Beyond 1,500 again

Market Review

Malaysia: The FBM KLCI (+0.4%) edged higher to close marginally above the 1,500 psychological level on the back of gains from glovemakers heavyweights as investors turned positive on Wall Street overnight. Consequently, the FBM KLCI rose 1.9% MoM, marking the third consecutive month of advance. Both the lower liners and the broader market closed mixed, while the energy sector (+2.3%) outperforming its peers in the latter.

Global markets: US stockmarkets advanced as the Dow added 0.9% to mark its biggest quarterly gain since 1987; rising 17.7% QoQ in 2Q2020 after the US Federal Reserve re-iterated their commitment to support the economy back to pre-Covid-19 level. European stockmarkets finished mostly lower on a choppy trading session, while Asia equities closed mostly higher with the Shanghai Composite adding 0.8% after the NBS Manufacturing PMI for June 2020 unexpectedly rose to 50.9.

The Day Ahead

The FBM KLCI may continue on the recovery path, taking cue from the gains on Wall Street overnight as investors turned slightly optimistic on the recent batch of stronger-than-expected economic data. Meanwhile, the conclusion of quarterly reporting earnings season may also bring some stability as investors focus on the gradual re-opening of economic activities.

Sector focus: We continue to favour the healthcare sector as the market remains concern over the rising cases of Covid-19.

The FBM KLCI rose above both the EMA20 and the 1,500 psychological level. Although the local bourse has demonstrated some stability, the key index is still trading within the consolidation band with the immediate resistance at 1,515, followed by 1,530. A breakout above the latter will only see the bulls taking charge again. Support is now pegged at 1,475 followed by 1,460. Indicators remain mixed as the MACD Line remains below the Signal Line, while the RSI remains above 50.

Company Brief

Eversendai Corp Bhd has agreed to acquire a liftboat business from its founder Tan Sri Nathan Elumalay for RM235.0m. Eversendai will issue 770.5m new redeemable convertible preference shares (RCPS) at 30.5 sen each to pay for the entire 100.0% stake in Vahana Offshore (M) Sdn Bhd. The acquisition will serve to provide the enlarged Eversendai Group with a source of recurring income. Eversendai expects Vahana to contribute more than 25.0% to its annual profit. (The Star)

Tenaga Nasional Bhd (TNB) is raising up to RM12.0bn via two sukuk programmes for future capital expenditure, investment, general corporate purposes and working capital requirements. The two programmes are the Islamic Medium Term Notes amounting to RM10.0bn and the Islamic Commercial Papers worth RM2.0bn, with tenure of 50 years and 7 years respectively. Proceeds may be utilised to refinance any existing financing facilities of TNB or its subsidiaries, and to defray any fees and expenses for the two Islamic bond programmes. (The Edge)

Tropicana Corp Bhd’s 1QFY20 net profit fell 88.8% YoY to RM5.2m, due to lower progress billings across some of the group’s key ongoing projects and lower sales during the movement control order period. Revenue for the quarter dropped 32.0% YoY to RM142.7m. (The Edge)

Malaysia Airports Holdings Bhd (MAHB) has slashed its planned RM1.80bn capital expenditure (capex) for 2020 by 82.2% to RM320.0m, as the airport operator embarks on an aggressive cost-optimisation plan amid the ongoing Covid-19 pandemic. Bulk of the original capex allocation comprised funds for airport expansion and other projects under the regulated asset base framework, which have been put on hold in light of the Covid-19 outbreak. (The Edge)

Malaysia Building Society Bhd (MBSB) is targeting a loan growth of 3.0-4.0% for FY20, amid uncertainties brought about by the Covid-19 pandemic. To achieve this, the bank will be focusing on the civil servants’ segment, as well as government projects and contracts. On another note, the bank said its plan to list MBSB’s wholly-owned banking unit, MBSB Bank on Bursa Malaysia remains on track. (The Edge)

Green Packet Bhd’s 1QFY20 net loss widened to RM34.1m, from net loss of RM13.9m recorded in the previous corresponding quarter as a result of higher costs and a fair value adjustment on an investment during the period under review. Revenue for the quarter, however, rose 50.1% YoY to RM147.1m. (The Edge)

Ann Joo Resources Bhd’s 1QFY20 net loss widened to RM30.6m, from net loss of RM6.6m recorded in the previous corresponding quarter, due to lower sales and selling prices of steel products amid the Covid-19 pandemic, which resulted in temporary business closures and global supply chain disruptions. Revenue for the quarter fell 17.2% YoY to RM445.7m. (The Edge)

Sasbadi Holdings Bhd plans to collaborate with China's Huawei on the development of e-learning products by leveraging the latter's cloud artificial intelligence technology and to implement joint opportunities. The firm has entered into a memorandum of collaboration with Huawei, which includes jointly promoting Sasbadi’s e-learning products in Malaysia and Southeast Asia via Huawei cloud marketplace. The memorandum will remain in force for two years. (The Edge)

Ikhmas Jaya Group Bhd’s external auditor Messrs KPMG PLT has expressed an unqualified opinion with material uncertainty related to the going concern ability of the group in respect of FY19. The auditor drew attention to the group and company’s incurred net losses of RM159.5m and RM161.8m respectively for FY19. At the same time, it also noted that the group’s current liabilities had exceeded its current assets by RM21.6m. These conditions, among others, indicated material uncertainties exist that may cast significant doubt on the ability of the group to continue as a going concern. (The Edge)

Source: Mplus Research - 1 Jul 2020