Sideways Trend

• The FBM KLCI endured a choppy trading session swinging between the positive and negative territory before finishing 0.02% lower yesterday. The lower liners - the FBM Small Cap (+0.2%), FBM Fledgling (+0.8%) and FBM ACE (+1.0%) all managed to stay afloat, while broader market ended mostly positive, led by the telecommunications and media sector.

• Market breadth stayed positive as gainers overrule the losers on a ratio of 461-to-374 stocks. Traded volumes, however, fell 0.8% to 5.05 bln shares on signs of quick profit taking activities.

• Key decliners on the FBM KLCI were Hong Leong Financial Group (-50.0 sen), Tenaga (-20.0 sen), Hong Leong Bank (- 14.0 sen), Hap Seng Consolidated (-9.0 sen) and Maybank (-8.0 sen). Notable losers on the broader market were Carlsberg (-76.0 sen), Heineken (-76.0 sen), Ayer Holdings (-35.0 sen), Far East Holdings (-13.0 sen) and Perusahaan Sadur Timah (-14.0 sen).

• On the flipside, Fraser & Neave (+68.0 sen), Dutch Lady (+40.0 sen), Riverview Rubber (+24.0 sen), Negri Sembilan Oil Palms (+21.0 sen) and United Plantations (+20.0 sen) topped the broader market winners list. Meanwhile, Nestle (+50.0 sen), Public Bank (+14.0 sen), Sime Darby (+14.0 sen), Axiata (+9.0 sen) and IHH (+8.0 sen) advanced on the local bourse.

• Asia benchmark indices ended mostly higher as Nikkei (+1.5%) recovered all its’ previous session losses, boosted by the stabilising crude oil prices, while the Hang Seng Index (+0.2%). The Shanghai Composite (-0.2%), however, retreated amid the uncertainty over economic growth. Asia stockmarkets, meanwhile, ended mixed yesterday.

• U.S. stockmarkets ended on a mixed note as the Dow rose 0.2% amid the stabilising crude oil prices, whilst weekly jobless claims stood at 4.4 mln last week, totaling more than 26.0 mln since Covid- 19 quarantine - wiping out all 23.0 mln jobs created post 2008 global financial crisis. On the broader market, the S&P 500 fell 0.1%, while the edged 0.01% lower.

• Earlier, European stockmarkets - the FTSE (+1.0%), CAC (+0.9%) and DAX (+1.1%), all extended their gains after recovering all their intraday losses. At the same time, the preliminary IHS Markit Purchasing Managers’ Index dropped to record low at 13.5 in April 2020.

The Day Ahead

• Buying momentum was punctuated by quick profit taking activities as the recovery on the FBM KLCI stalled yesterday. After two consecutive weeks of strong recovery, investors have now turned into a crossroad as concern over the economic impact from Covid-19 returns to the fore. At the same time, the persistent selling activities from foreign funds also limit gains over the near term.

• With conditions turning slightly on a weaker side, we think that the FBM KLCI may consolidate, ranging between the 1,360 and 1,410 levels. An upper band breakout will see the recovery resume for the key index towards the 1,420 and 1,455 levels. On the flipside, the support is pegged at the 1,360 level for the time being.

• The lower liners and broader market shares are also trading in an indifferent manner as investors were quick to lock in recent gains to pare down exposure in anticipation of further volatility. Nevertheless, the stabilising crude oil prices may garner trading interests towards oil & gas shares.

Company Update

• Serba Dinamik Holdings Bhd plans to raise up to RM580.0 mln by issuing up to 394.0 mln new shares or up to 10% of the total number of issued shares which would be used to repay its bank borrowings and also be used as working capital.

• As at 16th April 2020, Serba Dinamik has 3.08 bln shares, including 18.8 mln treasury shares, and 881.1 mln warrants issued on 6th December 2019. The exercise price of the warrants into shares is RM2.62 per share and the exercise period is until 5th December 2024.

• The shares would be placed out to third-party investor to be identified in the course of the book-building for the placement shares. The illustrative issue price of the placement shares is assumed to be issued at RM1.47 each, representing a discount of 9.8% or 16 sen to the five-day volume weighted average price of the shares of RM1.63. (The Star)

Comments

• We are neutral on the abovementioned corporate proposal. Although there will be dilution in share price, the move will likely to generate an interest cost saving of approximately RM9.0 mln per annum will boost the bottom line by 1.2% and 1.0% to RM577.0 mln and RM664.7 mln for 2020 and 2021 respectively.

• Consequently, we maintained our BUY recommendation on Serba Dinamik, but with a slightly lower target price of RM2.21 (from RM2.35). We arrive at our target price by ascribing a PER of 13.0x to its forecast 2020 EPS of 17.0 sen.

COMPANY BRIEF

• United Plantations Bhd’s (UP) 1Q2020 net profit improved 21.0% Y.o.Y to RM81.2 mln, driven by higher palm oil prices. Revenue for the quarter, however, slipped 1.2% Y.o.Y to RM318.0 mln. (The Star)

• Digi.com’s 1Q2020 net profit fell 2.8% Y.o.Y to RM332.0 mln as other expenses jumped, while it recorded a net loss from its foreign currency and fair value movement currency forward contracts. Revenue for the quarter, however, rose 3.4% Y.o.Y to RM1.56 bln. (The Star)

• Sino Hua-An International Bhd has entered into two agreements to acquire the entire stake in MD Labs Sdn Bhd as well as a 70% stake in HumanCapient Consulting Sdn Bhd (HCSB) for a combined total of RM27.0 mln.

• MD Labs is involved in data analytics and provision of business intelligence solutions, while HCSB is involved in the provision of services in design, planning and implementation of change management programmes, specialising in systems integration projects.

• Key Alliance Bhd’s unit Progenet Innovations Sdn Bhd has inked a reseller agreement with Singapore firm Storm Front Pte Ltd, under which it will offer post-Movement Control Order business reboot solutions. The two parties previously entered into a Memorandum of Understanding on 7th April 2020 for the partnership. The agreement is effective for two years, and is renewable for one year. (The Edge)

• Businessman Tan Chean Suan has emerged as a substantial shareholder of Censof Holdings Bhd, after acquiring a 5.4% stake in the tech company. Tan is the chief executive officer of TCSens Sdn Bhd, which provides radio frequency identifications (RFID) solutions. Tan bought the stake comprising 26.8 mln shares in the open market on 22nd April 2020. (The Edge)

• KIP Real Estate Investment Trust’s 1Q2020 net property income rose 41.9% Y.o.Y, underpinned by higher gross revenue following the acquisition of AEON Mall Kinta City in July 2019 as well as better cost management. The REIT’s gross revenue rose 24.1% Y.o.Y to RM19.4 mln. An interim income distribution of 1.52 sen per unit, payable on 29th May 2020 was declared. (The Edge)

• Solarvest Holdings Bhd has secured a rooftop solar project worth RM29.2 mln from Petronas-linked NE Suria Satu Sdn Bhd (NESS) involving 15 stores of a hypermarket chain. The majority shareholders of NESS are Petronas Power Sdn Bhd, a whollyowned unit of Petronas; and NEFIN Energy (Malaysia) Sdn Bhd, a subsidiary of bespoke solar developer and asset management firm NEFIN Group. (The Edge)  

Source: Mplus Research - 24 Apr 2020