Standard Index, while Panasonic (-18.0 sen), Watta (-15.0 sen), MPI (-14.0 sen) and Shangri-La (- 10.0 sen) declined on the broader market.

• Amongst the biggest gainers on the broader market include Carlsberg (+RM2.26), Heineken (+RM1.40), Frasr & Neave (+62.0 sen), Aeon Credit (+42.0 sen) and Yinson (+39.0 sen). Anchoring the FBM KLCI gainers list were IHH (+5.0 sen), Petronas Gas (+4.0 sen), MISC (+3.0 sen), RHB Bank (+3.0 sen) and Axiata (+2.0 sen).

• Asia benchmark indices halted their streak of gains on the spike in cases of coronavirus in China as the Nikkei fell 0.1%. The Hang Seng Index declined 0.6%) snapped a seven-day winning streak. ASEAN stockmarkets finished mostly lower on Thursday’s close.

• Wall Street retreated from their record high levels as the Dow fell 0.4%, dragged down by the sudden jump in reported cases of coronavirus. On the broader market, the S&P 500 declined 0.2% after erasing all its’ intraday losses, while the Nasdaq ended 0.1% lower.

• Major European indices – the FTSE (- 1.1%), CAC (-0.2%) and DAX (-0.03%), all slipped, mirroring the weakness across the Asia counterparts. At the same time, France’s economy minister, Bruno Le Maire, estimated a 1.0% hit to the global economy in 2020 due to the Wuhan virus outbreak.

THE DAY AHEAD

• Bursa Malaysia was not spared from the selling activities across the globe as the key index remained under pressured yesterday. Market sentiment was also affected by the possibility of another rebound of interest rate cut to combat the ailing economy growth. At the same time, the spike in the number of coronavirus casualties may see economic growth continue to stall.

• With the barrage of negative news on the forefront, the negative market sentiment is expected to prolong as the key index looks to end the week on a negative tone. Further weakness may drag the local bourse towards the 1,535 level, with the next key support located at the 1,515 level. Any recovery will be taken as a dead-cat bounce with gains capped at the 1,555 resistance level.

• Although the FBM KLCI remained frail, the lower liners continue to demonstrate resilience on the back of rotational play. We also note that trading interest was particularly firm in the construction sector amid reports on the upcoming resumption of KL-Singapore High Speed Rail.

COMPANY UPDATE

• Teo Seng Capital Bhd’s 4Q2019 net profit fell 21.2% Y.o.Y to RM13.6 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 declined 7.0% Y.o.Y to RM137.0 mln.
   
• For 2019, cumulative net profit jumped 93.8% Y.o.Y to RM58.8 mln. Revenue for the year gained 11.6% Y.o.Y to RM547.1 mln.

Comments

• Both the reported earnings and revenue came in line with our expectations, making up to 101.6% and 97.8% of our forecast of RM57.9 mln and RM559.3 mln respectively.

• With the reported earnings coming within our expectations, we made no changes to our earnings. Consequently, we maintained our BUY recommendation on Teo Seng with an unchanged higher target price of RM1.65. We arrive our target price by ascribing an unchanged target PER of 8.0x to its 2020 EPS of 20.6 sen.

COMPANY BRIEF

• Dialog Group Bhd‘s 2QFY20 net profit rose 15.5% Y.o.Y to RM158.0 mln, from RM136.8 mln last year, on higher income from operations and joint-ventures (JV), lower finance costs and lower tax expense. Revenue, however, was almost unchanged at RM612.3 mln against RM609.6 mln (+0.4% Y.o.Y) previously.

• Similarly, cumulative 1HFY20 net profit grew 28.3% Y.o.Y to RM322.7 mln, from RM251.4 mln in the previous corresponding period, on higher profit from JVs and associates, as well as the RM28.5 mln gain on disposal of a JV. Even so, revenue fell 3.3% Y.o.Y to RM1.26 bln, from RM1.3 bln previously. (The Edge Daily)

• Marine & General Bhd has been awarded a contract from Petronas Carigali Sdn Bhd for the provision of one offshore support vessel worth about RM14.0 mln. The project, which was awarded on 17th January, 2020, is for one unit of Anchor Handling Tug and Supply (AHTS) vessel, and will commence from mid-February this. (The Edge Daily)

• Duopharma Biotech Bhd has secured a 25-month extension on a Government contract for the supply of pharmaceutical and/or non-pharmaceutical products to hospitals, clinics and others until 1st December, 2021.

