Market Review

Malaysia: The FBM KLCI (-0.4%) started off the week on a feeble note as the key index extended its losses dragged down by the extended selling activities in gloves heavyweights, coupled with the sluggish retail sales data that fell -9.2% YoY in June 2020. The lower liners finished mixed, while the technology sector (-2.8%) underperformed the mostly positive broader market.

Global markets: US stockmarkets finished mostly higher again as the Dow climbed 1.3% buoyed by the four executive orders signed by US President Donald Trump on fiscal assistance over the weekend, but the Nasdaq slipped 0.5%. European stockmarkets extended their gains, but Asia stockmarkets ended on a mixed note.

The Day Ahead

Expectedly, quick profit taking activities emerged as investors offload from the recent rally. With the indifference still a feature, we see Malaysian equities maintaining their consolidation for longer to digest the recent gains. While there could be mild bargain hunting taking place, investors will be watchful on the upcoming batch of corporate earnings that is reflective of the full impact stemmed from Covid-19.

Sector focus: Rotational play is shifting towards the laggard sectors, mainly property and construction on their cheaper valuation metrics. The energy sector may see some improvement following Saudi Aramco’s bullish undertone on demand that boosted crude oil prices, while the higher-than-average trading volumes will provide support rotational play amongst FBM ACE-related stocks.

The FBM KLCI has formed a hammer candle to close below the daily EMA20 level after lingering mostly in the negative territory yesterday. We expect the consolidation to be a feature with 1,590 serving as the immediate resistance, followed by 1,615. On the downside, the immediate support is pegged at 1,550, followed by 1,530. Indicators are still weak with the MACD remains below the Signal Line, while the RSI remains below 50.

Company Brief

Supermax Corp Bhd’s 4QFY20 net profit surged 2646.4% YoY to RM399.6m on account of greater demand and higher average selling prices. Revenue for the quarter jumped 147.0% YoY to RM929.1m. A share dividend pay-out of one treasury share per every 45 shares held in FY20 was declared, subject to its earlier announced bonus issue that is set to be approved at an EGM on 18th August 2020. (The Edge)

HLT Global Bhd aims to raise RM236.0m to RM324.0m through a private placement of 20.0% of its issued shares to build a new rubber glove manufacturing plant, involving the sale of 104.5m to 144.9m new shares. About RM155.0m to RM181.0m of the proceeds will be used to partly finance land acquisitions, as well as the construction of the new plant. The remaining amount will be utilised for the fabrication, installation and commissioning of new production lines at the new plant that expects production to increase to between 4.10bn-5.30bn pieces from 1.00bn pieces per annum. (The Star)

RHB Banking Group (RHB) is partnering with Finology Sdn Bhd to enable instant online approval for mortgage loan applications through Loanplus. The collaboration with Finology allows the group to enhance the customisation and personalisation of services to the customers. (The Star)

AirAsia X Bhd’s (AAX) Malaysia operations carried only 2,291 passengers in 2Q2020, down from the 1.5m recorded in the previous corresponding quarter. Passenger load factor (PLF) was at 38.0%, down from 80.0% a year prior. Malaysia operations capacity fell to 6,032 seats, from 1.8m seats in 2Q2019. (The Edge)

AT Systematization Bhd is commissioning one single former and five double former glove dipping lines for its new factory to the tune of RM36.2m. It signed a supply contract with Ripcol Engineering Sdn Bhd (RESB) for lines. Consequently, it will see 928.0m pieces of rubber gloves per year. The fifth double dipping former line is expected to be installed and commissioned by April 2021. (The Edge)

Axiata Group Bhd is to issue US$1.50b (RM6.29b) in equivalent Euro medium-term note (EMTN) notes to refinance its debts and fund its capital structure. The EMTN programme has been issued a BBB+ rating by Standard & Poor Rating Services. The notes will be listed on the Singapore Exchange or other competent authorities. (The Edge)

Top Glove Corp Bhd is still finalising its total remediation fee to its foreign workers with the US Customers and Border Protection (CBP), currently estimated at RM53.0m. This estimate is higher than the RM20.0m to RM50.0m previously gauged to be paid to some of its foreign workers, to refund recruitment fees paid to recruitment agents. (The Edge)

Microlink Solutions Bhd is developing an insurance policy renewal digital platform with Pos Malaysia Bhd for nine months. Pos Malaysia will take a 12.0% cut of net revenue generated from the software usage with Microlink. The platform will have to be integrated into Pos Malaysia’s existing digital channel. (The Edge)

JAKS Resources Bhd is appealing against the High Court’s decision for it to pay damages to Star Media Group Bhd over the latter’s corporate guarantee claim concerning the balance RM134.5m for the sale of a piece of land in Section 13, Petaling Jaya from Star Media to JAKS. The late payment interest of 8.0% per annum on the balance purchase price owed between 25th October 2015 and 6th July 2020 could amount to RM50.0m and is almost sufficiently covered by the proceeds of the bank guarantee previously paid to Star Media. (The Edge)

Source: Mplus Research - 11 Aug 2020