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Author: MalaccaSecurities   |   Latest post: Wed, 12 May 2021, 9:11 AM

 

Mplus Market Pulse - 12 May 2021

Author: MalaccaSecurities   |  Publish date: Wed, 12 May 2021, 9:11 AM


Market Review

Malaysia: The FBM KLCI (-0.4%) extended its losses after lingering in the negative zone for the entire trading session, dragged down by weakness in plantation and banking heavyweights yesterday. The lower liners also extended their losses, while all 13 major sectors on the broader market finished lower with the Technology sector (-2.9%) taking the worst hit.

Global markets: The US stockmarkets extended their losses as the Dow (-1.4%) sank on the on-going concern over the inflationary pressure. European stockmarkets were downbeat, while Asia stockmarkets ended mostly lower.

The Day Ahead

The FBM KLCI settled lower in tandem with the regional peers as market sentiment was dampened by nationwide expansion of MCO. Taking cues from the negative Wall Street overnight performance, we expect lacklustre trade on the local bourse ahead of the Aidilfitri holiday. However, we believe bargain hunting activities may emerge within the energy sector as Brent oil price gained momentum due to the lingering fears of gasoline shortage as North America’s biggest petroleum pipeline was affected for days following the cyberattack.

Sector focus: We expect to see trading interest in energy counters amid concerns over the supply shortage situation in the US. Besides, we opine that bargain hunting activities may emerge in laggard counters with high earning certainties amid MCO, such as plastic-related and packaging stocks. Also, some of the glove counters may have a relief rebound, but upside might be short lived given the ongoing vaccine rollout plan globally could see Covid-19 subsiding moving forward.

The FBM KLCI retreated for the second trading session due to persistent selldown in selected heavyweights. Technical indicators turned negative as the MACD Histogram has turned into a red bar, while the RSI was hovering below the 50 level. We expect thin trading on the key index on the half-day trade, with support pegged around 1,555-1,565, while the resistance is set along 1,600-1,620.

Company Brief

Public Bank Bhd’s 1QFY21 net profit grew 15.1% YoY to RM1.53bn, on the back of further expansion of its loans and deposits businesses as well as fee-based revenue growth. Revenue for the quarter improved 8.8% YoY to RM5.03bn. (The Star)

Malayan Banking Bhd's (Maybank) 100.0%-owned subsidiary Maybank Islamic Bhd has announced the buy-back of RM1.50bn worth of Islamic bonds via private treaty under the latter's Islamic commercial papers and medium-term notes programme of up to RM10.0bn. (The Edge)

FGV Holdings Bhd has appointed Azman Ahmad, who is the group divisional director of logistics & support business, as officer-in-charge to cover the duties and responsibilities of the group chief executive officer (CEO) effective 16th May 2021. Azman is the officer-in-charge until a new CEO is appointed, following the resignation of Datuk Haris Fadzilah Hassan which was announced last month. Azman will still continue his current role, which he has been holding since 1st January 2021. (The Edge)

Syed Md Najib Syed Md Noor is stepping down as Pos Malaysia Bhd's group CEO with effect from 1st June 2021, after serving the company for close to three years since the appointed to his post in October 2018. Pos Malaysia is now searching for a suitable replacement. (The Edge)

WTK Holdings Bhd has clarified that it is not involved in any logging operations in Papua New Guinea (PNG), following an article in the Sarawak Report recently that said the PNG government planned to audit 20 delinquent logging companies in the country over suspected tax evasion. (The Edge)

Bina Darulaman Bhd has secured a RM431.0m contract to upgrade the Pelubang water treatment plant in Kedah. The contract was awarded to its wholly-owned BDB Synergy Sdn Bhd by the Kedah state government. The three-year contract commences on 20th May 2021. (The Edge)

