Corporate News

 •* Duopharma Biotech Bhd* has signed a deal with the Malaysian government to supply 6.4 million doses of the Russian-developed "Sputnik V" Covid-19 vaccine. The group said it will procure and supply to the Ministry of Health (MoH) the vaccine developed by the Gamaleya National Research Institute of Epidemiology and Microbiology. Duopharma said its subsidiary, Duopharma (M) Sdn Bhd (DMSB), has signed a term sheet agreement with MoH and the Russian Direct Investment Fund (RDIF) to secure the 6.4 million doses of Sputnik V. RDIF is the appointed marketing agent for Gamaleya for all international markets, with established partnerships in India, China, and South Korea to manufacture the vaccine. Duopharma said supply of the Sputnik V vaccine could be from any of RDIF's partners, subject to approval by MoH's National Pharmaceutical Regulatory Agency (NPRA).

•Meanwhile, Pharmaniaga Bhd signed an agreement with Putrajaya to supply 12 million doses of a China-developed Covid-19 vaccine. Its wholly-owned subsidiary Pharmaniaga LifeScience Sdn Bhd (PLS) entered into a term sheet agreement with the government of Malaysia, represented by MoH, for the purchase and distribution of the Covid-19 vaccine. The vaccine will be developed by Sinovac Life Sciences Co Ltd (Sinovac LS), a subsidiary of Sinovac Biotech Ltd. Pharmaniaga said the duly-executed agreement is to enable PLS to supply 12 million doses of finished Covid-19 CoronaVac, SARS-CoV-2 Vaccine (Vero Cell), Inactivated (developed by Sinovac LS), and filled and finished by PLS to be delivered to hospitals, clinics and any other facilities nationwide, as instructed by the MoH.

•* Atrium REIT* said its fourth-quarter net property income (NPI) rose 20.64% to RM9.30 million, from RM7.71 million in the preceding quarter, thanks to rental income contribution from its Atrium Bayan Lepas (ABLI) property in Penang. The industrial property REIT said gross revenue for the fourth quarter ended Dec 31, 2020 (4QFY20) increased 16.13% to RM8.85 million, from RM7.62 million in 3QFY20. On a year-on-year basis, the NPI increased 20.98% from RM7.47 million in 4QFY19, while revenue rose 16.28% from RM7.61 million. Atrium REIT declared a distribution per unit of three sen, payable on Feb 26, bringing the cumulative distribution for FY20 to nine sen, from 6.63 sen in FY19.

•* PNE PCB Bhd* is proposing a private placement to raise RM21.13 million in order to reduce its borrowings and upgrade its existing printed circuit board production. The printed circuit board manufacturer said it would be issuing up to 71.16 million new shares (20% of its total share capital) to third-party investors at an indicative price of 29.7 sen apiece. The company will allocate RM10.8 million of the proceeds to pay off borrowings, which will amount to estimated annual interest savings of RM382,000. Meanwhile, RM5 million will be used to fund the upgrading of its printed circuit board production line.

•* Gabungan AQRS Bhd* has bagged two contracts for the provision of piling and infrastructure work, worth a combined RM83.58 million. The group said its unit Gabungan Strategik Sdn Bhd was awarded an RM45.7 million job in a commercial building project by Teringin Sentral Sdn Bhd, to be executed over 30 months. The group also said Gabungan Strategik has also accepted an RM37.88 million contract from Solitaire Suites Sdn Bhd, involving an office building project which will commence on May 1 and is expected to be completed by Oct 31, 2023.

•* Poh Huat Resources Holdings Bhd's* main operating subsidiary in Malaysia has discovered 543 positive Covid-19 cases among its employees. The furniture company’s subsidiary Poh Huat Furniture Industries (M) Sdn Bhd (PHFI) went through a voluntary Covid-19 screening of all of its employees (foreign and local) at all its factories located in the Bukit Pasir Industrial Area in Muar, Johor. The screening exercise covered 1,400 employees at all of PHFI’s plant premises and corporate offices in Bukit Pasir, Muar, and 543 employees tested positive for Covid-19.

•* Hwa Tai Industries Bhd* has been slapped with an unusual market activity (UMA) query by the stock exchange, after its share price surged as much as 33.3% or 15.5 sen to a three-year high of 62 sen today. The biscuit maker, which is valued at RM44.15 million currently, has been on a steep climb since last Monday (Jan 18), from 36 sen. In its query to Hwa Tai, Bursa Malaysia demanded an explanation of the reasons that could have possibly driven up its share price. The biscuit manufacturer responded to the regulator, saying it was not aware of any corporate development, rumour or any other possible explanation for the higher trading activity.

•* Chin Teck Plantations Bhd* said its net profit doubled to RM15.77 million for the first quarter ended Nov 30, 2020 (1QFY21), from RM7.81 million a year earlier. In a bourse filing, the group said the higher bottom-line earnings were on the back of higher revenue, thanks to higher prices for fresh fruit bunches (FFB), crude palm oil (CPO) and palm kernel (PK). It added that the FFB production and purchases also increased, resulting in higher CPO and PK production. Chin Teck said revenue was up 36.61% at RM45.41 million, from RM33.24 million in 1QFY20.

•* Dagang NeXchange Bhd (DNeX)* has clarified that other than a consortium agreement signed by its unit yesterday, it has not received a letter of award, nor has it entered into an agreement with the Indonesian government for a cable laying, maintenance and repair job there. DNeX was responding to an article published in The Edge Malaysia dated Jan 25, entitled "DNeX close to bagging cable laying, maintenance and repair job in Indonesia”.

•* Advancecon Holdings Bhd* has bagged a RM60.6 million subcontract for the proposed construction and completion of subgrade works of Package 3, Section 4 for the East Coast Rail Link (ECRL) project. Advancecon said its wholly-owned subsidiary Advancecon Infra Sdn Bhd has accepted the letter of acceptance from China Communications Construction (ECRL) Sdn Bhd for the appointment of AISB as the subcontractor. The contract period spans March 1, 2021 to April 15, 2023.

•* Tasco Bhd* has proposed a share split of every share to four shares, the total logistics solution provider said in a bourse filing yesterday. Tasco currently has an issued share capital of RM100.8 million, comprising 200 million shares. The theoretical share price after the split would be 95.75 sen per share, based on, for illustrative purposes, the last transacted market price of RM3.83 per share on Jan 19. Tasco said the proposed share split is to reward its existing shareholders, improve liquidity of the company's shares and broaden its shareholder base.

•* Dagang NeXchange Bhd (DNeX)* has inked a consortium agreement with PT Infrastruktur Telekomunikasi Indonesia to maintain submarine cables there. DNeX signed the agreement via a consortium comprising its unit PT DNeX Telco Indonesia (PT DTI) and PT Samudera Mbiantu Sesami (PT SMS). The group said the agreement is for the deployment, management, maintenance and repair, as well as other value-added works, for the sea cable communication system maintenance support within and outside of Indonesia. Under the deal, the consortium is established for a period of three years and may be extended over the next three years.

