Absence of Follow-Through Buying

• The FBM KLCI started off the week on a feeble note as the key index were unable to build on-to the previous’ session gains, falling 0.5% on Monday. The lower liners – the FBM Small Cap (+0.2%) and FBM Fledgling (+0.04%) and FBM ACE (+0.32%), all advanced, while the broader market closed mixed with the energy sector (+0.8%) outperforming.

• Market breadth turned negative as decliners edged the advancers on a ratio of 444-to-413 stocks. Traded volumes, however, rose 8.8% to 2.91 shares amid the rotational play amongst the lower liners.

• Tenaga (-18.0 sen) topped the key index’s decliners list, followed by Top Glove (-17.0 sen), Maxis (-15.0 sen), Petronas Gas (-10.0 sen) and PPB Group (-8.0 sen). Notable decliners on the broader market were Panasonic (-68.0 sen), Fraser & Neave (-26.0 sen), SCIB (- 14.0 sen), Genting Plantations (-12.0 sen) and LPI Capital (-12.0 sen).

• In contrast, broader market winners were Dutch Lady (+RM1.00), Heng Yuan (+51.0 sen), G3 Global (+36.0 sen) and Petron Malaysia (+26.0 sen). Eversendai added 1.0 sen after bagging a contract in India valued at RM330.0 mln. Key advancers on the FBM KLCI include Hong Leong Financial Group (+26.0 sen), KLK (+20.0 sen), Nestle (+10.0 sen), Hong Leong Bank (+8.0 sen) and CIMB (+5.0 sen).

• Asia benchmark indices closed on a mixed note mixed as the Nikkei (-0.7%) trended lower for the third straight session after Japan’s 4Q2019 economy shrank 6.3% Y.o.Y – the worst decline since 2014 amid the slumping consumer spending due to the sales tax hike. The Hang Seng Index added 0.5%, while the Shanghai Composite jumped 2.3% after China’s central bank cuts interest rates and as the government looks to cut taxes to combat the effect of Covid-19 virus on the economy. ASEAN stockmarkets, meanwhile, closed mixed yesterday.

• European benchmark indices – the FTSE, CAC and DAX, all rebounded, rising 0.3% each. Market sentiment was mainly boosted by the fresh stimulus measures from China. In the meantime, Wall Street was closed for the President’s Day public holiday, whilst futures market edged higher.

The Day Ahead

• Similar with Malaysia over the past week, Japan also delivered a slower–thanexpected economic data which has rattled the region’s stockmarket (except for Chinese equities). The quick profit taking activities on glovemakers heavyweights also piled pressure to the already negative market sentiment as investors continue to assess the impact of Covid-19 virus outbreak of global economy.

• Although there were early signs of stability at the start of the day, gains were quick dismissed as investors were quick to lock in their profits. With market conditions remain challenging, the negative market sentiment may prolong as the FBM KLCI looks to re-test the 1,515 level. On the flipside, a recovery is expected to be mild with gains limited towards the 1,560 level.

• Market sentiment has turned slightly downbeat as investors turned their focus to the corporate earnings that will be release in these 1-2 weeks. We opine that plantation companies are expected to outperform, potentially backed by the surge in CPO prices towards end-2019.

COMPANY BRIEF

• Petra Energy Bhd's 4Q2019 net profit inched higher by 3.4% Y.o.Y to RM21.7 mln, from RM21.0 mln a year ago, on the back of lower finance costs, administrative expenses, and impairment on trade and other receivables. Revenue also trimmed 35.2% Y.o.Y to RM124.4 mln, from RM191.8 mln previously. Even so, the group has declared an interim dividend of two sen per share, payable on 15th May, 2020.