Careplus Group Bhd is acquiring a piece of land measuring 40,680 sqm (10.1-ac) in Oakland Industrial Park, Seremban for RM35.5m cash from Rapid Synergy Bhd. The acquisition is in line with its immediate plans to increase its existing manufacturing capacity by commissioning new production lines for gloves. The property will be earmarked for warehousing, gloves packing as well as Careplus' future operational needs. (The Edge)

Media Chinese International Ltd (MCIL) expects to record a net profit of not less than US$1.7m (RM7.0m) for 4QFY21 ended 31st March 2021, against a net loss of US$1.8m (RM7.4m) recorded in the previous corresponding quarter. This was mainly attributable to the gradual improvement in business conditions in Hong Kong as well as cost savings across all the group's business operations. (The Edge)

Genting Bhd's biotechnology arm Celularity Inc has reported that US-listed software company Palantir Technologies Inc will make an investment in the company under the planned Celularity-Palantir multi-year strategic partnership. The move comes following Celularity's planned business combination with US-listed GX Acquisition Corp, a special purpose acquisition corporation. (The Edge)

JF Technology Bhd's 3QFY21 net profit jumped 115.3% YoY to RM3.7m, underpinned by sustained robust demand from its customers amid the Covid-19 pandemic. Revenue for the quarter gained 55.9% YoY to RM9.6m. (The Edge)

Source: Mplus Research - 12 May 2021

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Mplus Market Pulse - 11 May 2021

Author: MalaccaSecurities   |  Publish date: Tue, 11 May 2021, 8:47 AM


Market Review

Malaysia: The FBM KLCI (-0.2%) started off the holiday shortened week on a downbeat note, dragged down by weakness in gloves heavyweights yesterday. The lower liners retreated, while the Energy (+2.2%) and Plantation (+0.7%) sectors outperformed the negative broader market.

Global markets: The US stockmarkets retreated overnight as the Dow (-0.1%, snapping a five-day winning streak dragged down by renewed concern over the inflationary pressure following the higher commodity prices. European stockmarkets ended mixed, while Asia stockmarkets closed mostly higher.

The Day Ahead

The FBM KLCI retreated yesterday after a two-session gain as investors stayed cautious sidelines of the release of Malaysia's 1Q21 GDP data today as well as trading activities were softer on the holiday-shortened trading week. Tracking the weakness from the Wall Street overnight, we expect market sentiment to remain weak following the announcement regarding the expansion of MCO 3.0 to the whole country starting from Wednesday. Meanwhile, the CPO future price contracted after registering a hefty rally recently.

Sector focus: Following the uptrend movement of commodities prices particularly CPO and oil prices, we believe energy and plantation counters may be put under traders’ radar over the near term. Also, some of the essential consumer stocks as well as lockdown beneficiaries such as plastic packaging industry may bode well throughout this period of time.

The FBM KLCI retreated after two sessions of gains with milder volume. Technical indicators remained mixed as the MACD Histogram has turned into a green bar, while the RSI was hovering below the 50 level. Should the key index set a further pullback, support is pegged around 1,555-1,565, while the resistance is set along 1,600-1,620.

Company Brief

Dayang Enterprise Holdings Bhd's wholly-owned subsidiary has received a contract from Sarawak Shell Bhd and Sabah Shell Petroleum Co Ltd for the provision of topside major maintenance services. The value of the contract is based on work orders issued by the Shell companies throughout the contract duration from 29th April 2021 to 19th Aug 2023. (The Star)

Boustead Holdings Bhd is unable to disclose further information about the Littoral Combat Ship project, following the government's announcement recently that the project will continue despite previous delays. Boustead will wait for official confirmation on the government’s approval, before disclosing any of its plans. (The Edge)

Gamuda Bhd has confirmed it is currently in talks with the government to put forth its proposal to sell its four highway concessions to a private highway trust. The group, however, denied that the enterprise value of the sale would be RM 5.20bn. It was responding to a query by Bursa Malaysia in relation to an article in this week's issue of The Edge Malaysia weekly, which stated that Gamuda had put forward a proposal to the government to sell the four highway concessions to a trust known as Amanah Lebuhraya Sdn Bhd. This trust will fund the acquisitions by raising money from bond investors with a promised annual return of 4.0-5.0%, backed by cash flows from the tolls without any need for government guarantees. (The Edge)