Astino Bhd: Revving up local operations
Trading Catalyst
• 10 manufacturing plants located across Peninsular Malaysia, supported by approximately 700 employees.
• Notable completed roofing projects include Pantai Hospital (Penang), SMJK Jit Sin (Penang), Toyo Tires plant, Fedex (Batu Kawan), Econsave (Taiping) and Inari (Batu Kawan).
• Demand in the local market to remain firm over the foreseeable future as building projects resume operations, while higher steel prices may contribute to improvement in margins. 
• Technically, a trendline breakout above the RM0.91 level may drive price higher towards the next resistances at RM0.97-RM1.00 with long term target at RM1.04.
Technical View
(i) ASTINO (S: RM0.85, R: RM0.97-1, LT TP: RM1.04, CL: RM0.82)
S: Support, R: Resistance, LT TP: Long term target price, CL: Cut loss

Technical Analyzer

JAKS (4723)

Outlook: Pending breakout MYR0.71

Levels: MYR0.74, MYR0.80

Exit: Below MYR0.665

(time frame: 2-4 weeks)

FoundPac (5277)

Outlook: Breakout MYR0.985

Levels: MYR1.07, MYR1.14

Exit: Below MYR0.985

(time frame: 2-4 weeks)

Globetronics (7022)

Outlook: Pending breakout MYR3.20

Levels: MYR3.50, MYR3.70

Exit: Below MYR3.05

(time frame: 2-4 weeks)

Techbond (5289)

Outlook: Pending breakout MYR1.38

Levels: MYR1.45, MYR1.60

Exit: Below MYR1.30

(time frame: 2-4 weeks)

Corporate News

•* Hartalega Holdings Bhd* announced its net profit for the third quarter ended Dec 31, 2020 (3QFY21) leapt to a record high of RM1 billion, up nearly 84% against RM544.96 million in the preceding quarter, 2QFY21. Its revenue grew by 58.2% to RM2.13 billion quarter-on-quarter against RM1.35 billion in 2QFY21. The brisk glove sales boosted Hartalega's cash pile to RM2.14 billion. Quarterly earnings per share (EPS) ballooned to 29.31 sen, from 15.95 sen in the preceding quarter. This brings the cumulative EPS to 51.68 sen, from 9.49 sen. Hartalega declared a second interim dividend of 9.65 sen, bringing the cumulative dividend payout for the nine months ended Dec 31, 2020 (9MFY21) to 15.6 sen, versus the 5.5 sen registered in 9MFY20.

•* IGB Real Estate Investment Trust's (REIT)* net property income for the fourth quarter ended Dec 31, 2020 slipped 3.12% to RM93.09 million, from RM96.09 million a year ago, mainly due to a higher allowance for impairment of trade receivables. Quarterly revenue rose 5.65% to RM147.51 million from RM139.61 million a year ago, the REIT said in a filing with Bursa Malaysia. The manager has approved a distribution of 95% of the trust's quarterly distributable income, amounting to RM74.3 million or 2.08 sen per unit, to be paid on Feb 26. For the full year, IGB REIT's net property income fell 20.59% to RM316.68 million, from RM398.79 million in the previous year. Revenue for the 12 months dropped 15.74% to RM465.24 million, from RM552.13 million previously.

•* Bioalpha Holdings Bhd* announced that it has entered into a two-year procurement and distribution agreement with Shanghai Bukun Trading Co Ltd for the procurement and distribution of vaccines in Malaysia, which include the Covid-19 vaccine developed by Sinovac Biotech Co Ltd, subject to approval by the relevant authorities, including the Ministry of Health (MoH) and the National Pharmaceutical Regulatory Agency (NPRA). Bioalpha managing director William Hon said the company is currently liaising with MoH and NPRA and preparing to submit the clinical data for all three clinical trials to secure approvals to distribute the vaccines here.

•* Key ASIC Bhd's* wholly owned subsidiary Key ASIC Semiconductor Ltd has entered into a contract worth US$5.25 million (approximately RM21.22 million) with Canvas Technology Pte Ltd. The project entails the technology and design of internet protocol development and licensing.

•* KNM Group Bhd's* Italian unit has clinched RM30.22 million in contracts for a plant in the United States. The process equipment manufacturer's unit FBM Hudon Italiana SpA, which manufactures process equipment such as condensers, spheres and process tanks, inked two agreements with Dutch oil and gas firm Stamicarbon BV to supply a high-pressure carbanate condenser and a high-pressure stripper. The contracts are expected to contribute to KNM's earnings for the financial year ended Dec 31, 2021 (FY21) and FY22.

•* Sunsuria Bhd* is disposing of two parcels of agricultural land in Kuala Lumpur to Kerjaya Prospek Property Bhd for a total of RM30.14 million. Sunsuria said its 70%-owned subsidiary Sunsuria Genlin Development Sdn Bhd has entered into a sale and purchase agreement with Kerjaya Prospek Property's wholly owned subsidiary Kerjaya Property Sdn Bhd to dispose of the two vacant freehold agricultural lands located in Setapak measuring a total of 9,092 square metres. "The disposal of properties will enable Sunsuria Group to unlock capital resources from being tied up as long-term assets and realise the value of the properties at a fair market value whilst enhancing Sunsuria Group's liquidity and strengthening its financial position," it said.

•* Bintai Kinden Corp Bhd* is teaming up with Australian-based company, International Equities Corp Ltd, to jointly undertake two mixed property development and management projects with healthcare facilities and wellness services in Melaka and Penang. Bintai Kinden will take lead in the project to be developed on two parcels of freehold land spanning 2.16 hectares in Melaka and Penang with an estimated gross development value of RM470 million. International Equities, on the other hand, will provide technical consultation, planning, design, development, and other services to assist Bintai Kinden in developing and promoting the project.

•High-precision plastic components maker Ge-Shen Corp Bhd announced that 10 employees of its 70%-owned subsidiary Demand Options Sdn Bhd have tested positive for Covid-19. The infected 10 employees work at Demand Options' primary operations in Desa Cemerlang, Johor Bahru. In a filing with Bursa Malaysia today, Ge-Shen said mass testing has been conducted after the first case of Covid-19 was identified at Demand Options.

•* Prestariang SKIN Sdn Bhd*, a unit of AwanBiru Technology Bhd (Awantec), is entitled to damages of between RM733 million and RM922 million after the Pakatan Harapan government unilaterally terminated a concession agreement for the provision of a comprehensive immigration system over 15 years with the company, said its lawyer. At the start of Prestariang SKIN's hearing against the government, its counsel Datuk Lim Chee Wee in his opening statement said the company had completed 22.37% of the project since 2017, based on an assessment by an independent expert.

•Koon Hoi Chun via AKK Capital Sdn Bhd is buying a 60.41% stake in carpet maker Paragon Union Bhd from major shareholders in an off-market deal which led to a planned unconditional mandatory takeover offer from the buyer to acquire the remaining shares in Paragon Union at 55 sen each. Paragon Union said it then received the notice of the unconditional mandatory takeover offer from Hong Leong Investment Bank Bhd on behalf of AKK. AKK's offer of 55 sen a share values Paragon Union at about RM36.4 million based on the company's latest reported number of issued shares at 66.18 million.

•* Censof Holdings Bhd* has proposed a private placement to raise up to RM25.09 million, partly to fund the acquisition of an additional stake in a subsidiary. The group said it is placing out up to 100.35 million new shares or 20% of its shareholding to third-party investors. The indicative issue price of the placement shares is 25 sen apiece, it said. Censof said it will be using RM14.06 million of the proceeds of the placement to acquire an additional 30.87% interest in its 58.20%-owned subsidiary Asian Business Software Solutions Pte Ltd. Asian Business Software is involved in the development and supply of financial management and accounting softwares for small and medium enterprises.

•* Dagang NeXchange Bhd (DNeX)* has inked a consortium agreement with PT Infrastruktur Telekomunikasi Indonesia to maintain submarine cables there. DNeX signed the agreement via a consortium comprising its unit PT DNeX Telco Indonesia (PT DTI) and PT Samudera Mbiantu Sesami (PT SMS). The group said the agreement is for the deployment, management, maintenance and repair, as well as other value-added works, for the sea cable communication system maintenance support within and outside of Indonesia. Under the deal, the consortium is established for a period of three years and may be extended over the next three years.

