Recovery in place

Market Review

Malaysia: The FBM KLCI (+0.4%) recovered all its intraday losses, shored up by buying interest in gloves heavyweights, snapping a four-day losing streak and offsetting concerns over rising confirmed cases of Covid-19 globally. The lower liners finished mixed, while the healthcare sector (+4.8%) outperformed the mostly negative broader market.

Global markets: US stockmarkets advanced the Dow jumped 2.3% lifted by the solid economic data that saw pending home sales jumped 44.3% MoM in May against economists’ expectations of 15.0% MoM rise. European stockmarkets also rebounded, but Asia equities were painted in red yesterday.

The Day Ahead

After four consecutive days of pullback, the local bourse has found some stability. We reckon that the buying momentum induced by gains in glove heavyweights may propel the FBM KLCI higher over the near term after glovemakers stocks consolidated over the past three weeks. The recovery will also be underpinned by the positive sentiment on Wall Street overnight as investors nibble on beaten down stocks in recent weeks, whilst the initial public offering of several companies as of late indicates that market liquidity remains on the table.

Sector focus: Rising number of Covid-19 confirmed cases may see buying momentum re-emerge on healthcare stocks, while the recovery in Brent oil prices staying above US$40 per barrel bodes well for oil & gas players.

The FBM KLCI’s intraday recovery to outperform the negative regional peers suggests for a potential recovery over the near term. With the key index finding stability along 1,476, we think the KLCI may trade towards the 1,510 and 1,530. Downside risk remain pegged the support at 1,460 followed by 1,430. Indicators are mixed as the MACD has turned green, but the RSI continues to stay flat along 50.

Company Brief

Kumpulan Powernet Bhd has secured a second renewable energy project in Laos, as the group seeks to double its orderbook to RM2.0bn within the next one year. It was awarded a US$40.7m (RM174.5m) contract by Zhenghong Building Road & Bridge Construction Co Ltd to build two hydropower energy facilities in Houaphan province. (The Star)

Ireka Corp Bhd has secured a RM163.9m contract to build a 10-storey extension block at a private hospital in Johor Baru, Johor. The 18-month contract, awarded by Regency Specialist Hospital Sdn Bhd, would start on 1st July 2020 and to be completed by 31st December 2021. (The Star)

Shangri-La Hotels (Malaysia) Bhd’s 1QFY20 net profit sank 90.8% YoY to RM2.0m as it was significantly impacted by worse operating results for its hotel businesses amid extremely challenging conditions due to the unprecedented disruption caused by the Covid-19 pandemic. Revenue for the quarter fell 36.0% YoY to RM88.5m. (The Edge)

Lingkaran Trans Kota Holdings Bhd’s (Litrak)’s 4QFY20 net profit slipped 7.8% YoY to RM54.6m on drop in traffic volume. Revenue for the quarter decreased 11.8% YoY to RM111.5m. (The Edge)

Panasonic Manufacturing Malaysia Bhd’s 4QFY20 net profit gained 34.9% YoY to RM30.3m on higher profit achieved by the associate company, mainly due to lower promotional and marketing expenses. Revenue for the quarter, however, slipped 9.3% YoY to RM204.7m. (The Edge)

Oriental Holdings Bhd’s 1QFY20 net loss stood at RM396.1m vs. a net profit of RM80.6m, mainly due to a foreign exchange loss on yen-denominated borrowings by the plantation segment. Revenue for the quarter dropped 31.2% YoY to RM956.4m. (The Edge)

Sunway Real Estate Investment Trust (Sunway REIT) is buying The Pinnacle Sunway in Sunway City for RM450.0m. This marks the 10th property addition to Sunway REIT’s asset portfolio. The REIT’s property value will rise to RM8.50bn upon completion of the acquisition. (The Edge)

Pecca Group Bhd is venturing into producing personal protective equipment (PPE) such as face masks, face shields and PPE garments to the commercial and medical sectors. Pecca Leather Sdn Bhd will repurpose its existing production lines and leverage its in-house talent of craftsmen and facilities to execute the PPE business. The group has allocated a capital expenditure of RM2.2m for the purchase of machinery and set-up of cleanroom facilities for production of face masks. (The Edge)

Sapura Energy Bhd’s 1QFY21 net profit stood at RM14.2m compared to a net loss of RM109.1m recorded in the previous corresponding quarter on higher project margins and cost cutting measures. Revenue for the quarter, however, fell 16.9% YoY to RM1.36bn. (The Edge)

QL Resources Bhd’s 4QFY20 net profit was flat RM43.0m due to higher tax expense and finance costs. Revenue for the quarter rose 8.4% YoY to RM979.4m. Seperately, The group plans to issue up to 811.2m bonus shares, one each for every two QL shares held. (The Edge)

MyEG Services Bhd' (MyEG) raked in a net profit of RM58.8m on revenue of RM121.7m for 1QFY20. There was no comparative data for the period as the firm changed its financial year from 30th September to 31st December. (The Edge)

AMMB Holdings Bhd’s (AmBank Group) 4QFY20 net profit fell 46.2% YoY to RM247.5m, due to a RM194.9m allowance for impairment on loans, advances and financing vs. a RM271.6m writeback of allowance for impairment on loans, advances and financing in 4QFY19. Revenue for the quarter declined 5.1% YoY to RM2.21bn. (The Edge)

Source: Mplus Research - 30 Jun 2020