Volatility strikes again

Market Review

Malaysia: The FBM KLCI (-0.4%) snapped a 3-day winning streak, mirroring the weakness on Wall Street overnight, dragged by weakness in selected banking and telco heavyweights. The lower liners also retreated, while the broader market ended mostly negative with the energy sector (-2.2%) taking the worst hit.

Global markets: Wall Street remained downbeat as the Dow (-0.8%) fell on rising concern over the impact of persistently high inflation and erosion of corporate margins going forward. The European stock markets also extended their decline, while the Asia stock markets ended mostly lower.

The Day Ahead

The FBM KLCI fell in tandem with most of the regional markets (except for China) due to concerns over elevated inflation and prolong Russia-Ukraine conflicts. Investors may remain cautious over the near term as current market sentiment could be exacerbated by the ongoing volatility on Wall Street. On a side note, Indonesia’s move to lift a ban on palm oil export could bring a relief to global market and lower the CPO price. At the point of writing, the CPO is priced around RM6,000, while the crude oil price remained firm above USD112.

Sector focus: The plantation stocks may face selling pressure following Indonesia’s announcement to uplift the palm oil export ban. Meanwhile, investors may focus further on the banking sector in the anticipation on firmer earnings and bode well under the interest rate hike environment. For recovery themed sector, we favour tourism and REITs.

FBMKLCI Technical Outlook

The FBM KLCI retreated, snapping the three-day winning streak as the key index failed to sustain above its 200-day moving average. Technical indicators remained mixed as the MACD Histogram crossed above the zero line, while the RSI is hovering below the 50 level. Support is located at 1,500-1,530, while the resistance is set around 1,570-1,580.

Company Brief

Dayang Enterprise Holdings Bhd’s 1QFY22 net profit stood at RM13.8m vs. a net loss of RM27.5m recorded in the previous corresponding quarter, as result of insurance claims received from the incident of Dayang Topaz of RM3.6m, net realised/unrealised gain in foreign exchange of RM900,000 as well as lower depreciation charge of RM4.9m. Revenue for the quarter jumped 90.5% YoY to RM160.1m. (The Star)

Magnum Bhd’s 1QFY22 net profit jumped 121.7% YoY to RM16.7m, on higher revenue. Revenue for the quarter rose 30.5% YoY to RM501.0m. (The Star)

Petronas Gas Bhd’s (PetGas) 1QFY22 net profit fell 20.5% YoY to RM410.6m, due to higher costs in gas processing, gas transportation and regasification segments. Revenue for the quarter, however, climbed 8.8% YoY to RM1.46bn. A first interim dividend of 16.0 sen per share, payable on 16th June 2022 was declared. (The Edge)

Tenaga Nasional Bhd's (TNB) unit Vantage RE Ltd enhanced TNB’s renewable energy portfolio and net-zero goals with the acquisition of a 49.0% stake in the UK's Blyth Offshore Demonstrator Ltd. The acquisition marks TNB’s maiden entry into the international offshore wind market. (The Edge)

Bintulu Port Holdings Bhd has awarded an RM14.2m contract extension to Sibubased Sing Kiong Hong Dockyard Sdn Bhd to hire two units of 25-tonne ship handling tugs complete with crew for its unit Bintulu Port Sdn Bhd (BPSB). BPSB had issued a letter of extension of contract to Sing Kiong Hong Dockyard for the contract, which is for a 36-month period from 19th May 2022, to 18th May 2025, or until the expiry of the concession period for BPSB to operate Bintulu Port, whichever occurs first. (The Edge)

TPC Plus Bhd's external auditor Crowe Malaysia PLT has expressed an unmodified audit opinion with material uncertainty regarding its ability to continue as a going concern on the group's audited financial statements for the financial year ended 31st December 2021 (FY21). The poultry farmer's net loss stood at RM28.5m for FY21, and also that its current liabilities exceeded its current assets by RM29.1m. (The Edge)

Tomei Consolidated Bhd's 1QFY22 net profit grew 14.6% YoY to RM15.8m, on better profit margins. Revenue for the quarter, however, dropped 4.1% YoY to RM234.2m. (The Edge)

Hup Seng Industries Bhd's 1QFY22 net profit shrank 31.4% YoY to RM6.8m, due to a spike in input costs. Revenue for the quarter dropped 4.2% YoY to RM79.3m. (The Edge)

Kobay Technology Bhd’s 3QFY22 net profit jumped 113.7% YoY to RM15.1m, on improved contribution from the manufacturing segment, coupled with the contribution from its newly acquired pharmaceutical and healthcare products segment. Revenue for the quarter surged 184.1% YoY to RM100.1m. (The Edge)

Southern Acids (M) Bhd’s 4QFY22 net profit soared 313.0% YoY to RM26.7m, on higher contributions from oleochemical, milling and estate segments that was driven by strong commodity prices. Revenue for the quarter added 63.8% YoY to RM364.4m. A final dividend of 5.0 sen per share was proposed. (The Edge)

GIIB Holdings Bhd has announced the termination of Wong Weng Yew as the group’s executive director with immediate effect. Wong, who was appointed as GIIB’s executive in March 2021 to oversee the finance and spearhead the group’s glove business, has been suspended from his role since 28th March 2022. Wong claims that the company’s management took action against him after he raised questions about several transactions that he found to be suspicious in nature. (The Edge)

Green Packet Bhd has missed the deadline to sell 305.3m shares of G3 Global Bhd to its former group managing director Puan Chan Cheong for 15.0 sen per share or RM45.8m. The shares, which amounted to 12.4% in G3 Global, were converted from G3 warrants at an exercise price of 3.0 sen apiece or RM9.2m. (The Edge)

Source: Mplus Research - 20 May 2022