HEVEA (RM0.65 – BUY- HLIB RESEARCH TP RM0.83) – Potential downtrend line breakout 

Continue to shine. Hevea risk-reward profile is more attractive now after tumbling 22% from its 52-week high of RM0.835 to RM0.65 last Friday, supported by undemanding valuations of 12.3x (ex NCPS of 18.5sen or ~28% to share prices) FY21E P/E (vs 5Y mean of 15.1x) and 0.88x P/B (20% below 5Y mean of 1.1x), coupled with a strong 19% EPS CAGR from FY19-22 

We expect Hevea to post a seasonally better 4Q20 results particularly in the RTA division, benefitting from pent-up demand, stocking up activities and work-from-home arrangements as a result of disruption of supply chain and trade diversions

However, growing pressures from stronger RM, higher freight costs and raw material prices remain a challenge to the group

R1-R2: 0.69-0.72
LT objective: 0.80
S1-S2: 0.61-0.60
Cut: 0.58 

Thong Guan Industries Bhd: On expansion drive

Trading Catalyst

• 17 manufacturing operations located in Malaysia, China and Thailand with products exported to 70 countries worldwide.

• Earmarked a sizeable expansion plan with planned CAPEX of RM150.0m for 2021 & 2022 with RM30-40m will be allocated to set up a manufacturing plant in Myanmar that provides lower cost of production and better margins.

• Healthy balance sheet with net cash position of RM118.3m, translating to net cash per share of RM0.31 (c. 12.4% of share price) in 3QFY20.

• Technically, a consolidation breakout above RM2.54 may drive share price higher towards the next resistances at RM2.70-RM2.88 with long term target at RM3.26.

(i) TGUAN (S: RM2.41, R: RM2.70-2.88, LT TP: RM3.26, CL: RM2.40)

S: Support, R: Resistance, LT TP: Long term target price, CL: Cut loss

•* Tenaga Nasional Bhd's (TNB)* foreign shareholding fell to 12.87% as at Dec 31, 2020 from 13.81% as at end-November 2020, according to the Malaysian Government-controlled utility's latest updates on overseas investors' ownership of the company's shares. The December and November 2020 updates, which were published on TNB's website on Monday (Jan 18), showed that its latest foreign shareholding figures had fallen from 17.62% as at end-February 2020.

•* Supermax Corp Bhd* spent RM53.92 million to buy back its own shares today, its first share buyback exercise this year. In a bourse filing, the glove manufacturer said it bought back 8.15 million shares at between RM6.24 and RM6.70 apiece. It now holds 102.98 million cumulative net outstanding treasury shares, which is equivalent to 3.79% of its total share capital of 2.72 billion shares.

•* CIMB Group Holdings Bhd* has appointed Paul Wong Chee Kin as president and CEO of CIMB Thai effective Feb 1, 2021, succeeding acting president and CEO Sutee Losoponkul after the departure of the previous CEO, Adisorn Sermchaiwong. The group said Losoponkul will remain with CIMB Thai and assume the role of advisor to the president and CEO, until Dec 31, 2021. Wong is currently CIMB’s group chief operations officer, overseeing activities across functions in payments, digitalisation, strategy, customer delivery and process improvements.

•* Dagang NeXchange Bhd (DNeX)* is acquiring an additional 60% of the issued share capital in Ping Petroleum Ltd for US$78 million (RM314.3 million), as the group looks to further strengthen its presence in the upstream oil and gas (O&G) segment. DNeX said it entered into a conditional share sale and purchase agreement with the other shareholders of Ping to acquire the stake, which upon completion will increase its holdings in the latter to 90%. It said the transaction price for the 60% stake represents a discount of around 40% of the market valuation of Ping’s proved and probable (2P) reserve. The purchase will be satisfied by a combination of US$40.95 million in cash, and the issuance of new ordinary shares in DNeX and new redeemable preference shares in its wholly-owned unit DNeX Energy Sdn Bhd, for the remaining US$37.05 million.

•* SC Estate Builder Bhd* has proposed to undertake a private placement of up to 20% of the total number of issued shares to third-party investors at an issue price to be determined later. The construction group said that based on the indicative issue price of 5.5 sen per placement share, the proposed private placement is expected to raise gross proceeds of RM10.54 million.

•* FGV Holdings Bhd’s* non-interested directors have recommended that minority shareholders reject the proposed takeover offer for the plantation group’s shares at RM1.30 each by the Federal Land Development Authority’s (Felda), saying the offer is not fair and not reasonable after taking into account FGV’s fair value and initial public offering (IPO) share price of RM4.55 each. Independent adviser RHB Investment Bank Bhd said the FGV non-interested directors contended that the offer price is not fair because it is below the fair value of RM1.42 to RM1.60 per FGV share as determined by independent adviser RHB. RHB, however, said while Felda’s proposed takeover offer for FGV's shares at RM1.30 each is not fair, it is reasonable in the absence of an alternative proposal and Felda's intention not to maintain FGV's listing status. Hence, RHB recommended minority shareholders to accept the offer.

•* Serba Dinamik Holdings Bhd* said today its proposed private placement involving 336.83 million new shares was oversubscribed by 1.85 times. In conjunction with the completion of the private placement’s book-building exercise, the oil and gas service provider said the issue price of the private placement shares was fixed at RM1.51 per share, and that it is expected to raise gross proceeds of RM508.61 million from the exercise.

•* HB Global Ltd* has proposed to raise RM12.17 million via a private placement to repay creditors, and for use in future investments and working capital. The loss-making China-based frozen food maker said it would be issuing 93.6 million placement shares or 20% of its total share capital, at an indicative issue price of 13 sen to third-party investors.

•* PLS Plantations Bhd* has proposed to place out 19 million new shares in the durian planter to CIMB Group Holdings Bhd's ex-chairman Datuk Seri Nazir Razak at 95 sen each under a private placement of up to 10% of the total number of issued shares in the company to improve its public shareholding spread and raise money to finance the expansion of its existing business. PLS said the placement, which includes share placements to other independent third-party investors, will also enable the company to raise funds to partially repay the group’s bank borrowings, which stood at about RM121.48 million as at Dec 31, 2020.

Corporate News

 •* AirAsia Group Bhd* is proposing to issue up to 668.39 million new shares or 20% of its current share capital for private placement to raise RM454.51 million. The proposed sum is based on an indicative price of 68 sen per share. AirAsia Group closed at 73 sen, valuing the airline at RM2.44 billion. The low-cost carrier said the private placement is not sufficient to meet its long-term cash flow. The move is an interim measure to address its immediate cash flow operations while it explores other options to improve its long-term financial performance.

•A tech fund promoted by Green Packet Bhd is funding the majority shareholders of Nuglobal Ventures Sdn Bhd which is keen on taking over Khazanah Nasional Bhd's semiconductor fabricating company SilTerra Malaysia Sdn Bhd. Green Packet said Nuglobal Ventures has submitted a bid for SilTerra. However, it highlighted that the bid is subject to strict confidentiality with Khazanah and no detail of the bid can be publicly disclosed now. Green Packet stressed that Nuglobal Ventures is neither its associate company nor its subsidiary, and is owned by majority local bumiputera shareholders and minority Chinese shareholders.

•* Dagang NeXchange Bhd (DNeX)* today clarified that it has not entered into any definitive agreement to acquire Khazanah Nasional Bhd's semiconductor fabricating company SilTerra Malaysia Sdn Bhd. It said the company nevertheless is constantly evaluating various proposals to grow its business organically or through acquisitions including that of SilTerra.

•* Genting Malaysia Bhd's (GenM)* Resorts World Genting, Resorts World Away, Resorts World Kijal and Resorts World Langkawi will be temporarily closed following the implementation of the Movement Control Order in six more states. The gaming giant also announced that its Resorts World Birmingham, alongside all land-based casinos in the UK, will be temporarily closed until further notice, in compliance with the British government's directives to curb the spread of Covid-19. Its online business GentingBet.com is still operational.

•* UOA Real Estate Investment Trust's (REIT)* net rental income for the fourth quarter ended Dec 31, 2020 fell 10.81% to RM12.98 million, from RM14.61 million a year earlier. The fall was due to rental rebates given to eligible tenants, the commercial REIT said in a bourse filing. UOA REIT declared a distribution per unit of 4.6 sen, compared with 2.3 sen a year ago. There was an 8.42% decline in the REIT's quarterly revenue to RM18.11 million from RM19.78 million.

