Downward bias consolidation resumes

Market Review

Malaysia: The FBM KLCI (-1.2%) declined sharply lower to close below the 1,500 psychological level, weighed by gloves heavyweights amid ongoing downward bias consolidation on the local bourse. The lower liners ended in the red, while transportation & logistics (+2.1%) and REIT (+0.3%) sectors outperformed the mostly lower broader market.

Global markets: US stockmarkets retreated as the Dow (-0.4%) closed lower after enduring a choppy trading session as investors anticipate for potential stimulus deal by end of the week. European stockmarkets was also splashed in red, while Asia stockmarkets finished mixed.

The Day Ahead

It was another bleak performance on the local bourse that was marred by the selling pressure from gloves heavyweights yesterday. The near term weakness is expected to prevail as any recovery will be tempered by quick profit taking activities. Nevertheless, we still think that rotational play will remain on the table that is buoyed by the rise in trading activities as of late (albeit the negative market sentiment is keeping gains in check). Hence, we advocate traders to lock in quick profits, avoid holding position for too long.

Sector focus: Following the renewed volatility, gold-related stocks are back into focus after gold prices remained above USD1,900/oz. Elsewhere, the speculation of the Sarawak state election by end-2020 has triggered some trading interest within Sarawak-based listed companies.

The FBM KLCI succumbed to further selling pressure and remained below the daily EMA9 level. The downward bias consolidation has returned with the immediate support at 1,480, followed by 1,475. In contrast, the immediate resistances are located at 1,520, followed by 1,530. Indicators remained negative as the MACD Histogram has extended another red bar, while the RSI is hovering below 50.

Company Brief

Kumpulan Powernet Bhd (KPower) has signed a share sale agreement with Sabaka Group Sdn Bhd to acquire 2.2m shares, or a 51.0%, in Sabaka’s wholly-owned unit, Chemtrax Sdn Bhd for RM10.0m. Headquartered in Pasir Gudang, Johor, Chemtrax is principally involved in the provision of chemical and gas transportation and forwarding services. It has logistics facilities with depots and yards in Pasir Gudang and Simpang Renggam, Johor and Kuantan, Pahang.

Chemtrax is also heavily involved in the transportation of synthetic latex and nitrile butadiene rubber, which are key ingredients for latex gloves, and KPower is expecting Chemtrax to benefit from the surge of demand for latex gloves across the world due to the Covid-19 pandemic. Sabaka has guaranteed that the aggregate Ebitda of Chemtrax in FY20 and FY21, based on the business forecast, would not be less than RM10.0m or RM5.0m for each FYE. (The Star)

GD Express Carrier Bhd (GDEX) has proposed to issue up to 705.2m free warrants C on the basis of one warrant for every eight shares held. The entitlement date will be determined and announced later as it requires the approvals of Bursa Malaysia Securities Bhd and GDEX shareholders. (The Star)

Ekovest Bhd has secured more time to consider a proposal to acquire a 40.0% stake in IWH-CREC Sdn Bhd. The group has mutually agreed with Iskandar Waterfront Holdings Sdn Bhd (IWH) for an extension of 30 market days starting 22nd October 2020 till 3rd December 2020, for the company to deliberate and consider as well as to enable the parties to finalise the relevant agreements. (The Edge)

Axis Real Estate Investment Trust’s 3QFY20 net property income for the third rose 5.0% YoY to RM50.3m on higher overall trust income. Total trust income for the quarter added 6.2% YoY to RM57.2m. It declared a distribution per unit (DPU) of 2.25 sen; of which 1.84 sen is taxable and 0.41 sen is non-taxable to be paid on 30th November 2020. (The Edge)

Gadang Holdings Bhd’s 1QFY21 net profit net profit slumped 96.3% YoY to RM0.5m due to lower contribution from the construction division and unfavourable foreign exchange translation. Revenue for the first quarter fell 21.8% YoY to RM115.34m. (The Edge)

Hua Yang Bhd’s 2QFY21 net loss stood at RM5.7m vs. a net profit of RM0.9m recorded in the previous corresponding quarter on lower sales and the Meritus Residence development had been completed at the end of the previous financial year. Revenue for the quarter slumped 52.3% YoY to RM32.5m. (The Edge)

Kerjaya Prospek Group Bhd has bagged an RM64.0m contract to build a sewerage plant for the Seri Tanjung Pinang (Phase 2A) development (STP2) in Penang. This is the group’s fifth contract in STP2, which is developed by Tanjung Pinang Development Sdn Bhd, an indirect subsidiary of Eastern & Oriental Bhd. (The Edge)

Mah Sing Group Bhd is set to commence glove production in April 2021. Mah Sing has commenced additional piling works that is expected to be completed by November 2020, to be immediately followed by installation of the machinery. These 12 production lines are Phase 1 of Mah Sing’s diversification into gloves and have a maximum production capacity of up to 3.7bn pieces of gloves per annum. (The Edge)

Source: Mplus Research - 22 Oct 2020