Relief recovery

Market Review

Malaysia: The FBM KLCI (-0.3%) ended lower for the choppy week as speculation about a state of emergency might be declared turned market sentiment cautious in the second trading session. The lower liners finished mostly red, while the broader market closed mostly lower with the exception of financial services sector (+0.5%).

Global markets: US stockmarkets finished the week mostly higher as the S&P 500 (+0.3%) and Nasdaq (+0.4%) climbed on investors’ hope for last minute stimulus breakthrough, but the Dow (-0.1%) edged down. European stockmarkets ended higher, while Asia stockmarkets also closed mostly in green.

The Day Ahead

Given that the speculations over the potential declaration of state of emergency move did not materialise, we reckon that a relief rebound on the FBM KLCI may take shape. Gains, however, is expected to be limited following the rising number of Covid-19 cases that may see the Conditional Movement Control Order (CMCO) to be extended. The lower liners are also bracing for a rebound after enduring some volatility on last Friday, supported by the recent batch of mostly strong corporate earnings.

Sector focus: We favour the technology sector following Semiconductor Equipment Manufacturers Industry (SEMI) report that saw global semiconductor equipment billings rose 40.3% YoY to USD2.75bn in September 2020. Meanwhile, we also expect bargain hunting to take place in healthcare stocks after enduring a difficult week amidst the prospects of stellar quarterly earnings.

The FBM KLCI has erased most of its previous session gains as the key index was traded in a volatile manner. Albeit that, we reckon that a recovery could take place today but gains are likely to cap towards the near term immediate resistances at 1,520, followed by 1,530. In contrast, the immediate support is at 1,480, followed by 1,475. Indicators remained negative as the MACD Histogram has extended another red bar, while the RSI is hovering below 50.

Company Brief

Careplus Group Bhd’s 3QFY20 net profit stood at RM42.9m vs. a net loss of RM4.9m recorded in the previous corresponding quarter due to strong demand for gloves due to the ongoing Covid-19 pandemic. Revenue for the quarter rose 45.5% YoY to RM122.7m. (The Star)

AirAsia Group Bhd plans to use the RM300.0m loan from Sabah Development Bank Bhd for its digital food supply chain in Sabah and also the Kota Kinabalu International Airport project. Of the RM300.0m, RM170.0m would be used to set up operate “OURFARM” digital food supply chain and cold chain facilities in Sabah. Another RM110.0m would be used to part-finance the project to turn Kota Kinabalu International Airport into an international hub for AirAsia's operations, RM10.0m would be used to enhance e-commerce platforms and marketability of Sabah products and RM10.0m to further promote Sabah tourism destinations on airasia.com, the digital super app of AirAsia. (The Star)

MI Technovation Bhd's 3QFY20 net profit in the third quarter fell 29.2% YoY to RM12.3m due to an increase in fixed costs for its new factory in Batu Kawan, Penang. Revenue for the quarter, however, increased 35.8% YoY to RM64.3m. (The Star)

Maxis Bhd's 3QFY20 net profit rose 1.9% YoY to RM365.0m due to lower depreciation. Revenue for the quarter, however, fell 3.1% YoY to RM2.21bn. An interim dividend of 4.0 sen per share, payable on 23rd December 2020 was declared. (The Edge)

Unisem (M) Bhd's 3QFY20 net profit jumped 98.7% YoY to RM49.5m on higher sales volume and better average selling prices for its products. Revenue for the quarter climbed 23.4% YoY to RM357.7m. (The Edge)

Tasco Bhd's 2QFY21 net profit jumped 160.3% YoY to RM10.7m as the logistics company experienced a surge in business volume, coupled with result of its strong actions to control and reduce costs. Revenue for the quarter rose 20.4% YoY to RM229.5m. (The Edge)

UEM Sunrise Bhd will be disposing of a 20.0% stake in a firm developing 2,500.0- ac. of land in Kulai, Johor, which will result in Kuala Lumpur Kepong Bhd (KLK) taking over as the firm's majority shareholder for RM182.6 m. Following this, KLK's property development arm KLK Land Sdn Bhd's shareholding in Aura Muhibah Sdn Bhd will rise to 60.0%, while UEM Sunrise's unit UEM Land Bhd will hold 40.0%. (The Edge)

AirAsia X Bhd (AAX) has acknowledged that it is being sued by Malaysia Airports Holdings Bhd (MAHB) for aeronautical charges totalling RM78.2m allegedly owed by the airline. MAHB, meanwhile, has filed an application to intervene in AAX's debt restructuring scheme. The airport operator wants to be excluded from the scheme, which entails a more than 90.0% haircut imposed on creditors. (The Edge)

Key Alliance Group Bhd's wholly-owned subsidiary Key Alliance Sdn Bhd is teaming up with clinical diagnostics laboratory firm Dunia Wellness Laboratories Sdn Bhd to offer onsite testing services for Covid-19 within Peninsular Malaysia. Key Alliance will provide Care Gene Covid-19 PCR test kits to Dunia Wellness for onsite testing services, for clients provided by the former only. (The Edge)

Vsolar Group Bhd has entered into a memorandum of understanding to install rooftop solar panels at a plant belonging to AT Systematization Bhd's glove manufacturing subsidiary in Perak, with a 15-year tenure lease. A formal corporate power purchase agreement is to be signed by both parties at a later stage. The rooftop solar power system will have installed capacity of 1.0MW. (The Edge)

Source: Mplus Research - 26 Oct 2020