•* Pantech Group Holdings Bhd*, which supplies pipes and valves to the oil and gas (O&G) industry, said third-quarter net profit fell 14.8% to RM8.75 million from RM10.27 million a year earlier as revenue dropped partly due to a decrease in sales of the company's products to O&G customers at a time when the industry contended with the impact of the Covid-19 pandemic. Pantech said revenue slipped to RM133.04 million in the third quarter ended Nov 30, 2020, from RM165.51 million a year earlier.

•* CIMB Group Holdings Bhd's* 94.8%-owned subsidiary CIMB Thai Bank PCL saw its net profit for the financial year 2020 (FY20) ended Dec 31, 2020 decline 36% from a year earlier to 1.29 billion baht (RM173.96 million). The fall in earnings was attributed to a 60% increase in provisions to 2.68 billion baht as at the end of FY20 from 2.3 billion baht at the end of FY19. The bank also registered an expected credit loss of 4.47 billion baht in FY20.

Pertama Digital Bhd is urging banks to lift limits on FPX transactions as it predicts that digital bail collections will rise further this year after the Covid-19 pandemic forced courts to move their operations to digital platforms. Its executive director Sabri Abdul Rahman said this would enable the full adoption of its digital bail payment solution eJamin.

•Independent adviser BDO Capital Consultants Sdn Bhd has advised Versatile Creative Bhd's minority shareholders to accept its largest shareholder NSK Trading Sdn Bhd's takeover offer as the deal is "fair and reasonable". BDO said the offer price of 70 sen is fair because it represents a premium of 44 sen or 169.2% to the estimated fair value per Versatile Creative share of 26 sen. The offer price also represents a discount of 7.28% per share to the closing price at the latest practicable date (LPD) of 75.5 sen and 2.45% to the five-day volume-weighted average market price up to the LPD. It said the offer is reasonable as Versatile Creative shares are relatively illiquid and in the absence of a competing offer, the offer provides an opportunity to the holders to realise their investment in Versatile Creative.

•* Top Glove Corp Bhd* said its annual rubber glove production capacity has reached 91 billion pieces as at January 2021 as demand for gloves continues to be strong despite the availability of vaccines to curb the Covid-19 pandemic. The world's largest rubber glove manufacturer in terms of production capacity expects to have an annual output capacity of 110 billion gloves by December 2021 as the company adds new capacity of 19 billion pieces of gloves for the year. Top Glove said its current annual production capacity of 91 billion pieces gloves has been achieved via collective output across the group's 36 glove factories out of the company's total of 47 factories.

Technical Analyzer

Tomypak (7285)
Outlook: Pending breakout MYR0.775
Levels: MYR0.805, MYR0.825
Exit: Below MYR0.75
(time frame: 2-4 weeks)

Media Prima (4502)
Outlook: Pending breakout MYR0.285
Levels: MYR0.30, MYR0.315
Exit: Below MYR0.275
(time frame: 2-4 weeks)

MTAG (0213)
Outlook: Breakout MYR0.76
Levels: MYR0.805, MYR0.84
Exit: Below MYR0.76
(time frame: 2-4 weeks)

JAG (0024)
Outlook: Pending breakout MYR0.235
Levels: MYR0.25, MYR0.265
Exit: Below MYR0.225
(time frame: 2-4 weeks)

Corporate News

 •* KNM Group Bhd* plans to raise up to RM54.93 million via a private placement to pay off its bank borrowings and to fund some ongoing projects. The process equipment manufacturer aims to issue up to 10% of its share capital or 296.92 million shares, which will be placed out to third-party investors to be identified. It said RM20 million of the proceeds raised will be used to repay bank borrowings, while RM33.63 million will be used to procure raw materials, pay subcontractors and other related expenses for its ongoing contracts in Indonesia, Malaysia and Guyana.

•* Kanger International Bhd* has diversified into the construction business by signing six deals totalling RM495.9 million today. It involves the group undertaking the remaining works at six construction sites in Kuala Lumpur and Pahang, the group said. The jobs were awarded by the main contractors of the projects and will provide a steady stream of revenue for the group during the tenure of the deals. The scope of works includes management of subcontractors appointed by the main contractors and the handling of financial matters which include fulfilling payments to the sub-contractors promptly.

•* SKP Resources Bhd* is temporarily closing its Johor Bahru operations from Jan 16 till Jan 29, to facilitate Covid-19 screening of its employees, after five of them tested positive last week. This temporary closure is expected to result in a capacity loss of 3% of its annual output, SKP said.

•* Batu Kawan Bhd* has updated that it now controls 92.14% of Chemical Company of Malaysia Bhd (CCM), after receiving more acceptances for its RM3.10 takeover offer. With its shareholding rising above 90%, Batu Kawan said it will not be maintaining CCM’s listing on the Main Market of Bursa Malaysia. The group said the offer will remain open for acceptance until Feb 2.

•* Daya Materials Bhd*, a Practice Note 17 (PN17) company, said its subsidiary has secured an RM23.86 million construction sub-contract in Banting, Selangor. The sub-contract awarded to its 51%-owned subsidiary Daya CMT Sdn Bhd involves the construction of a recycle pulp and packaging paper plant in Mahkota Industrial Park. It was awarded by Sing Foong Niap Engineering Sdn Bhd and is targeted to be completed by June 30.

•* Samaiden Group Bhd* has secured a RM25.8 million contract from Gimzan Plywood Sdn Bhd to develop a biomass-based power plant in Terengganu. The contract will commence on Feb 2, and the job is targeted to be completed within 23 months.

•* MESB Bhd* plans to venture into the waste recycling business, as it sees its loss-making trading and retailing of apparel and leather products business to continue to face challenges amid the Covid-19 pandemic. The group said the waste recycling business has a favourable outlook to enhance its prospects and financial performance, as well as reduce its sole dependency on the existing business.

•* Seacera Group Bhd* is selling a 72,770 sq metre land in Taiping, Perak to AT Systematization Bhd’s glove unit for RM10.5 million. The land being sold to AT Glove Engineering Sdn Bhd was valued at RM11.7 million by an independent valuer in June 2015. The deal is deemed to be a related party transaction because Asiabio Capital Sdn Bhd is a major shareholder of Seacera and AT Systematization.

•* Notion VTec Bhd* announced today that some of its workers have been tested positive for Covid-19 and that the company has detected 87 positive and suspect cases thus far within its premises. The hard-disk drive manufacturer said as a precautionary and preventive measure, the company has conducted Covid-19 tests on workers who have had close contact with infected workers.

•* Tenaga Nasional Bhd (TNB)* said it will implement the government-approved enhanced terms for the electricity connection charge and connected load charge, effective today. A connection charge is the upfront payment made by consumers who require new electricity supply infrastructure or an upgrade of existing infrastructure to cater for additional power supply. Meanwhile, the connected load charge is a mitigating tool to discourage consumers from over-declaring their electricity load requirement, TNB said.

•* Genting Malaysia Bhd's (GenM)* wholly-owned subsidiary Genting UK plc permanently closed its Genting Casino Southport, in the north-west of England, with 38 staff members facing redundancy. According to gaming news portal G3 Newswire, GenM said the closure was "simply unavoidable" due to the lack of business as a result of Covid-closures. The gaming group has already closed casinos in Margate, Torquay and Bristol and has reduced its workforce in London, Glasgow, Edinburgh, Blackpool and Birmingham.

•Federal Land Development Authority (Felda) has acquired 5.14 million FGV Holdings Bhd shares for a total of RM6.64 million yesterday, following an earlier purchase of 22 million shares, as part of its efforts to take the group private. The smaller tranche of shares was also bought at RM1.29 apiece, one sen below its cash offer of RM1.30 for FGV shares. To date, the agency has acquired 27.1 million of FGV’s shares from the open market, representing a 0.74% equity stake.

