Market Review

Malaysia: The FBM KLCI (-1.5%) tumbled on the first day of new year as the key index was dragged by the selldown in glove heavyweights, led by Hartalega (- 13.7%). The lower liners on a mixed note, while the healthcare sector (-4.3%) was the worst decliner amongst the mostly negative broader market.

Global markets: US stocks retreated sharply on the first trading day on the back of investors’ concern over a post-holiday spike in Covid-19 cases as well as a longerthan-expected economic recovery moving forward. European stockmarkets, however, ended in green, while the Asian stockmarkets also closed mostly higher.

The Day Ahead

Although there were signs of recovery at the start of the trading bell, stocks across Bursa Malaysia were hammered by the uplift of regulated short selling activities. For now, we think that the volatility may persist, taking cue from the selldown on Wall Street overnight. On a brighter note, the recovery in Malaysia Manufacturing Purchasing Managers’ Index (PMI) may provide some cushion to further weakness. Meanwhile, we also think that the lower liners may continue to endure further profit taking as investors risk appetite dwindled due to the rising number of Covid-19 cases.

Sector focus: The surging crude palm oil prices may provide further trading interest amongst the plantation sector. Amidst the renewed volatility, gold-related stocks may extend their gains after gold prices surged to 2-months high.

FBMKLCI Technical Outlook

The FBM KLCI has formed another bearish candle as the key index re-tested the daily EMA60 level. With the selling pressure likely to persist, we think that the immediate support at 1,580 may come into focus, followed by 1,550. Any recovery is capped towards the immediate resistances at 1,630-1,660. Indicators wise, the MACD Histogram has extended another red bar, while the RSI remains below 50

Company Brief

Top Glove Corp Bhd will be declaring a special dividend of 20.0% for the remaining financial quarters in FY21. The move is in recognition of its good profits and strong cash flow, as well as to reward its shareholders. The special dividend will be on top of its existing dividend policy of a 50.0% payout ratio on profit after tax and minority interests (PATAMI). Top Glove shareholders will receive 70.0% of the company’s PATAMI as dividend. (The Edge)

Malaysian Resources Corp Bhd and George Kent (M) Bhd joint venture (JV) and Light Rail Transit 3 (LRT 3) contractor MRCB-George Kent Sdn Bhd (MRCBGK) said Prasarana Malaysia Bhd’s payment on 2nd October 2020 were only for construction works done up to end-June 2020. Prasarana’s delayed payments of RM723.9m were from July 2020 to October 2020, which have been certified for payment by Prasarana’s independent consultant KL Prima Consult Sdn Bhd. November 2020’s payment amount is still pending certification. Prasarana's nonexecutive chairman Datuk Seri Tajuddin Abdul Rahaman said Prasarana had paid RM3.47bn to MRCBGK up to 2nd October 2020. He also said Prasarana had not withheld any payments to MRCBGK. (The Edge)

Destini Bhd has bagged an extension for its maintenance, repair and overhaul (MRO) contract with the Royal Malaysian Air Force. The extension is for a one-year period from 3rd October 2020. The contract is also for the supply of safety and survival equipment to the RMAF. The contract ceiling is about RM30.4m. (The Edge)

T7 Global Bhd has secured a 10-year contract from Petronas Carigali Sdn Bhd for the leasing, operation and maintenance of a mobile offshore production unit (MOPU) for Phase 2 of the Bayan gas redevelopment project.T7 Global did not reveal the value of the charter contract, inked on 25th November 2020, other than saying it is based on prices stipulated in the contract, and that the agreement's effective date is 1st February 2020. (The Edge)

New Hoong Fatt Holdings Bhd announced 79 of its employees tested positive for Covid-19 at its plastic parts production factory in Meru, Klang among 337 workers of the group's wholly-owned subsidiary Auto Global Parts Industries Sdn Bhd (AGP) who underwent a mass planned screening test on 30th December 2020. This is a follow-up to an earlier screening test at AGP's metal parts production factory in Meru on 24 December 2020, which saw 94 infections among 314 employees tested. The affected metal parts production factory had been closed from 25th December 2020 until further notice. (The Edge)

Aeon Credit Service (M) Bhd reached an out-of-court settlement with the Inland Revenue Board (IRB) today under which the unpaid taxes sought from the company have been significantly reduced. The amount sought from the financial services company, inclusive of penalties, has been brought down to RM10.3m, from RM96.8m previously. The taxman has agreed to withdraw the legal proceedings launched against the company at the High Court, while Aeon Credit has agreed to withdraw its appeal before the Court of Appeal. (The Edge)

Ageson Bhd’s 75.0%-owned subsidiary Ageson Holdings Sdn Bhd (AHSB) has inked a development rights agreement (DRA) with Menteri Besar Inc (Perak) to develop a mixed development with an estimated gross development value of RM1.24bn on some 475-ac of land in Batang Padang district in Perak. The development will comprise government agencies and administration units, industrial, commercial and residential development. The project, which is expected to commence in 1Q22 and be completed in 15 years. Separately, it will pay part of an outstanding sum it owed to RHB Bank Bhd. RHB had filed a suit against the group over RM33.0m term loan. (The Edge)

Focus Dynamics Group Bhd has proposed to split each of its shares into three shares in a move to improve the trading liquidity of the shares. The share split will take place based on an entitlement date to be determined later, and is expected to be completed by 1Q21. As at 29th December 2020, the group’s issued share capital stood at RM203.8m, comprising 6.15bn shares. (The Edge)

Source: Mplus Research - 5 Jan 2021