Astino Bhd has proposed a bonus issue of 219.3m shares on the basis of four bonus shares for every five shares held. The exercise will increase the group’s share base to 493.4m shares, while the share capital will remain unchanged at RM138.3m. (The Edge)

Eastern & Oriental Bhd (E&O) has announced that Tan Sri Mohd Bakke Salleh has resigned as non-independent and non-executive director of the group. Bakke's resignation, effective immediately, was due to the cessation of Sime Darby Bhd as a major shareholder of the company. (The Edge)

EcoFirst Consolidated Bhd has proposed a bonus issue of up to 443.8m warrants, on the basis of one warrant for every two existing EcoFirst shares. The assumed conversion price of 40 sen apiece is a 2.1% premium to the five-day volume weighted average market price of EcoFirst shares up to 7th May 2021 of 39.2 sen. (The Edge)

Privasia Technology Bhd has roped in the former CEO of the Malaysian Investment Development Authority (MIDA), Datuk Azman Mahmud, as its independent and nonexecutive director. The company also appointed Rachel Lau Jean Mei and Leong Kah Chern as independent and non-executive directors. (The Edge)

Source: Mplus Research - 11 May 2021

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Mplus Market Pulse - 10 May 2021

Author: MalaccaSecurities   |  Publish date: Mon, 10 May 2021, 10:08 AM


Market Review 

Malaysia: The FBM KLCI (+0.6%) ended the week on a positive tone, spurred by bargain hunting in gloves heavyweights, coupled with the gains in plantation giants as CPO prices remain upbeat. The lower liners rebounded, while the broader market ended mostly higher, led by the Healthcare sector (+2.3%).

Global markets: The US stockmarkets extended their gains as the Dow (+0.7%) rallied for the fifth session as the weaker-than-expected jobs data provided some alleviation towards the inflationary pressure. European stockmarkets also extended their gains, but Asia stockmarkets finished mixed.

The Day Ahead

The FBM KLCI finished the Friday’s session on a positive note on the back of bargain hunting activities in glove and plantation heavyweights. However, market sentiment may remain cautious throughout the holiday-shortened trading week while focusing on Malaysia’s 1Q2021 GDP growth rate, which might still be weak on the back of Covid-19 affected environment. Nevertheless, traders may focus on commodities that are on a rising tone such as CPO, which has jumped more than 5.0% last week as well as Brent oil price that has a slight uptick as of this juncture.

Sector focus: Plantation and O&G sector may be under the limelight today amid firmer CPO and Brent oil price. Also, under the MCO3.0, we might anticipate stronger demand in packaging and media-related stocks amid the stay home mode. Besides, the technology sector may see some technical rebound following the overnight gains in Nasdaq.

The FBM KLCI extended its gains last Friday after erasing the morning losses. Technical indicators turned mixed as the MACD Histogram has turned into a green bar, while the RSI was hovering below the 50 level. The key index may trade within a tight range with support pegged around 1,555-1,565, while the resistance is set along 1,600-1,620.

Company Brief

Malaysia Smelting Corp Bhd’s (MSC) 1QFY21 net profit stood at RM22.1m vs. a net loss of RM13.2m recorded in the previous corresponding quarter, as tin prices surged to 10-year high in March 2021. Revenue for the quarter grew 34.4% YoY to RM275.9m. (The Star)

Bursa Malaysia Securities has imposed a cap on the upper limit price of Widetech (Malaysia) Bhd at RM2.15 for today. The freezing of the price was due to the counter trading at the static limit-up prices for two straight days. Its share price closed 49 sen higher at RM2.15 with 587,500 shares. (The Star)