Technical Analyzer

Kronologi Asia (0176)
Outlook: Pending breakout MYR0.75
Levels: MYR0.775, MYR0.795
Exit: MYR0.73
(time frame: 2-4 weeks)

Dayang Enterprise (5141)
Outlook: Pending breakout MYR1.24
Levels: MYR1.29, MYR1.33
Exit: MYR1.20
(time frame: 2-4 weeks)

Cypark Resources (5184)
Outlook: Pending breakout MYR1.29
Levels: MYR1.32, MYR1.43
Exit: MYR1.25
(time frame: 2-4 weeks)

N2N Connect (0108)
Outlook: Breakout MYR0.735
Levels: MYR0.775, MYR0.80
Exit: MYR0.725
(time frame: 2-4 weeks)

Corporate News

 •Eco World Development Group Bhd (EcoWorld) said the property developer’s board has decided not to pursue the proposed merger with rival UEM Sunrise Bhd following careful evaluation of the merger alongside EcoWorld’s own business plans and the current challenging environment with the re-implementation of the Movement Control Order (MCO). EcoWorld said that since the last announcement on Dec 30, 2020 regarding the proposed merger, the parties involved had been engaged in discussions with a view towards establishing the key parameters of the merger after taking note of UEM Group Bhd’s proposed heads of terms as set out in its letter dated Oct 2, 2020.

•Malaysian Rating Corp Bhd (MARC) has assigned preliminary ratings of MARC-1IS and A+IS to George Kent (Malaysia) Bhd’s proposed RM100 million Islamic Commercial Papers (ICP) Programme and RM500 million Islamic Medium-Term Notes (IMTN) Programme. The ratings outlook is stable, the rating agency said in a statement today. It said the assigned ratings reflect George Kent’s conservative capital structure, strong liquidity position and a relatively stable water meter manufacturing business that is well supported by a long-standing relationship network, an extended geographical footprint and brand recognition.

•* Chin Hin Group Property Bhd* has proposed to acquire a 1,943 sq metre piece of vacant land in Kuala Lumpur for RM20.91 million to develop office lots. The group said BK Alliance Sdn Bhd, its indirect 51%-owned unit, is buying the land from Suez Domain Sdn Bhd. The 94-year lease on the land expires in 2112.

•* WCT Holdings Bhd* said a judicial committee has upheld the Dubai Court of Appeal's decision that recognises a final award of RM1.2 billion in favour of the company in its dispute with Meydan Group LLC over the Nad Al Sheba Dubai Racecourse project. The committee dismissed Meydan's challenge of the court's decision and its application to annul the final award. WCT said it will continue to pursue its legal rights in respect of the final award, which was issued by the Arbitral Tribunal in 2015 when it initiated arbitration proceedings against Meydan in 2009 over the cancellation of the RM4.6 billion race course project in Dubai.

•* Greatech Technology Bhd* is buying 5.9 acres of leasehold land in Penang for RM13.37 million from the Penang Development Corp. The company announced that its wholly-owned subsidiary Greatech Integration (M) Sdn Bhd (GIM) had entered into the sales and purchase agreement with the State’s development agency for the acquisition of the land, which is located in Batu Kawan Industrial Park. The purchase will be funded through internally-generated funds. Greatech intends to move GIM’s manufacturing operations in Lunas, Kedah, to the newly acquired land.

•The Inland Revenue Board has renewed a contract worth RM35.3 million for HeiTech Padu Bhd for supply, delivery and renewal of CA Gen software, Access Gen (TSO) and Composer Report for the mainframe system. HeiTech Padu said the contract is for a period of three years commencing Feb 1, 2021, to Jan 31, 2024. However, the contribution will only start in the next financial year ending Dec 31, 2022 (FY22).

•* Aeon Credit Service (M) Bhd* has been granted a renewal for its money-lending licence under the Moneylenders Act 1951 and Moneylenders (Control and Licensing) Regulations 2003 by the Ministry of Housing and Local Government. The licence is valid for another two years effective Jan 15, 2021 till Jan 14, 2023 and is subject to renewal with the Ministry, the company said in a filing today, adding that it had received the letter from the Ministry dated Nov 23, 2020. Aeon Credit was first granted the money-lending licence in January 2019 from the Ministry for a period of two years.

•* Dayang Enterprise Holdings Bhd* has won a contract extension from Sarawak Shell Bhd. The group said its wholly-owned subsidiary DESB Marine Services received the contract extension for the provision of an accommodation workboat, Dayang Opal. This is under the umbrella contract for offshore support vessel services for Petronas’ Petroleum Arrangement Contractors’ drilling and project activities, Dayang Enterprise said. The group added that the value of the contract is based on work orders issued by Sarawak Shell throughout the extended one-year contract period from March 20.

•* Landmarks Bhd* has confirmed that a major fire incident took place at The Andaman, its hotel resort in Langkawi. All guests and staff have been evacuated safely, the group said in a filing today. The property is owned by its subsidiary Andaman Resort Sdn Bhd.

•* Petronas Dagangan Bhd (PetDag) and Maxis Bhd* have inked a strategic partnership to jointly offer converged solutions focusing on safety, security and sustainability for businesses. The firms said the partnership will focus on leveraging big data and advanced analytics to co-create hyper personalization for an enhanced retail experience.

•* Genting Malaysia Bhd’s* Resorts World Genting (RWG) has issued a notice that it anticipates a decline in number of visitors following the implementation of the MCO, Conditional MCO (CMCO) and Recovery MCO (RMCO). It said it will be operating at a lower capacity and that some of its offerings may not be available from Jan 13, 2021.

•* AE Multi Holdings Bhd* has bagged another project to set up the production facility for PNE PCB Bhd, a new entrant to the rubber glove industry. The company announced that its unit AE Multi Industries Sdn Bhd has received a letter of award from PNE Glove Sdn Bhd — a unit of PNE PCB Bhd — to design, build and deliver on a turnkey basis a glove-manufacturing factory of up to 59,000 square feet within eight months. The factory will have the capacity to house up to 10 glove-dipping lines for the sole purpose of manufacturing medical grade nitrile gloves.

•* Wintoni Group Bhd* has been granted a further extension of time to appoint a replacement sponsor and submit its regularisation plan. The Practice Note 17 (PN17) said Bursa Malaysia Securities has now granted the company up till June 30 to submit its regularisation plan to the relevant authorities, subject to the appointment of a sponsor by March 1.

Technical Analyzer

Opensys (0040)
Outlook: Pending breakout MYR0.51
Levels: MYR0.535, MYR0.565
Exit: MYR0.50
(time frame: 2-4 weeks)

Uchi Technologies (7100)
Outlook: Breakout MYR2.50
Levels: MYR2.60, MYR2.68
Exit: MYR2.50
(time frame: 2-4 weeks)

JAKS Resources (4723)
Outlook: Pending breakout MYR0.65
Levels: MYR0.68, MYR0.715
Exit: MYR0.62
(time frame: 2-4 weeks)

Boustead Holdings (2771)
Outlook: Breakout MYR0.635
Levels: MYR0.665, MYR0.69
Exit: MYR0.63
(time frame: 2-4 weeks)

Corporate News

 •* QL Resources Bhd's* takeover offer for shares it does not own in Boilermech Holdings Bhd has been extended to Jan 29. The initial deadline for the conditional mandatory general takeover offer at 95 sen per share was Jan 14. QL currently controls a 48.41% stake or 249.79 million shares in Boilermech.

•The Federal Land Development Authority (Felda) has issued an offer document in relation to its unconditional mandatory takeover offer for all remaining ordinary shares in FGV Holdings Bhd which it does not own, except treasury shares. Felda said the cash offer of RM1.30 per share would be open for acceptances until Feb 2 unless extended or revised.