• On a full-year basis, the group returned to the black with a net profit of RM62.6 mln, from a net loss of RM20.9 mln a year ago, as revenue jumped 26.8% Y.o.Y to RM592.9 mln, from RM467.4 mln earlier. (The Edge Daily)

• Former Renong Bhd Managing Director (MD) Datuk Mohd Zakhir Siddiqy has emerged as a substantial shareholder in Scomi Energy Services Bhd, with an 18.1% equity stake in the latter. This comes after an off-market trade of 424.0 mln Scomi Energy shares on 14th February, 2020, to Gelombang Global Sdn Bhd, a wholly-owned unit of United Flagship Sdn Bhd which in turn has Mohd Zakhir as its sole shareholder.

• The shares were transferred to Mohd Zakhir pursuant to a loan agreement with Scomi Group Bhd dated 17th July last year. To recap, Scomi Group had defaulted on a RM21.0 mln loan from Mohd Zakhir last month, which was securitised against an 18.6% stake in Scomi Energy, owned by Scomi Group. (The Star Online)

• Malayan United Industries Bhd (MUI) is reportedly in talks with its lenders to secure a fresh drawdown to keep its fashion and homeware retail chain Laura Ashley afloat, according to a news report.

• Besides the London Stock Exchangelisted Laura Ashley Holdings Plc, MUI also owns Metrojaya Bhd, one of Malaysia’s oldest department store operators. (The Edge Daily)

• Malpac Holdings Bhd has been declared as an affected listed issuer, as the company has been recording zero revenue since 2012. (The Edge Daily)

• Kuala Lumpur Kepong Bhd (KLK) and its parent Batu Kawan Bhd are upbeat about their FY20 earnings performance, despite starting the year with weaker first quarter results – led by stronger plantation earnings, in view of recovering crude palm oil and palm kernel prices, amid declining crude palm oil stocks and production.

• KLK’s 1QFY20 net profit tanked 33.0% Y.o.Y to RM167.2 mln, from RM250.9 mln last year, albeit revenue was flattish at RM4.08 bln, from RM4.09 bln previously.

• Batu Kawan also posted a 24.0% Y.o.Y drop in its 1QFY20 net profit to RM103.4 mln vs RM136.7 mln in the last corresponding year, though revenue was only marginally lower at RM4.21 bln, from RM4.22 bln a year ago. Both planters’ bottomline were mainly affected by lower manufacturing and investment holdings income. (The Star Online)

• Sinmah Capital Bhd has aborted its plans to acquire two pieces of land together with a three-star hotel and a six-storey commercial building sited on them in Bandar Nilai Utama, Seremban, for a combined RM27.0 mln. The termination is due to a breach of agreement by the vendor, who had removed various fittings, furnishings and furniture on the properties, which had resulted in the devaluation of the properties.

• Separately, Sime Darby Property (City of Elmina) Sdn Bhd (SDP Elmina) has accepted an offer from Sinmah Amegajaya to acquire a 5-acre piece of land in Sungai Buloh, Selangor, for RM32.7 mln.

• Moving forward, Sinmah Amegajaya plans to build a university hospital and a hospital-related building on the land. (The Edge Daily)

• HLT Global Bhd has inked a patent licence agreement with AF Solution and the inventor, which grants exclusive rights to HL Advance Technologies to market and use the high density triple former holder assembly technology. (The Edge Daily)

• Eversendai Corp Bhd has clinched RM330.0 mln worth of projects in India, pushing its total contract wins in 2020 and outstanding order book to RM653.0 mln and RM2.2 bln respectively. (The Star Online)

• Luxchem Corp Bhd’s 4Q2019 net profit grew 11.5% Y.o.Y to RM9.6 mln, from RM8.6 mln a year earlier, mainly due to higher profit in the trading segment. Revenue, however, fell 9.0% Y.o.Y to RM187.2 mln, from RM206.3 mln in the same period last year. Subsequently, the group has announced an interim dividend of 1.25 sen per share, payable at a date to be determined later.

• For 2019, Luxchem’s net profit slipped marginally to RM37.7 mln, from RM37.8 mln a year earlier, on the back of lower revenue of RM765.5 mln compared to RM814.1 mln in 2018. (The Edge Daily)  

Source: Mplus Research - 18 Feb 2020