Genting Bhd-owned Resorts World Las Vegas has announced a partnership with cryptocurrency exchange Gemini to explore future opportunities that will allow Gemini crypto wallet users to use the cryptocurrency facility for payments in the US-based casino and hotel entity. The partnership aims to make Resorts World Las Vegas one of the most crypto-friendly resorts on the Las Vegas Strip. (The Edge)

S P Setia Bhd is selling eight parcels of plantation land in Johor to Scientex Bhd for RM518.1m. The freehold plot of about 960.0-ac is in Tebrau, Johor Bahru, and is registered for agricultural use. (The Edge)

Marine and General Bhd (M&G) has secured a RM13.0m work order award from PETRONAS Carigali Sdn Bhd for the provision of an anchor handling tug and supply vessel. The job is effective from June 2021 for a primary duration of 315 days from the commencement date. (The Edge)

Major shareholders of Amcorp Properties Bhd (Amprop) have proposed to take the company private via selective capital reduction (SCR) and repayment exercise of 90 sen per share. The repayment of 90 sen per share is at a 65.1% premium over its last traded price of 54.5 sen. The shareholders comprise Amcorp Group Bhd, Clear Goal Sdn Bhd and banker Tan Sri Azman Hashim together with Amprop Trust in which Azman has deemed interest. (The Edge)

WCT Holdings Bhd has clarified that its wholly-owned unit, Subang Skypark Sdn Bhd (SSSB), has proposed to re-concession and not to acquire the Sultan Abdul Aziz Shah Airport (formerly known as Subang Airport) as reported by several media organisations. The company plans to operate the airport the same way under a lease whereby the government would continue to own the land and Subang Airport. (The Edge)

EP Manufacturing Bhd (EPMB) has proposed a private placement of up to 31.6m new shares in EPMB, representing up to 20.0% of its total shares, to third party investors to be identified later. It expects to raise gross proceeds of up to RM13.1m, based on an illustrative issue price of RM0.42 per placement share and proceeds are mainly to use as working capital. (The Edge)

Careplus Group Bhd’s 1QFY21 net profit soared 108.3x YoY to RM123.5m on higher sales and average selling prices. Revenue for the quarter jumped 130.5% YoY to RM241.3m. An interim dividend of two sen per share, payable on 16th June 2021 was declared. (The Edge)

Pharmaniaga Bhd has proposed a bonus issue of 1.06bn shares on the basis of four bonus shares for every share held on an entitlement date to be announced later, to reward its shareholders. (The Edge)

Source: Mplus Research - 10 May 2021

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SLP Resources Bhd - ASP revision booster

Author: MalaccaSecurities   |  Publish date: Mon, 10 May 2021, 10:01 AM


Summary

• SLP Resources Bhd’s (SLP) 1QFY21 net profit grew 52.1% YoY to RM6.0m, on higher average selling prices (ASP) and sales volume for plastic flexible packaging products and plastic resins. Revenue for the quarter added 34.9% YoY to RM46.0m. A first interim dividend of 1.0 sen per share, payable on 8th July 2021 was declared. 

• The results came above our expectations, accounting to 31.0% of our forecasted net profit of RM19.5m and 28.0% of consensus forecasted net profit at RM21.5m. Meanwhile, the reported revenue also came above our forecast, making up to 30.4% of our estimated revenue of RM151.2m and 25.6% of consensus revenue of RM180.0m.

• After recording zero sales to European countries in 1QFY21, we opined that the trend will largely remain unchanged with the region’s path of recovery remains clouded by a barrage of uncertainties. Still, the upbeat local sales as well as the Japanese market may underpin the recovery progress as 1QFY21 local sales rising 50.3% QoQ to RM25.6m, whilst sales to Japan rose 20.7% QoQ to RM16.4m.

• Moving forward, we believe that sales from the local market will continue to dominate, contributing slightly more than 50.0% of total revenue in FY21 as the shortage of containers and high logistic charges may continue to delay export shipment to the overseas customers.