•* Pharmaniaga Bhd* is partnering with China's Sinovac Life Sciences Co Ltd for the supply of 14 million doses of Covid-19 vaccine in Malaysia. Pharmaniaga expects the vaccine to be distributed to the public by the end of March, according to managing director Datuk Zulkarnain Md Eusope. This will cover 22% of the country's total population. An agreement was entered into between Pharmaniaga and Sinovac today. Under the deal, Pharmaniaga will carry out the fill and finish process of the vaccine developed by Sinovac.

•* I-Stone Group Bhd* has temporarily halted production activities at two of its subsidiaries in Johor Bahru after 11 employees tested positive for Covid-19. The group said four local engineers from i-Stone Systems Sdn Bhd contracted the virus from its customer's workplace, while seven foreign employees — four from i-Stone Engineering Sdn Bhd and three from PA Metal Technics Sdn Bhd — contracted the virus in a dormitory managed by a third-party service provider.

•Meanwhile, Spring Art Holdings Bhd has suspended the operations of two factories as well as its administrative office after some of its employees tested positive for Covid-19. However, it did not disclose how many have been infected. It said it is working closely with the Ministry of Health to implement mitigating steps to contain the spread of Covid-19 at the premises.

•* Ho Wah Genting Bhd* is planning to raise up to RM34.58 million via a private placement. The group said it would be placing up to 60.67 million new shares, representing 10% of its share capital of 606.68 million shares, among third-party investors. Ho Wah Genting plans to use up to RM12 million of the placement proceeds to purchase healthcare products and for research and development activities for its healthcare-related business. Another RM10 million would be used to fully repay a loan from Hong Kong-based Prime King Investment Ltd, which had given Ho Wah Genting a short-term advance for working capital purposes. The group added that up to RM11.77 million of the proceeds would be used for general working capital requirements.

•Meanwhile, Handal Energy Bhd is looking to raise up to RM11.13 million via a private placement to repay its borrowings and fund its working capital. It is planning to issue up to 49.48 million new shares or 20% of its share capital to third-party investors to be identified. It noted that the indicative issue price of placement shares is assumed to be 22.5 sen apiece, which is a 2.28 sen or 9.2% discount to its five-day volume-weighted average market price of 24.78 sen. Up to RM4 million of the proceeds raised will be used to repay the group's borrowings, which will trim its borrowings to RM25.87 million from RM29.87 million, and reduce its gearing to 0.29 times, from 0.38 times.

•* ATTA Global Group Bhd's* executive director Tan Kim Hee has been detained by the police. The group said Tan was held by Johor police to assist an investigation not related to the group or any of its subsidiaries and associate companies.

•* MTD ACPI Engineering Bhd* has won a RM33.44 million construction contract from the Public Works Department in Pahang. The group said its wholly-owned subsidiary MTD Construction Sdn Bhd will undertake the Police Training Centre project in Bentong. The contract is due to be completed on July 11, 2022.

•* Mulpha International Bhd's* wholly-owned unit Mulpha Australia (Holdings) Pty Ltd has accepted a syndicated credit facility of A$342 million (RM1.07 billion) from Oversea-Chinese Banking Corp Ltd and United Overseas Bank Ltd in Australia to finance the refurbishment works at InterContinental Sydney Hotel and to refinance its existing borrowings.

•* Malaysia Airports Holdings Bhd's (MAHB)* passenger traffic for December rose 24.18% to 2.27 million, from 1.83 million passengers in November. The increase followed two consecutive months of decline in passenger traffic after the airport operator registered 3.5 million passengers in September. MAHB said Malaysia's December traffic performance was impacted by the lifting of the interstate travel ban on Dec 7 — with domestic passenger movements totalling 1.07 million. Daily passenger movements rose 50% on Dec 10 and continued to jump by another 50%, reaching a peak of 54,000 passengers on Dec 27, said MAHB.

•* AirAsia Group Bhd* said its domestic flights in Malaysia remain operational despite the planned implementation of the Movement Control Order across several states and federal territories from tomorrow until Jan 26 and that guests who do not wish to travel during this period can cancel their flights voluntarily and opt for unlimited flight changes without any additional cost.

•* Gas Malaysia Bhd* has set the average natural gas selling price for the distribution segment of its unit Gas Malaysia Energy and Services Sdn Bhd at RM22.14 per million British thermal units (mmBtu) for the first quarter of 2021, which is RM11.51/mmBtu or 34.21% lower than the 2020 average natural gas selling price.

Technical Analyzer

Thong Guan Industries (7034)
Outlook: Breakout MYR2.35
Levels: MYR2.50, MYR2.60
Exit: MYR2.35
(time frame: 2-4 weeks)

MI Technovation (5286)
Outlook: Pending breakout MYR4.00
Levels: MYR4.20, MYR4.40
Exit: MYR3.90
(time frame: 2-4 weeks)

Magnum (3859)
Outlook: Pending breakouThong Guan Industries (7034)
Outlook: Breakout MYR2.35
Levels: MYR2.50, MYR2.60
Exit: MYR2.35
(time frame: 2-4 weeks)

AEON Co. (M) (6599)

Outlook: Pending breakout MYR0.985
Levels: MYR1.04, MYR1.10
Exit: MYR0.95
(time frame: 2-4 weeks)

Trading Ideas💡for today:

🟨 IJMPLNT – BUY, SL: MYR1.78, R1: MYR2.05, R2: MYR2.28

🟨 INARI – BUY, SL: MYR2.48, R1: MYR2.82, R2: MYR3.05

🟨 MASTER – BUY, SL: MYR1.70, R1: MYR2.03, R2: MYR2.26

🟨 PENTA – BUY, SL: MYR4.72, R1: MYR5.40, R2: MYR5.70

🟨 TAANN – BUY, SL: MYR2.92, R1: MYR3.15, R2: MYR3.39

🟨 CRUDE PALM OIL – Pullback set to end, uptrend to resume

🟨 KLCI INDEX FUTURES – Consolidation & building a new base  

A reason for Top Glove’s investors to cheer even as uncertainties loom

EVEN as the country is bracing for an official announcement from Prime Minister Tan Sri Muhyiddin Yassin on how “a potential MCO 2.0” will pan out, today should be a happy day for all Top Glove Corp Bhd loyal investors.

After all, the 16.5 sen/share dividend for the first quarter ended Nov 30 – which amounts to RM1.33 bil – will be doled out today (Jan 11).

Moreover, CIMB-CGS Research has lent an additional moral support to the world’s largest glove maker by retaining its “add” call with an unchanged target price of RM8.90.

“Backed by its strong earnings prospects, we believe that Top Glove is undervalued at 6.2 times CY2021F price-to-earnings ratio (P/E) discounts of 65.8% and 34.3% to its five-year mean (18x) and the sector’s average CY21F P/E respectively,” rationalised analyst Walter Aw in a company update.

Elaborating further on its virtual meeting with Top Glove’s chief financial officer Lim Cheong Guan and finance manager See Sook Fong, CGS-CIMB Research said the discussion focused on (i) average selling prices (ASPs); (ii) dividend payments, and (iii) workers’ welfare.

Interestingly, Top Glove is not discounting the possibility that it will continue to declare a 70% dividend pay-out post 4Q FY8/2021 assuming that its earnings remain robust.

In a Bursa announcement on Jan 4, Top Glove has stated plans to raise its dividend pay-out to 70% (additional 20% special dividend on top of existing dividend pay-out policy of 50%) from 2Q FY8/2021 to 4Q FY8/2021.

“In this note, we input the higher dividend pay-out into our FY2021 estimates and now project Top Glove to pay 83.1 sen dividend per share (DPS) for FY2021, reflecting a 13% dividend yield,” suggested Aw.

With regard to workers’ welfare, CGS-CIMB Research noted that Top Glove is earmarking a RM195 mil capex to build and purchase new workers’ hostels near its existing factories over the next one to two years.

