Turning Toppish

• Once again, the rally in glovemakers powered the FBM KLCI (+0.4%) higher as the key index brushed off the choppy trading period in the first half of the trading session yesterday. The lower liners edged mostly lower as the FBM Small Cap and FBM ACE fell 0.8% and 0.4% respectively, while the broader market closed mixed.

• Market breadth turned negative as decliners led advancers by a ratio of 3- to-2. Traded volumes fell 3.6% to 6.94 bln shares on the emergence of mild profit taking activities.

• Asia stockmarkets closed mostly higher as the Nikkei (+2.3%) rallied to record its fourth straight session of advance after the Japanese Cabinet approved the second supplementary budget valued at US$296.0 bln. The Shanghai Composite added 0.3% after being powered into the positive territory in the final trading hour, but the Hang Seng Index (-0.7%) extended its losses after China’s legislatures approved a proposal to impose a highly contentious national security law in Hong Kong. Asia stockmarkets, meanwhile, were mostly higher on Wednesday close.

• U.S. stockmarkets snapped a three-day winning streak after dipping into the negative territory in the eleventh trading hour; the Dow fell 0.6% on the back of the souring trade relationship with China and the higher-than-expected initial unemployment claims data for last week. Similarly, the S&P 500 (-0.2%) retreated, while the Nasdaq closed 0.5% lower.

• Earlier, major European stockmarkets - the FTSE (+1.2%), CAC (+1.8%) and DAX (+1.1%), all marched higher as investors

continue to digest the massive €750.0 bln recovery fund to boost the ailing region’s economy.

The Day Ahead

• The soaring demand amongst the healthcare related stocks continue to power the FBM KLCI yesterday. As it is, the strong performance was mainly back by the surge in demand in healthcare stocks. At the same time, the lackluster earnings performance across other sectors prompted investment concentration towards the outperformers.

• As market players continue to cheer on the healthcare sector, we see gains on the FBM KLCI to prolong but upsides may be capped by the rising tension between U.S. and China. The resistance is now located at the 1,480 level, followed by the 1,500 psychological level. Downside risk will be pegged at the 1,430 level.

• It is a tale of two sides for the lower liners and broader market shares as mild profit taking activities are taking the lead. The combination of weak earnings prospects and the toppish market condition after the recent recovery suggest that consolidation will take helm over the near term.

COMPANY BRIEF

• FGV Holdings Bhd’s 1Q2020 net loss widened to RM142.4 mln vs. a net loss of RM3.4 mln recorded in the previous corresponding quarter, on the back of lower FFB production and slimmer margins. Revenue declined 15.0% Y.o.Y to RM2.78 bln. (The Star)

• Time DotCom Bhd’s 1Q2020 net profit jumped 55.2% Y.o.y to RM98.0 mln, on higher overall revenue growth, a large net gain on foreign exchange, lower interest expense and a higher share of profit from associates. Revenue for the quarter increased 11.9% Y.o.Y to RM294.0 mln. (The Star)

• Mega First Corporation Bhd’s 1Q2020 net profit jumped 70.5% Y.o.Y to RM57.4 mln, boosted by energy sales revenue from the Don Sahong project in Cambodia which was completed in 4Q2019. Revenue for the quarter, however, fell 27.5% Y.o.Y to RM160.7 mln. (The Star)

• ViTrox Bhd’s 1Q2020 net profit fell 10.8% Y.o.Y to RM21.1 mln, due to unfavourable sales mix. Revenue for the quarter, however, inched up 1.5% Y.o.Y to RM90.3 mln. It declared a dividend of 2.8 sen a share. (The Star)

• Ho Hup Construction Bhd's 1Q2020 net profit surged 199.1% Y.o.Y to RM15.9 mln due to the recognition of progressive billngs and sales in the property development division. Revenue for the quarter jumped 89.6% Y.o.Y to RM80.3 mln. (The Star)

• The Armed Forces Fund Board (LTAT) has confirmed that it is considering taking its 59%-owned unit Boustead Holdings Bhd private. The indicative offer price is 80 sen per share while yesterday’s closing price is 63 sen. (The Edge)

• LYC Healthcare Bhd is acquiring a controlling 51.0%-stake in Singaporebased HC Orthopaedic Surgery Pte Ltd for S$6.9 mln (RM21.3 mln). This is its second acquisition involving a Singapore medical firm in less than a month. (The Edge)  7-Eleven Malaysia Holdings Bhd’s 1Q2020 net profit added 2.1% Y.o.Y to RM11.4 mln due to higher revenue and marketing income earned. Revenue for the quarter rose 6.1% Y.o.Y to RM619.3 mln. (The Edge)

• Power Root Bhd’s 4QFY20 net profit jumped 154.0% Y.o.Y to RM12.7 mln due to increased revenue base, higher foreign exchange gain on strengthening of the US Dollar against the Ringgit as well as an one-off impairment on trade receivables recognised in the previous year's corresponding quarter. Revenue for the quarter rose 13.6% Y.o.Y to RM90.4 mln.

• For FY20, cumulative net profit increased 83.5% Y.o.Y to RM51.4 mln. Revenue for the year grew 14.2% Y.o.Y to RM386.1 mln. A fourth interim dividend of two sen per share, together with a special two sen dividend was proposed. (The Edge)

• BIMB Holdings Bhd's 1Q2020 net profit rose 3.3% Y.o.Y to RM209.2 mln on better performances from its two main subsidiaries, Bank Islam Malaysia Bhd and Syarikat Takaful Malaysia Keluarga Bhd. Revenue for the quarter, however, fell 6.1% Y.o.Y to RM1.24 bln. (The Edge)

• Gadang Holdings Bhd’s wholly-owned unit Gadang Engineering (M) Sdn Bhd has secured two contracts worth a combined RM81.2 mln from China Communications Construction (ECRL) Sdn Bhd in respect of the East Coast Rail Link project. The first contract, which commenced from 28th May 2020 and is expected to be completed on 30th June 2022 is worth RM24.1 mln while the second contract which shall start on 15th June 2020 and is slated for completion on 15th December 2022 is worth RM57.1 mln. (The Edge)

• Vizione Holdings Bhd has bagged an RM96.3 mln contract to build 214 condominium units and 31 superlink villas together with ancillary facilities in Seksyen U20, Shah Alam. The commencement of work is in two phases, which will be from 27th May 2020 and 27th Aug 2020 respectively and will be completed within 29 months from their commencement date. (The Edge)
• Cypark Resources Bhd said it is buying a 51.0% equity stake in biogas plant operator BAC Biogas (Kg Gajah) Sdn Bhd for RM6.0 mln. BAC is principally engaged in the business of developing and operating a 1.6 MW palm oil mill effluent biogas plant and had previously signed a 16-year renewable energy power purchase agreement with Tenaga Nasional Bhd to sell energy to the latter. (The Edge)  

Source: Mplus Research - 29 May 2020