• SLP will focus on ramping up the production of kitchen and garbage bag, targeting approximately 25.0% of production output in FY21f (from less than 20% recorded in FY20). Following the rising healthcare awareness, SLP aims to undertake new products, namely medical pouches, tacky mats and door handle refills.

• Polyethylene (PE) prices was on the rise since the start of the year as resin prices surged in tandem with the higher crude oil prices. This bodes well for SLP to revise their ASP higher, whilst the flexible packaging remains as the preferred choice of packaging for consumers. We also note that SLP maintains a lean balance sheet with zero borrowings, whilst cash position of RM72.0m in 1QFY21 translates to net cash per share of 22.7 sen (c.23.8% of share price).

Valuation & Recommendation

• With the reported earnings coming above our forecast, we revise our earnings estimates higher by 29.3% and 28.4% to RM25.2m and RM25.7m in FY21f and FY22f respectively as we expect the ASP will hold at current levels over the foreseeable future. Consequently, we upgrade SLP to HOLD (from SELL) with a higher target price of RM1.03. Our target price is based on the assigned target PER of 13.0x to our revised FY21f EPS of 7.9 sen.

• At RM0.955, we note that prospective dividend yields are fairly attractive at 7.3% for FY21f and FY22f each.

• Risks to our recommendation include the volatility in the global resin prices which affect production costs and margins. Foreign exchange fluctuation risk; although net forex exposure in USD is capped to about 5.0% as raw material costs is largely offset by export sales denominated in the same currency (close to 50.0% of total export revenue).

Source: Mplus Research - 10 May 2021

Labels: SLP
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Teo Seng Capital Berhad - Another subdued quarter

Author: MalaccaSecurities   |  Publish date: Mon, 10 May 2021, 9:58 AM


Summary

  • Teo Seng Capital Bhd’s (Teo Seng) 1QFY21 net loss stood at RM0.8m, vs. a net profit of RM1.9m recorded in the previous corresponding quarter due to lower contribution from the animal health products segment on the back of lower demand, and higher feed production cost, coupled with increased depreciation cost.
  • The reported net profit came below our expectation, registering losses in contrast to our previous estimated net profit of RM32.1m. Meanwhile, the reported revenue amounted to 20.5% of our previous revenue forecast of RM562.7m for the year.
  • On average, the chicken egg price dropped by 3.8% YoY in 1Q2021 to average of RM0.27 per egg, dragged by lower demand amid Covid-19 pandemic. Despite the weaker ASP of chicken eggs, the group registered flattish revenue YoY in the poultry farming segment. Revenue for the quarter contracted 0.5% YoY to RM115.5m.
  • Cost wise, soybean prices maintained its upward momentum in 1Q2021, rising 22.6% QoQ due to climate change and huge import from China. Likewise, the maize price climbed 13.6% QoQ on the back of sharp rise in demand which led to poor availability on the market. Nevertheless, 1QFY21 saw narrowed losses QoQ due to the improved QoQ ASP of chicken eggs (4Q20: 23.0 sen) and the disposal gain on fixed assets, offsetting the higher feed price.
  • Considering the reimplementation of Movement Control Order (MCO) following resurgence of Covid-19 daily confirmed cases, coupled with the persistently rising feed commodity prices, the uncertainties in the market may continue to exist over the near term. We reckon the chicken egg prices will linger around RM0.30 per Grade C chicken egg whilst the poultry players’ expansion plans were deferred amid intermittent outbreak of Covid-19 waves could help avoid a potential oversupply.
  • In view of the uncertainties in the market amid MCO, Teo Seng has put off some of the projects under their initial expansion plan, targeting production of at least 4.5m chicken eggs per day by end-2022 instead of the earlier expectation of 5.0m (current production at 4.0m chicken eggs per day). However, we reckon the challenging situation to be normalise later in the year when the pandemic is under control following the ongoing vaccination programme.

