No Sight Of Recovery

• The FBM KLCI (+0.1%) snapped a threeday losing streak after enduring a choppy trading session, backed by China’s stimulus measure to ease financial strains on companies hit by the Covid-19 outbreak. The lower liners – the FBM Small Cap (+0.3%), FBM Fledgling (+0.3%) and FBM ACE (+0.7%), all advanced, but the broader market closed mostly lower.

• Market breadth was again negative as decliners topple the advancers on a ratio of 436-to-405 stocks. Traded volumes, however, gained 16.4% to 2.96 bln shares as market stability return to the fore.

• Anchoring the FBM KLCI winners list were Public Bank (+18.0 sen), Tenaga (+18.0 sen), Hong Leong Bank (+4.0 sen) and Sime Darby Plantation (+4.0 sen). Maxis added 3.0 sen after delivering strong set of quarterly earnings. Consumer products stocks took the lead on the broader market again with the likes of Carlsberg (+74.0 sen), Dutch Lady (+66.0 sen), Panasonic (+60.0 sen) and BAT (+50.0 sen), while Aeon Credit rose 48.0 sen.

• Notable decliners on the broader market were Fraser & Neave (-RM1.80), Genting Plantations (-32.0 sen), G3 Global (-16.0 sen), KKB Engineering (-15.0 sen) and Heng Yuan (-14.0 sen). Big board losers on Thursday were Nestle (-RM1.10), PPB Group (-34.0 sen), KLK (-18.0 sen), Malaysia Airport Holdings (-17.0 sen) and Top Glove (-13.0 sen).

• Asia benchmark indices finished mostly higher as the Nikkei (+0.3%) extended its’ gains, taking cue from gains on Wall Street overnight. The Shanghai Composite jumped 1.8% to recover above the 3,000 psychological level after the People Bank of China reduced the country’s benchmark loan prime rate (LPR), but the Hang Seng Index fell 0.2%. ASEAN stockmarkets, meanwhile, closed on a mixed note yesterday.

• U.S. stockmarkets retreated overnight as the Dow fell 0.4% as investors turned risk off amid the unabated concern over the impact of Covid-19 outbreak on global economy. On the broader market, both the S&P 500 slipped 0.4%, while the Nasdaq ended 0.7% lower – both retreating from their all-time high levels.

• Earlier, major European equities also posted a recovery – the FTSE (-0.3%), CAC (-0.8%) and DAX (-0.9%), all retreated on a rising number of Covid-19 cases in China. Market sentiment was also weighed down by the sluggish corporate earnings from Air France KLM, Telefonica and Swiss Re.

THE DAY AHEAD

• We see Malaysian stocks trend lower alongside with the more weakness across equity market undertone that is brought about by the renewed volatility in many overseas indices, particularly from Wall Street. Global equities also remain choppy and that could extend to Malaysian equities.

• Still, we think that the pullback on Malaysian equities will be mild and selective as investors continue to monitor on the country’s stimulus plan in coming week. The supports are at 1,520 and 1,515 respectively. The potential upsides to are located at the 1,550-1,560 levels for now.

• Elsewhere, condition was similar for the lower liners with few impetuses and leads to entice increased retail participation. As a consequence, we also think that the near term upsides are limited among the FBM Small Cap, FBM ACE and FBM Fledgling index stocks as investors continue to monitor on the recent mixed batch of corporate earnings.

COMPANY BRIEF

• British American Tobacco (Malaysia) Bhd ‘s (BAT Malaysia) 4Q2019 net profit fell 18.3% Y.o.Y to RM93.9 mln, from RM114.8 mln in the corresponding quarter last year – led by rising illicit cigarette trade, while revenue lost 14.0% Y.o.Y to RM662.5 mln, from RM770.6 mln last year. The group has also declared a fourth interim dividend of 33.0 sen per share, payable on 18th March, 2020.

• For the full-year, net profit also fell 27.0% Y.o.Y to RM343.8 mln vs RM470.7 mln in 2018, while revenue declined 11.1% Y.o.Y to RM2.51 bln, from RM2.82 bln earlier.

• Separately, the group has appointed Jonathan Reed as its new Managing Director, effective 1st April this year, replacing Hendrik Stoel, who has opted for early retirement and has handed in his resignation. (The Star Online)

• YTL Corp Bhd‘s 2QFY20 net profit more than halved to RM17.5 mln, from RM44.8 mln last year, weighed down by weaker profits from the utilities and property investment and development segments, alongside higher taxes. Quarterly revenue, however, grew 21.7% Y.o.Y to RM5.54 bln, from RM4.55 bln earlier.

