Unabated volatility

Market Review

Malaysia:. The FBM KLCI (-0.7%) extended its losses alongside with the weakness across regional peers with more than two-thirds of the key index components finished lower. The lower liners also retreated, while the broader market ended mostly negative with the exception of the REITs (+0.1%) sector.

Global markets:. Wall Street ended mixed as the Dow (+0.2%) edged mildly higher, but the S&P 500 (-0.8%) and Nasdaq (-2.4%) faltered on sluggish economic data after new home sales data sank -16.6% MoM to the lowest since April 2020, coupled with weakness in technology shares. Both the European and Asia stock markets retreated.

The Day Ahead

The FBM KLCI suffered its fourth straight session of decline, marking the longest losing streak since end of January 2022 as banking and healthcare heavyweights led losses. Given the selldown in technology stocks on Wall Street, we believe it may spillover to the tech sector on the local front. However, we still expect selected stocks in the consumer and REITs sectors to outperform the market on the back of business recovery catalyst. On the commodity markets, the crude oil traded above USD113 per barrel, while the CPO price hovered around RM6,450.

Sector focus:. As both crude oil and CPO prices traded higher, we believe investors should favour the energy and plantation counters. Traders may avoid technology stocks given the selldown on Wall Street overnight. Meanwhile, we expect traders to focus on selected consumer and REITs stocks on the back of recovery theme.

FBMKLCI Technical Outlook

The FBM KLCI slipped further into the negative territory to close just above its immediate support at 1,530. Technical indicators remained mixed as the MACD Histogram slanted downwards towards the zero line, while the RSI hovered below 50. Should the key index breached below the 1,530, next support is located at 1,500. Meanwhile, resistance is set around 1,570-1,580.

Company Brief

Kuala Lumpur Kepong Bhd’s (KLK) 2QFY22 net profit rose 11.4% YoY to RM546.6m, boosted by the higher contribution from the plantation and manufacturing segment. Revenue for the quarter grew 41.6% YoY to RM6.38bn. An interim dividend of 20.0 sen per share, payable on 2nd August 2022 was declared. (The Star)

Sime Darby Bhd’s 3QFY22 net profit decreased 18.7% YoY to RM244.0m, due to one-off gains of RM60.0m recorded in the previous corresponding quarter. Revenue for the quarter fell 4.1% YoY to RM10.60bn. (The Star)

UMW Holdings Bhd's 1QFY22 net profit rose 26.8% YoY to RM101.2m, driven by continued strong sales momentum following the economic recovery under the National Recovery Plan. Revenue for the quarter improved 23.7% YoY to RM3.65bn. (The Star)

Serba Dinamik Holdings Bhd has been slapped with a civil suit from Malaysian Trustees Bhd, the trustees of the former’s RM100.0m Islamic Commercial Papers (ICP) that it has defaulted on. (The Edge)

KNM Group Bhd’s indirect unit Deutsche KNM GmbH entered into a conditional sale, purchase and transfer agreement with GPR Siebzigste Verwaltungsgesellschaft mbH (GSV), to sell the former’s entire stake in Borsig GmbH for €220.8m (RM1.03bn). KNM is expected to make an estimated loss of RM490.6m from the disposal. (The Edge)

TSH Resources Bhd's 1QFY22 profit surged 554.2% YoY to RM101.9m, thanks to higher palm product prices and gains from the disposal of an estate and palm oil mill that partially offset by lower sales volume. Revenue for the quarter grew 38.2% YoY to RM337.4m. (The Edge)

Malakoff Corp Bhd’s 1QFY22 net profit fell 15.8% YoY to RM50.9m, due to lower contribution from Tanjung Bin Energy Sdn Bhd (TBE), resulting from the plant outage caused by low-pressure turbine blade failure, coupled with higher depreciation charges. Revenue for the quarter, however, climbed 39.4% YoY to RM1.88bn. (The Edge)

Farm Fresh Bhd's 4QFY22 net profit improved 50.6% YoY to RM17.7m, on a higher gross profit margin that was in line with both an increase in sales, as well as a price increase of its chilled ready-to-drink (RTD) milk products and ambient RTD products. Revenue for the quarter rose marginally by 0.4% YoY to RM128.1m. (The Edge)

Boustead Heavy Industries Corp Bhd’s (BHIC) 1QFY22 net profit stood at RM6.5m vs. a net loss of RM0.9m recorded in the previous corresponding quarter, due to higher contribution from its maintenance, repair and overhaul (MRO) activities. Revenue for the quarter jumped 97.8% YoY to RM37.5m. (The Edge)

Menang Corp (M) Bhd’s 3QFY22 net profit surged 187.9% YoY to RM4.5m, lifted by receipt of late payment interest of RM1.5m from Lembaga Lebuhraya Malaysia (LLM) in respect to the compulsory acquisition of Klang Land by the government and lower interest expenses. Revenue for the quarter, however, fell 2.2% YoY to RM21.5m. (The Edge)

KLCCP Stapled Group’s 1QFY22 net profit gained 10.5% YoY to RM161.4m, amid a rebound in business activities. Revenue for the quarter grew 13.9% YoY to RM321.7m. A dividend of 8.0 sen per stapled security was declared. (The Edge) Pekat Group Bhd’s 1QFY22 net profit declined 3.1% YoY to RM4.4m, on higher operational costs. Revenue for the quarter, however, increased 9.2% YoY to RM45.5m. (The Edge)

Perak Corp Bhd’s 1QFY22 net loss narrowed to RM1.2m, from a net loss of RM6.3m recorded in the previous corresponding quarter, helped by profit from the sale of land by a former subsidiary under its property development segment. Revenue for the quarter, however, contracted 4.4% YoY to RM32.2m. (The Edge)

GDEX Bhd’s 1QFY22 net loss stood at RM1.9m vs. a net profit of RM5.6m recorded in the previous corresponding quarter, amid tough competitions in Malaysia and higher operating costs. Revenue for the quarter declined 13.2% YoY to RM91.9m. (The Edge)

Nexgram Holdings Bhd, via its unit NEG Auto Group Sdn Bhd had on 18th May 2022 entered into a China-Malaysia new-energy-vehicle (NEV) cooperation agreement with Shenzhen Hengsheng Energy Management Co Ltd to promote industrial development of NEV design and parts, as well as manufacture NEV parts and vehicles in Malaysia. The agreement will remain in force up to 31st December 2030. (The Edge)

Dagang NeXchange Bhd (DNeX) has inked a memorandum of understanding (MoU) with Accenture Solutions Sdn Bhd on 24th May 2022 to create joint offerings with products, services and solutions that drive data-led transformation in Malaysia's public services and government-linked companies (accelerate digital transformation for Malaysia's public services). (The Edge)

Pestech International Bhd has inked a memorandum of understanding (MoU) with Hydrogène De France SA (HDF Energy) to collaborate on green hydrogen production from hydropower plants in Cambodia and Malaysia. Under the MoU, Pestech will initiate its commitment to contributing toward sustainable development through participation in green renewable initiatives. (The Edge)

KAF Investment Bank Bhd has appointed Rafiza Ghazali as the chief executive officer (CEO) designate in leading its Digital Islamic Bank. Rafiza will initially be joining KAF Investment Bank as part of the digital bank project team, pending the incorporation process of the digital bank entity. (The Edge)

Source: Mplus Research - 25 May 2022