Minor pullback

Market Review

Malaysia:. The FBM KLCI (-0.2%) retreated for the first time in 4 days, as quick profit taking activities emerged in selected oil & gas and plantation heavyweights yesterday. The lower liners, however, turned mixed, while the broader market remained mixed.

Global markets:. Wall Street were closed for the Memorial Day public holiday, while futures markets indicate a higher opening. Both the European and Asia stock markets ended mostly higher, boosted by China’s move to ease key cities Covid-19 restrictions.

The Day Ahead

The FBM KLCI ended slightly lower on profit taking activities within selected consumer and plantation heavyweights. We expect investors to reassess the corporate earnings and reposition on solid companies as we are heading into the final day of reporting season. Meanwhile, we expect the easing of restrictions in China will help the market sentiment overall. Hence, buying support should emerge within the technology and recovery themed sectors. Nevertheless, upside on the broader market may be kept as traders be focusing on the inflationary pressure that may dampen the corporates’ margins. Commodities wise, the Brent crude oil is traded above USD120, while CPO is priced around RM6,200-6,300.

Sector focus:. We believe the momentum may persist in technology stocks. Also, we expect the easing of restrictions in China should boost the sentiment in recovery-themed stocks. Meanwhile, we expect traders to continue focusing in O&G sector on the back of firmer Brent oil price.

FBMKLCI Technical Outlook

The FBM KLCI snapped its three-session winning streak to break below the daily EMA9 level. Technical indicators remained negative as the Histogram has extended a negative bar, while the RSI hovered below the 50 level. The next support level is located at 1,500-1,530, while the resistance is pegged along 1,530-1,540.

Company Brief

Press Metal Aluminium Holdings Bhd’s 1QFY22 net profit jumped 104.7% YoY to RM421.0m, due to the higher aluminium price and additional production output following the full commissioning of its Phase 3 smelting operations in October 2021. Revenue for the quarter expanded 86.6% YoY to RM3.92bn. (The Star)

AirAsia X Bhd’s (AAX) 3QFY22 net profit stood at RM33.6bn, as the carrier completed its debt restructuring that revolves around the write back of provisions and forgiveness of liabilities in the period, amounting to RM33.6bn. Revenue for the quarter stood at RM113.0m. There are no comparative figures due to a change in AAX's financial year-end from 31st December to 30th June. (The Star)

Sapura Energy Bhd’s wholly-owned subsidiary, Sapura 3000 Pte Ltd has entered into a memorandum of agreement (MOA) for the disposal of its vessel, known as Sapura 3000, for US$71.5m (US$1=RM4.36). Proceeds from the proposed disposal of Sapura 3000 will be utilised for working capital and to reduce the borrowings. The sale of the asset is expected to be completed by mid-July 2022. (The Star)

Steel Hawk Bhd’s wholly owned subsidiary Steel Hawk Engineering Sdn Bhd (SHESB) has secured a contract worth RM51.4m from PBH Engineering Sdn Bhd (PBHE). The contract is to provide engineering design, procurement, construction, installation and commissioning (cold) storage and handling facilities for propylene oxide and ethylene oxide operations in Kerteh, Terengganu. The contract will start from 30th May 2022 and shall be valid until the completion of the services by 30th July 2023. (The Star)

Tenaga Nasional Bhd (TNB)’s 1QFY22 net profit slipped 6.8% YoY to RM893.1m, on higher tax expenses due to an additional tax on Cukai Makmur amounting to RM113.5m. Revenue for the quarter, however, grew 36.4% YoY to RM15.66bn. (The Edge)

Public Bank Bhd's 1QFY22 net profit dropped 8.6% YoY to RM1.40bn, due to recognition of the prosperity tax. Revenue for the quarter dropped 2.8% YoY to RM4.89bn. (The Edge)

RHB Bank Bhd's 1QFY22 net profit fell 7.7% YoY to RM600.3m, no thanks to higher taxes as well as lower net income from Islamic banking. Revenue for the quarter declined 1.4% YoY to RM2.86bn. (The Edge)

Hong Leong Financial Group Bhd's (HLFG) 3QFY22 net profit was flat at RM577.5m. Revenue for the quarter, however, dropped 4.9% YoY to RM1.50bn. (The Edge)

Hong Leong Bank Bhd’s (HLB) 3QFY22 net profit rose 1.7% YoY to RM784.8m, due to lower allowance for impairment losses on loans, advances and financing, as well as higher share of profit from an associated company. Revenue for the quarter, however, fell 2.8% YoY to RM1.35bn. (The Edge)

Guan Chong Bhd’s (GCB) net profit increased 56.7% YoY to RM53.3m, supported by higher grinding margins due to recovery of key chocolate consuming markets and lower production cost per tonne as a result of higher production volume. Revenue for the quarter grew 3.2% YoY to RM990.5m. A first interim single-tier dividend of 1.5 sen per share, payable on 12th July 2022 was declared. (The Edge)

Malaysia Airports Holdings Bhd’s (MAHB) 1QFY22 net loss narrowed to RM104.8m, boosted by a significant increase in passenger volumes. Revenue for the quarter gained 69.4% YoY to RM570.9m. (The Edge)

My EG Services Bhd’s (MyEG) net profit rose 10.9% YoY to RM84.6m, on the back of higher contribution from MySafeTravel and MySafe Quarantine, as the government closed down its quarantine centres and allowed private quarantine arrangements to be made. Revenue for the quarter, however, dipped 5.7% YoY to RM161.8m. (The Edge)

IGB Bhd’s 1QFY22 net profit stood at RM42.7m vs. a net loss of RM8.0m recorded in the previous corresponding quarter, due to higher contributions from the property investment (retail, property investment), commercial, hotel and investment divisions. Revenue for the quarter rose 22.8% YoY to RM288.2m. (The Edge)

Serba Dinamik Holdings Bhd’s 3QFY22 net loss stood at RM434.2m on the back of the revenue of RM205.5m during the quarter. There were no comparative figures as the group changed its financial year end to 30th June, from 31st December. (The Edge)

Berjaya Corp Bhd’s (BCorp) 3QFY22 net loss narrowed to RM35.9m, amid better contributions from its services, retail and hospitality businesses, coupled with higher net investment-related income. Revenue for the quarter grew 33.0% YoY to RM2.42bn. (The Edge)

QL Resources Bhd’s 4QFY22 net profit dropped 39.4% YoY to RM69.4m, amid higher raw material price, rising fuel cost and disrupted operations. Revenue for the quarter, however, rose 12.6% YoY to RM1.37bn. A final dividend of 3.50 sen per share was proposed. (The Edge)

Ekovest Bhd has confirmed that it is currently in ongoing discussions with relevant parties to explore a potential takeover of the Rapid Transit System (RTS) Link project. All negotiations are still ongoing and appropriate announcements will be formalised upon finalisation of the agreed terms and conditions. (The Edge)

Comintel Corp Bhd’s (Comintel) unit Total Package Work Sdn Bhd has accepted 2 revised letters of award with regards to 2 sub-contract jobs worth RM275.4m from Binastra Construction (M) Sdn Bhd. The sub-contracts are worth RM152.8m and RM122.6m respectively. (The Edge)

Source: Mplus Research - 31 May 2022