Building up momentum

Market Review

Malaysia: The FBM KLCI (+1.2%) recovered all its previous session losses as the resumption of upward momentum in glove heavyweights powered the key index beyond the 1,600 psychological level. The lower liners extended their gains, while the broader market finished mostly higher with the exception of healthcare (-1.8%) and transportation & logistics (-0.5%) sectors.

Global markets: US stockmarkets retreated as the Dow (-1.3%) wiped out all its previous session gains after the Labour Department reported number of unemployment filings rose for the first time in 16 weeks to 1.4m vs. 1.3m in the previous week. European stockmarkets closed mildly lower after erasing all their intraday gains, while Asia equities closed mixed.

The Day Ahead

The upbeat momentum on the FBM KLCI continues to be induced by the strong performance on glovemakers heavyweights. Gains, however, may be limited owing to the weakness on Wall Street overnight which may permeates to the Asia equities. Amid the rising number of Covid-19 cases, the buying momentum in glove makers stocks may provide some cushion to further weakness.

Sector focus: With CPO prices rallying above RM2,700 per metric tonne we reckon that plantation stocks will be trading in a positive manner. At the same time, we remain upbeat on the construction sector that emerged as biggest broader market winner (+2.0%) yesterday as a proxy to economic revival play for 2H2020.

The FBM KLCI has formed a bullish candle to remain above the daily EMA9 level as momentum was upbeat throughout the trading session. Despite that, the FBM KLCI remained within a range bound mode with immediate resistance located at 1,615, followed by 1,630. Supports are pegged at 1,560, followed by 1,530. Indicators have turned slightly positive with the MACD Histogram turning green but remains mildly below the Signal Line, while the RSI remains above 50.

Company Brief

Vitrox Corp Bhd’s 2QFY20 net profit slipped 6.0% YoY to RM22.9m due to unfavourable product mix. Revenue for the quarter, however, improved 8.4% YoY to RM96.5m. An interim dividend of 2.8 sen a share was declared. (The Star)

Opcom Holdings Bhd has accepted a RM21.4m contract from Telekom Malaysia Bhd to manufacture and supply optical fiber cables. The contract will commence on 1st August 2020 to 20th May 2022. (The Star)

Maxis Bhd’s 2QFY20 net profit declined 13.6% YoY to RM343.0m on weaker contribution from prepaid segment. Revenue for the quarter fell 2.7% YoY to RM2.15bn. A second interim dividend of 4 sen per share, payable on 24th September 2020 was declared. (The Edge)

British American Tobacco (M) Bhd’s (BAT) 2QFY20 net profit decreased 28.4% YoY to RM54.6m, due to lower sales. Revenue for the quarter fell 14.7% YoY to RM546.6m. A second interim dividend of 18 sen per share, payable on 19th August 2020 was declared. (The Edge)

Pavilion Real Estate Investment Trust (REIT)’s 2QFY20 net property income (NPI) declined 57.2% YoY to RM39.1m, impacted by rental rebates offered for tenant retention in the Movement Control Order (MCO) period. Revenue for the quarter fell 39.8% YoY to RM86.7m. A distribution per unit of 0.4 sen for the quarter was declared. (The Edge)

Ranhill Utilities Bhd is forming a consortium to partake in the bidding of a development project relating to the drinking water allocation system of the Jatiluhur dam in Jakarta. Its subsidiary Ranhill Capital Sdn Bhd signed a deal with two Indonesian firms and two Philippine firms to conduct feasibility studies and take part in the bidding process. (The Edge)

Two days after proposing a private placement of 15.0% of its shares to its founder Dr Abu Hasan Ismail, Prestariang Bhd announced another cash call. Together with the RM27.9m injection agreed by Abu Hasan, Prestariang is aiming to raise a total of RM63.2m through the two corporate exercises.

It is planning to raise a further RM35.4m via a renounceable rights issue of ordinary shares with free detachable warrants. The rights issue will involve up to 176.8m new shares at an issue price of 20 sen per rights share, on the basis of one rights share for every three Prestariang shares held. The rights issue will come with free detachable warrants, on the basis of one warrant for every one rights share subscribed. (The Edge)

MTouche Technology Bhd has proposed a private placement to raise up to RM18.1 m for the development of a new over the top media platform. Up to 777.6m shares or 30.0% of the group's issued share capital will be issued to independent third party investors to be identified later. (The Edge)

Willowglen Msc Bhd has been awarded a contract worth RM8.5m from Tenaga Nasional Bhd for the supply, installation and testing of field terminal units for its distribution automation project. The contract commenced on 22nd July 2020 and is expected to be completed by 20th January 2024. (The Edge)

Minority shareholders of Rubberex Corp (M) Bhd have been advised to reject the takeover offer from chemical firm Hextar Global Bhd's executive director Datuk Ong Choo Meng and his 90.0%-held Hextar Rubber Sdn Bhd for the remaining Rubberex shares at RM1.80 apiece. Ong and Hextar had acquired an additional 20.6% stake in Rubberex, raising their collective interest to 50.2%; above the 33.0% threshold that triggers the mandatory general offer for the remaining shares they do not own in the company. (The Edge)

Bertam Alliance Bhd’s acting managing director Liu Shenghui was ousted from his position in a tussle between shareholders that saw a majority of shareholders voting against Liu’s re-election as the company’s director. At today’s annual general meeting, a total of 77.2% voted shares were against Liu’s re-election. Liu is the second-largest shareholder of the company holding some 28.9m shares or a 14.0% equity stake in the PN17 Sabah-based property developer. (The Edge)

Top Glove Corporation Bhd is now the second largest Malaysian company with market capitalisation of RM70.47bn, second only to Malayan Banking Bhd which sits at a market cap of RM88.58bn. Despite logging a 455% YTD price gain, bullish sentiments among analysts covering Top Glove remain unfettered. (The Edge)

Source: Mplus Research - 24 Jul 2020