• Separately, the group’s 4Q2019 net profit decreased 16.0% Y.o.Y to RM12.0 mln vs RM14.4 mln, despite stronger revenue performance, which rose 19.0% Y.o.Y to RM137.8 mln, from RM115.6 mln in the last corresponding period. The weaker bottomline was mainly due to higher costs.

• Despite the weaker quarterly earnings, 2019 net profit jumped 16.0% Y.o.Y to RM55.3 mln, from RM47.6 mln earlier, while revenue grew to RM576.5 mln, from RM498.7 mln in 2018. (The Star Online)

• Sunway Real Estate Investment Trust (REIT)’s 2QFY20 net property income (NPI) grew almost 12.0% Y.o.Y to RM116.6 mln, from RM104.2 mln a year ago, in-tandem with revenue growth at 11.7% Y.o.Y to RM155.8 mln, from RM139.5 mln last year. Subsequently, the group declared an income distribution per unit (DPU) of 2.45 sen, payable on 12th March this year.

• Similarly, 1HFY20 NPI was up by 9.8% Y.o.Y to RM235.7 mln, from RM214.7 mln a year ago, while revenue rose nearly 10.0% Y.o.Y to RM311.2 mln compared to RM283.2 mln. (The Star Online)

• Gas Malaysia Bhd‘s 4Q2019 net profit rose 13.4% Y.o.Y to RM57.9 mln previously, from RM51.1 mln in 4Q2018, on the back of higher share of results from its JVs. Revenue, however, fell 3.5% Y.o.Y to RM1.68 bln, from RM1.74 bln last year. The group has also declared a second interim dividend of 4.8 sen per share.

• Full-year net profit in 2019 also gained 5.4% Y.o.Y to RM190.1 mln vs RM180.4 mln last year, boosted by higher JV contribution, while revenue rose 10.5% Y.o.Y to RM6.89 bln, from RM6.23 bln previously. (The Star Online)

• Barakah Offshore Petroleum Bhd was slapped with a summons and claims of RM85.2 mln from PRPC Utilities and Facilities Sdn Bhd, a unit of Petroliam Nasional Bhd. Both the writ of summons and statement of claim was received on 13th February, 2020 which followed an initial claim filed by PRPC sometime last year which Barakah had disputed and counterclaimed for RM6.6 mln.

• The claims are in-relation with a contract for the procurement, construction and commissioning of Underground Pressurized Non Metallic Piping Firewater Network East Side (P14 Contract). The similar amount of RM85.2 mln is also claimed by PRPC against Barakah’s unit PBJV Group Sdn Bhd. (The Edge Daily)

• British American Tobacco (M) Bhd (BAT) will no longer be in the MSCI Global Standard Index, while Carlsberg Brewery Malaysia Bhd will be added to the equity gauge following the February 2020 quarterly index review for the MSCI Equity Indexes.

• Concurrently, BAT will be added to the MSCI Global Small Cap Index. The changes will be implemented as of the close of 28th February, 2020. (The Edge Daily)

• Pos Malaysia Bhd is disposing its 49.0% equity stake in its indirect wholly-owned subsidiary Pos Aviation Engineering Services Sdn Bhd to SIA Engineering Co Ltd (SIAEC) for an indicative cash consideration of RM10.1 mln to facilitate the entry of SIAEC as Pos Aviation Engineering’s strategic partner.

• To recap, SIAEC is a major provider of aircraft MRO services in Asia-Pacific. SIAEC has a client base of more than 80 international carriers and aerospace equipment manufacturers. (The Edge Daily)

Source: Mplus Research - 14 Feb 2020