Finding a footing

Market Review

Malaysia: The FBM KLCI (+0.3%) snapped a three-day losing streak after enduring a choppy trading session, lifted by gains from Telekom Malaysia (+9.0%) that reported stellar corporate earnings in mid-day break. Meanwhile, the lower liners closed higher, but the healthcare sector (-1.1%) underperformed the mostly-positive broader market.

Global markets: US stockmarkets extended their gains as the Dow climbed 0.6% after US Federal Reserve Chairman Jerome Powell outlined a two-year policy to allow inflation rising beyond the 2.0% whilst maintaining the low interest rates environment. European closed lower, while Asia stockmarkets ended mixed.

The Day Ahead

Expectedly, mild gains took place as investors remain cautious on the sluggish corporate earnings undertone in general. We think that the FBM KLCI may continue its quest to find stability investors with market recovery to be choppy owing to the weakness in Genting-related financial performance. At the same time, the strong trading interests (trading volume above 10.0bn) powered by rotational play amongst the lower liners may continue to dominate the trading scene.

Sector focus: While the technology sector is expected to march higher, we think that the construction sector will see some upward bias move as tenders for the Kuala Lumpur-Singapore High Speed Rail (HSR) kicks off. Elsewhere, plantation stocks are also in favour owing to the strong corporate earnings which looks to sustain with CPO prices hovering above RM2,600/MT in recent month.

The FBM KLCI rebounded from the daily EMA60 level as the key index formed a bullish candle to close at intraday high, suggesting potential recovery in the cards. Gains, however, will be capped with 1,580 as the immediate resistance, followed by 1,600. Downside risk remains located at 1,540, followed by 1,515. Indicators are still weak with the MACD Line below the zero level, while the RSI remains below 50.

Company Brief

Telekom Malaysia Bhd (TM) 2QFY20 net profit jumped 140.6% YoY to RM274.8m due to the absence of impairment losses on fixed network assets last year. Revenue for the quarter, however, fell 6.5% YoY to RM2.59bn. An interim dividend of 6.8 sen per share, payable on 2nd October 2020 was declared. (The Star)

Sime Darby Bhd’s 4QFY20 net profit dropped 3.8% YoY to RM177.0m on challenging market conditions due to the Covid-19 outbreak in 2HFY20. Revenue for the quarter dropped 5.4% YoY to RM8.82 bn. A second interim dividend of 7.0 sen per share and a special dividend of 1.0 sen per share, both payable on 30th October 2020 were declared. (The Star)

Malayan Banking Bhd’s (Maybank) 2QFY20 net profit fell 51.6% YoY to RM941.7m as net interest income and Islamic banking income dropped as well due to significantly higher allowance for impaired loans amid a Covid-19 pandemic-driven weaker economic outlook. Revenue for the quarter declined 9.7% YoY to RM11.79bn. (The Edge)

Genting Bhd’s 2QFY20 net loss stood RM786.1m vs. a net profit of RM599.7m recorded in the previous corresponding quarter as the Covid-19 pandemic dealt a big blow to its leisure and hospitality business. Revenue for the quarter plunged 79.7% YoY to RM1.11bn An interim dividend of 6.5 sen, payable on 1st October 2020 was declared. (The Edge)

Genting Malaysia Bhd’s (GENM) 2QFY20 net loss stood at RM900.4m, vs. a net profit of RM416.5m recorded in the previous corresponding quarter in tandem with the lower revenue recorded. Revenue for the quarter plummeted 95.6% YoY to RM114.9m. An interim dividend of 6.0 sen per share, payable on 29th September 2020 was declared. (The Edge)

Hap Seng Consolidated Bhd’s 2QFY20 net profit fell 66.0% YoY to RM44.1m, as all of its business segments except for plantation were affected by the Movement Control Order. Revenue for the second quarter fell 43.3% YoY to RM989.6m. (The Edge)

IHH Healthcare Bhd’s 2QFY20 net loss stood at RM120.6m, vs. a net profit of RM185.0m recorded in the previous corresponding quarter, in line with the lower revenue posted for the quarter. Revenue for the quarter fell 29.6% RM2.57bn. (The Edge)

Axiata Group Bhd’s 2QFY20 net profit fell 63.7% YoY to RM80.0m, mainly due to distribution shutdowns and outlet closures during the stringent movement control order period that prevented subscribers from accessing prepaid reloads, as well as the provision of free data and bonus recharge. Revenue for the quarter slid 5.9% YoY to RM5.79bn. A dividend of 2.0 sen per share was proposed.

Rubberex Corp (M) Bhd’s 2QFY20 net profit jumped 856.7% YoY to RM23.0m as the Covid-19 pandemic boosted demand for the company’s products. Revenue for the quarter grew 58.3% YoY to RM88.1m. A two-for-one bonus issue was announced. (The Edge)

My EG Services Bhd’s net profit stood at RM63.1m on top of revenue of RM124.3m. No comparison was made due to change in financial year end to 31st December 2020. (The Edge)

PPB Group Bhd’s 2QFY20 net profit surged 108.0% to RM332.7m, boosted by performance of its 18.0% associate, Wilmar International Ltd and its agribusiness segment. Revenue for the quarter, however, fell 17.3% to RM953.3m. An interim dividend of 8.0 sen per share, payable on 29th September 2020 was declared. (The Edge)

Boustead Holdings Bhd’s 2QFY20 net loss stood at RM73.7m, vs. a net profit of RM24.3m recorded in the previous corresponding quarter, as Covid-19 brought more pain than gain for its business segments. Revenue for the quarter dropped 41.1% YoY to RM1.50bn. (The Edge)

KPJ Healthcare Bhd’s 2QFY20 net profit dropped 69.7% to RM12.7m due to the full impact of the Covid-19 pandemic disruption on its business. Revenue for the quarter dipped 27.2% to RM626.6m. (The Edge)

Sime Darby Property Bhd is targeting to achieve RM1.40 bn sales for FY20 and it will be launching another RM1.00 bn gross development value (GDV) worth of projects 2HFY20, comprising 601 units valued at RM509.8m in the third quarter and another 1,150 units in 4QFY20. Looking towards 2021, the group will be looking at diversifying its development income streams, towards industrial and logistics developments as a new engine of growth.

According to Gamuda Bhd, a joint venture between Gamuda Australia and Laing O’Rourke has been shortlisted for the first stages of the A$20.00bn (RM60.48bn) Sydney Metro West Project. Early works on the Sydney Metro West project are expected to begin by year-end, pending a planning approval, with the target of having tunnel boring machines in the ground by 4Q2022.

Kumpulan Powernet Bhd has secured a contract worth US46.2m (RM192.7m) for a hydropower project at Mahakulung VDC, Nepal, from Apex Makalu Hydro Power Pvt Ltd. (The Edge)

Source: Mplus Research - 28 Aug 2020