“Furthermore, Top Glove said it was confident that the US Customs and Border Protection (CBP) ban will be lifted post a verification by its independent international consultant that its workers’ accommodation meet requirements of the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446).

Backed by COVID-19-led global glove demand, CGS-CIMB Research said Top Glove order backlog is still robust at 160-560 days (depending on glove type).

Moreover, the glove maker has stated that its ASPs should rise by 15% month-on-month (mom) and 10% mom in January 2021 and February 21 respectively.

“Another round of ASP increase of at least 5% mom in March 2021 is highly likely,” projected Aw. “Note that we estimate Top Glove’s ASP for nitrile butadiene rubber (NBR) gloves to reach US$113/1,000 pieces in December 2020.”

Beyond the positive review by CGS-CIMB review, there is another piece of good news for Top Glove’s investors to cheer.

Of the RM1.33 bil, about RM39.1 bil will go to the coffer of company founder and executive chairman Tan Sri Lim Wee Chai (and family) as ‘ammunition’ to lend support to Top Glove’s shares in the event of a setback to its prices.

At the close of the morning trading, Top Glove was down 13 sen or 2% (in a see-saw trading) to RM6.37 with 65.49 million shares traded, thus valuing the company at RM52.24 bil. – Jan 11, 2021

Technical Analyzer

Kawan Food (7216)
Outlook: Breakout MYR1.89
Levels: MYR2.10, MYR2.25
Exit: MYR1.89
(time frame: 2-4 weeks)

Mah Sing Group (8583)
Outlook: Breakout MYR0.865
Levels: MYR0.94, MYR0.975
Exit: MYR0.865
(time frame: 2-4 weeks)

Iconic Worldwide (9113)
Outlook: Breakout MYR0.505
Levels: MYR0.565, MYR0.60
Exit: MYR0.505
(time frame: 2-4 weeks)

Caely Holdings (7154)
Outlook: Pending breakout MYR0.465
Levels: MYR0.49, MYR0.52
Exit: MYR0.44
(time frame: 2-4 weeks)

Sarawak Oil Palms (5126) (RM4.19): Technical Buy

Targets: RM4.50, 4.70

Stop: RM3.91

Omesti (9008) (RM0.565): Technical Buy 

Targets: RM0.625, 0.66

Stop: RM0.51

Hong Seng Consolidated Bhd: Breathing a new life

• Turnaround fortune is on the table, following the venture into the healthcare segment which allows the group to provide pharmaceutical, medical and healthcare supplies.

• Further diversification into gloves manufacturing with production of 2 nitrile gloves lines in April 2021 is timely.

• Total of 6 nitrile gloves production lines in September 2021 will produce approximately 1.5bn pieces of gloves per annum.

• Technically, a consolidation breakout above RM1.06 may drive price towards the next resistances at RM1.17-1.25, with long term target at RM1.40. 

(i) HONGSENG (S: RM1.00, R: RM1.17-1.25, LT TP: RM1.40, CL: RM0.99)

S: Support, R: Resistance, LT TP: Long term target price, CL: Cut loss

MAHSING (RM0.905 – BUY- HLIB RESEARCH TP RM1.41) – Firing both guns 

We like MAHSING due to its “fast turnaround” strategy that enables it to crystalize on land value, generate strong cash flows within a short period and lower upfront costs 

As MAHSING offers exposures to property and glove manufacturing businesses, the group is expected to ride earnings rebound from its property division and a new stream of glove earnings amid sustainable demand from the permanent structural shift in hygiene awareness

We expect FY20 to be a bottomed year and remain upbeat on the longer-term prospects from key projects such as M Vertica and M Centura which are currently in their early stages of construction. Meanwhile, the commencement of its glove venture starting in Apr 2021 will provide a meaningful boost to FY21/22 earnings 

The stock is trading at 10.9x FY21 P/E (16% below its 5Y mean), supported by a strong FY19-22 earnings CAGR of 26% and decent FY21-22 DY of 4.6-5.7%

Trend Positive triangle breakout

R1-R2: 0.975-1.03

LT objective: 1.13

S1-S2: 0.88-0.825

Cut: 0.81 

Corporate News

 •* APFT Bhd* will be delisted from Bursa Malaysia on Jan 13, after the bourse dismissed the company’s appeal for an extension of time to submit its regularisation plan for approval. Bursa Malaysia said today that upon APFT’s delisting, the Practice Note 17 company will continue to exist, but as an unlisted entity.

•* SKP Resources Bhd* said five employees of its wholly-owned subsidiary, Syarikat Sin Kwang Plastic Industries Bhd, have tested positive for Covid-19. The group said it will continue to adhere to the standard operating procedures as directed by the MoH, in order to ensure the necessary safeguards are in place to prevent the spread of Covid-19 and to ensure its employees are provided with a safe and healthy working environment.

•The Employees Provident Fund (EPF) has ceased to be a substantial shareholder of Top Glove Corp Bhd, after disposing of 40 million shares or a 0.5% direct interest in the group on Jan 5. After this sale, the EPF is left with 392.85 million shares or a 4.9% stake in the world’s largest glove maker, according to a filing with Bursa Malaysia today. Separately, Top Glove defended its board after BlackRock Inc issued a scathing statement earlier this week, attacking the firm's handling of a coronavirus outbreak and saying it had voted against the re-election of six independent directors to Top Glove's board. Nevertheless, the six directors were re-elected at the company's annual general meeting on Wednesday, gaining between 86.5% and 72.3% of shareholder votes. In a statement, Top Glove said the directors have served an average of six years and that the board meets regularly to discuss the pandemic and other governance matters.

•* VS Industry Bhd*, an electronics manufacturing service provider, has set aside RM200 million in capital expenditure (capex) for the financial year 2021 (FY21) to expand and enhance its capacity and capabilities. Managing director Datuk SY Gan said despite 2020 being an arduous year for the company in the face of unprecedented market challenges stemming from the Covid-19 pandemic and ongoing macroeconomic issues, it managed to secure two new customers from the United States.

•A subsidiary of Bintai Kinden Corp Bhd has been appointed by South Korea’s SLAB Asia Co Ltd, as the exclusive distributor for the Greenie Medi Cold Chain Box designed for the storage and distribution of Covid-19 vaccines in Malaysia. The subsidiary, Bintai Healthcare Sdn Bhd, has also been appointed an authorised distributor for the product in Southeast Asian countries. The Greenie Medi Cold Chain Box was designed for the exclusive use in transporting and storing medical products at very low temperatures, as it keeps the inbox temperature at -70℃ for up to 120 hours.

•* Sentoria Group Bhd* is selling two parcels of land measuring 747,069 sq m collectively in Kedah for RM27.9 million, to repay bank borrowings. In a bourse filing, the group announced that it's 75%-owned Sentoria Utara Sdn Bhd had inked a sale and purchase agreement (SPA) with Redvalley 

Development Sdn Bhd for the sale of the freehold parcels in Amanjaya, Kuala Muda. Sentoria will be using RM26.7 million of the sale proceeds to repay bank borrowings, which it noted will save it RM1.6 million worth of interest per year, based on the average interest rate of its borrowings of about 6% per annum. The balance RM1.2 million will be used for working capital.

Quick update on construction🚜🚜🚜 by RHB Research

Stays OVERWEIGHT

Top Pick: Kerjaya Prospek, Gabungan AQRS

♦️We refer to the recent news on the ECRL project. It was reported that both Malaysia Rail Link Sdn Bhd (MRLSB) and main contractor China Communications Construction Co Ltd (CCCC) have reached an agreement for CCCC to appoint local subcontractors and suppliers for at least 40% of the civil works of the ECRL project excluding tunneling works. The value of works was estimated to be up to MYR10bn for the implementation of the project from 2017 to 2026. 