Valuation & Recommendation

  • Considering the deferment of some projects under the expansion plan, we have reduced our FY21f and FY22f forecasted earnings to RM25.5m and 36.3m respectively. We downgrade Teo Seng capital to SELL (from HOLD), with a revised target price of RM0.69. We arrive our target price by ascribing a target PER of 8.0x to its FY21f EPS of 8.7 sen.
  • Outlook wise, despite part of its expansion plan was halted due to the pandemic outbreak, the company remained committed in increasing production, targeting to boost its chicken eggs production to 4.5m daily by end-2022. Should the vaccination programme being rolled out smoothly and lead to reopening of business activities, the industry should improve by 2022 in tandem with the company’s expansion plan.
  • Risks to our recommendation include low ASP of chicken eggs amid imposition of stricter movement restrictions following renewed spike in Covid-19 cases, as well as higher chicken feed costs (mainly soybean and maize) due to growing global export demand, which may eventually lower its margin.

Source: Mplus Research - 10 May 2021

Labels: TEOSENG
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Serba Dinamik Holdings Bhd - Investment abroad

Author: MalaccaSecurities   |  Publish date: Mon, 10 May 2021, 9:57 AM


Summary

• Serba Dinamik Holdings Bhd (Serba Dinamik) through its wholly-owned subsidiary, Serba Dinamik Group Berhad (SDGB) has sponsored Data Knights Acquisition Corp., a special purpose acquisition company (SPAC) of its initial public offering of 10.0m shares. The shares have commenced trading on the Nasdaq Capital Market on 7th May 2021, under the symbol DKDCU.

• The total investment made by SDGB in the SPAC is approximately USD5.9m (c. RM24.1m), based on the exchange rate of USD1.00: RM4.12. Each unit consists of one share of the DKDCU's Class A common stock and one redeemable warrant, which entitles the holder to consequently purchase one share of Class A common stock at the price of $11.50 per share.

• DKDCU is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganisation, or similar business combination with one or more businesses. DKDCU aims to focus on data centers and internet technology sectors where its management team has extensive experience.

• Separately, Serba Dinamik is desirous to change their financial year end from 31st December 2020 to 30th June 2021. The move comes due to the extension of the Movement Control Order (MCO) in Malaysia and lockdowns in countries in which the group have hampered the ability to finalise the financial statements.

• We are neutral on the aforementioned investment, which is expected to see minimal impact to the group’s profitability over the foreseeable future. Still, we believe that Serba Dinamik will be able to leverage on DKDCU’s management team expertise in the technology sector which is in line with Serba Dinamik’s move in reducing the reliance on oil & gas industry.

• With Brent oil prices now recovering back towards slightly below USD70/bbl, we believe that major oil & gas players may accelerate their CAPEX plans. Meanwhile, crude oil rigs in US have now remained above 300 since mid-February 2021 (from slightly below 200 in October 2020) as economic recovery gain traction.

Valuation & Recommendation

• We made no changes to our earnings estimates and valuation metrics, pending the upcoming quarterly results release at the end of the month. We maintain our BUY recommendation on Serba Dinamik with an unchanged target price RM2.37. Our target price is derived by ascribing an unchanged target PER of 13.0x to its FY21f EPS of 18.1 sen.

• We continue to like Serba Dinamik as one of the key players in the oil & gas industry, backed by its sturdy orderbook comprising of dozens of jobs from local and overseas that will provide long-term earnings visibility, coupled with the group’s ongoing effort diversification into businesses that generates recurring income.

• Risks to our recommendation include failure to hit the targeted outstanding orderbook of RM18.0bn by end-FY21f. Meanwhile, a firmer ringgit against the USD could affect the group’s bottom line as it will have a negative impact on the group’s earnings and vice versa with majority of existing orderbook derived from overseas.

Source: Mplus Research - 10 May 2021

Labels: SERBADK
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