• Cumulative 1HFY20 net profit also plunged 80.7% Y.o.Y to RM32.9 mln, from RM170.6 mln in the same period before, despite the 25.3% Y.o.Y growth in revenue to RM10.83 bln, from RM8.64 bln. (The Edge Daily)

• Pharmaniaga Bhd recorded a 4Q2019 net loss of RM178.6 mln compared to a net profit of RM4.4 mln a year ago, due to recognition of the remaining RM247.0 mln unamortised Pharmacy Information System (PhIS), on top of a provision for stock write-off on the voluntary Ranitidine product recall of RM9.0 mln. Revenue, however, grew 20.0% Y.o.Y to RM715.7 mln, from RM596.6 mln previously.

• Consequently, the group also turned in its first full-year loss since going public 21 years ago. Full-year net loss reached RM149.2 mln vs a net profit of RM42.5 mln in the previous year, although revenue rose 18.3% Y.o.Y to RM2.82 bln, from RM2.38 bln in 2018. (The Star Online)

• Rohas Tecnic Bhd has clinched two contracts worth a combined RM192.0 mln to install transmission lines in Bangladesh. The first contract that will run for 30 months is for the design, supply, installation, testing, and commissioning of 230 kilowatt (kV) and 132kV transmission lines on a turnkey basis. The project is worth RM126.0 mln.

• The second contract worth RM66.0 mln, meanwhile, entails the design, supply, installation, testing and commissioning of another 132kV transmission lines, also on a turnkey basis. The contract duration is 24 months. (The Star Online)

• GD Express Carrier Bhd’s (GDex) 2QFY20 net profit nearly halved to RM5.9 mln, from RM10.7 mln earlier, dragged down by the absence of proceeds from the redemption of convertible bonds, and increased expenses including warehouse expansion. Quarterly revenue, however, grew slightly to RM87.4 mln (+5.5% Y.o.Y), from RM82.8 mln in the year-ago quarter.

• Moving forward, the group has warned that “the economic uncertainties arising from the outbreak of Covid-19 may impact the group’s results”. (The Edge Daily)

• Sunway Construction Group Bhd‘s (SunCon) 4Q2019 net profit trimmed 13.3% Y.o.Y to RM31.6 mln, from RM36.5 mln in the same quarter last year, in-tandem with a weaker revenue of RM485.9 mln (-22.0% Y.o.Y), from RM626.0 mln, as the majority of the group’s existing projects are at their initial stages. The group has also proposed a second interim dividend of 3.5 sen per share, payable on 8th April, 2020.

• Going forward, the group is targeting new orders of RM2.0 bln and is confident of securing projects in Myanmar and India by 2H2020. (The Star Online)

• Magnum Bhd’s 4Q2019 net profit tapered 22.8% Y.o.Y to RM56.3 mln, from RM72.9 mln a year earlier on weaker performance from its gaming division. Quarterly revenue also weakened to RM630.9 mln vs RM724.4 mln previously.

• Despite the weaker final quarter, the group’s full-year net profit rose to RM238.7 mln against RM105.4 mln last year, on the back of lower income tax. Revenue, meanwhile, was flattish at RM2.7 bln. Magnum has also proposed a dividend of three sen per share. (The Edge Daily)

• Ranhill Holdings Bhd was awarded a contract to develop a sewage treatment plant for the R&F Tanjung Puteri property project in Johor Bahru, worth RM5.5 mln. The job was awarded by R&F Development Sdn Bhd and that is expected to be completed in the next nine months. (The Edge Daily)

• Perdana Petroleum Bhd posted a 4Q2019 net loss of RM2.6 mln, from a net profit of RM9.1 mln last year, hit by a lower reversal of impairment loss on its assets and a one-off fee related to its debt-restructuring exercise. Revenue for the quarter was also marginally lower at RM64.0 mln, from RM64.1 mln in 4Q2018.

• Full year net loss, however, narrowed to RM22.9 mln, from RM40.9 mln in the last corresponding year, boosted by higher gross profit and one-off gains. Annual revenue also improved 26.6% Y.o.Y to RM240.0 mln, from RM189.7 mln in the previous year. (The Edge Daily)

• VSTECS Bhd, formerly known as ECS ICT Bhd, saw its 4Q2019 net profit jumped 29.6% Y.o.Y to RM10.7 mln, from RM8.3 mln in 4Q2018, in-tandem with stronger revenue growth, which expanded 21.5% Y.o.Y to RM542.1 mln, from RM446.1 mln previously. The group has also proposed a final dividend of three sen per share, payable on 17th June, 2020.

• Full-year net profit came in at RM29.6 mln (+20.3% Y.o.Y), from RM24.6 mln last year, while revenue rose 10.4% Y.o.Y to RM1.8 bln.

• Despite ending the year on a strong footing, VSTECS remains cautious on its 2020 outlook and expects demand from the consumer segment to remain challenging given the lower forecast of Malaysia’s gross domestic product (GDP) growth rate this year. (The Edge Daily)

Source: Mplus Research - 21 Feb 2020