♦️We are neutral on the news as we have already expected a work value between MYR9bn-MYR11bn. It was also guided by MRL before that the portion for local contractors is around 40% for the civil works. Nonetheless, we still believe that the new development comes as a positive news for local contractors who remains keen to participate in the project. A total of MYR331.2m worth of advance works was awarded last year to listed contractors namely Gadang, AQRS, Hohup and Advancecon. Among these contractors, ECRL packages still make up a portion of their tenderbook which we believe comprise works for the Section B.

♦️Stay OW with AQRS (BUY, TP: MYR1.04) and Kerjaya Prospek (BUY, TP: MYR1.31) as Top Picks.

Technical Analyzer

NI Hsin Resources (7215)
Outlook: Breakout MYR0.265
Levels: MYR0.30, MYR0.33
Exit: MYR0.265
(time frame: 2-4 weeks)

DPI Holdings (0205)
Outlook: Breakout MYR0.29
Levels: MYR0.315, MYR0.345
Exit: MYR0.29
(time frame: 2-4 weeks)

Asia Poly Holdings (0105)
Outlook: Breakout MYR0.265
Levels: MYR0.295, MYR0.305
Exit: MYR0.265
(time frame: 2-4 weeks)

K-One Technology (0111)
Outlook: Pending breakout MYR0.345
Levels: MYR0.36, MYR0.40
Exit: MYR0.335
(time frame: 2-4 weeks)

Corporate News

 •Bursa Malaysia has issued an unusual market activity (UMA) query to BSL Corp Bhd due to the sharp rise in the group’s share price and trading volume. The share price surged as much as 30 sen or 69.8% to 73 sen before retreating to close at 63.5 sen, still up 20.5 sen or 47.7% from yesterday. The counter saw 7.86 million shares traded today, sharply higher than an average of 117,700 shares per day over the past 200 days

•Tomei Consolidated Bhd is mulling over the listing of its design and manufacturing of jewellery arm through a special purpose vehicle on the ACE Market. Tomei said that it is planning to list YXG Group, which will house four wholly-owned subsidiaries — Yi Xing Goldsmith Sdn Bhd, Gemas Precious Metals Industries Sdn Bhd, Emas Assayer Sdn Bhd and GPM Refinery Sdn Bhd. The group did not reveal any timeline of the listing plan.

•Bintai Kinden Corp Bhd's partner Generex Biotechnology Corp has filed for a trademark for its li-Key vaccine, to be known as "The Complete Vaccine", and patent for its li-Key SARS-CoV-2 vaccine. Bintai Kinden said the technology offers the safest and best route for the rapid development of a Covid-19 vaccine that can be safely administered to everyone, including children and pregnant women, without side effects.

•Apex Equity Holdings Bhd, which last week announced the disposal of four parcels of freehold land in Shah Alam for RM37 million, had initially planned a project with an estimated gross development value of RM86.5 million on the land. The project was to involve the development of 61 units of shoplots, the company said in a filing with to provide additional information on the proposed disposal. The building plan is, however, still pending approval from the Shah Alam City Council (MBSA). Most of the 2.39-hectare land is currently vacant except for a small plot which is currently let out to MBSA.

•The sales tax exemption introduced by the government in the middle of last year propelled strong sales for UMW Holdings Bhd in the second half of the year, resulting in 59,320 units of Toyota vehicles and 220,154 units of Perodua automobiles being sold last year, exceeding its 2020 targets of 53,000 vehicles under the Toyota marque and 210,000 units of Perodua automobiles. UMW Toyota Motor (UMWT) chalked its highest monthly sales in December at 9,246 units, with Toyota Vios, Yaris and Hilux being UMWT’s bestselling models for the year. Meanwhile, 38%-owned Perusahaan Otomobil Kedua Sdn Bhd (Perodua) sold 25,171 units in December — its second-highest monthly sales last year.

•CN Asia Corp Bhd said it will apply for a digital banking licence to offer services for women. The group said it had signed a memorandum of understanding with Intcys Sdn Bhd, under which it plans to invest RM400 million in the establishment of a consortium to provide digital banking for women. Via the proposed MyWeW (Women Empowering Women) Digital Bank, the group plans to offer services such as entrepreneurial financing, microloans, applications of debit and credit cards, and opening of digital bank accounts.

•TIME dotCom Bhd has acquired a 60% stake in Malaysia’s leading private cloud computing provider AVM Cloud Sdn Bhd for RM58.7 million. TIME said the acquisition marks the group’s efforts in accelerating the growth of cloud computing as the newest pillar of its business, alongside fixed line services, global network connectivity and data centres. “With the inclusion of AVM in the TIME family, the group now possesses a full spectrum of product offerings that can meet the needs of its enterprise customers across the region,” it said.

•KESM Industries Bhd’s executive chairman and CEO Sam Lim today announced a new investment of a factory space of more than 100,000 sq ft in Melaka to support future growth in burning and test of automotive semiconductors, in anticipation of the business recovery. He said the reliability of semiconductors for safety of cars will always be the top concern for all new car designs.

Top Glove AGM Summary

📌 ASP in Q2FY21 is expected 30% higher than Q1FY21. The whole industry players in gloves manufacturing agreed that the ASP will remain strong for year 2021

📌  Delivery period increase from 30~40 days previous to 560 days and 370 days for nitrile and natural rubber gloves respectively. Note: Nitrile and natural rubber gloves comprises of around 90% of Top Glove revenue in FY20.

📌  US gloves stockpile reduced from 16.9 billion pieces to 2 billion pieces in October 2020. 

📌  Some Top Glove customer stockpile for gloves reduced from 2~3 months to 1~2 weeks

📌  Exporting gloves to 195 countries currently.

📌  Has enough raw material for continuous manufacturing of gloves. 

📌 Expects new players in gloves manufacturing facing issues from factory installing, workers and raw material issues. 

📌  Dividend payout for Q2, Q3 and Q4FY21 will be 70% on PATAMI.

📌  Reason for share buyback (SBB) is because Top Glove thinks their company is undervalued at the purchased price and expects better return than putting into FD which gives 2% only. The amount of SBB is only 2.15% from the allowed 10% threshold

📌  Top Glove has 4 billion cash as of 31 Dec 2020. 

📌  US Border issues will be resolved when the independent international consultant verified the hostels and accommodation meets the required of Workers Housing Act 446. 

📌  All factories that has been affected by Covid-19 lockdown has been resumed operations as of 20 Dec 2020. The lockdown is expected to impact 4% of the total revenue and profit. 

📌  Spending 100 million for next 3 years to build hostels for 7300 workers and using 95 million to acquire new apartments for 2700 workers

📌  Moving towards automation direction which previously 1 million gloves need 8 workers and now only 1.6 workers. 

📌  Current factory utilization rate is 95%

📌  Malaysia will remain the focus ground of gloves manufacturing activities at the same time expanding their existing foreign manufacturing plant. 

📌  Top Glove Hong Kong listed is expected around mid 2021. 

📌  Top Glove aims to achieve Fortune 500 by 2035 with an expected CAGR of 20%. Note: Top Glove current CAGR is 28%

Technical Analyzer

Malayan Flour Mills (3662)
Outlook: Breakout MYR0.635
Levels: MYR0.675, MYR0.70
Exit: MYR0.635
(time frame: 2-4 weeks)

MAG Holdings (0095)
Outlook: Breakout MYR0.20
Levels: MYR0.23, MYR0.25
Exit: MYR0.20
(time frame: 2-4 weeks)

Jaya Tiasa (4383)
Outlook: Pending breakout MYR0.915
Levels: MYR0.95, MYR1.00
Exit: MYR0.885
(time frame: 2-4 weeks)

Opensys (M) (0040)
Outlook: Pending breakout MYR0.565
Levels: MYR0.59, MYR0.61
Exit: MYR0.54
(time frame: 2-4 weeks)

1) PNEPCB (6637); Technical BUY with 33.6% potential return  

*Last: RM0.595 Target: RM0.735, RM0.795 Stop: RM0.495

*Timeframe: 2 weeks to 2 months

*Syariah: YES

2) PERTAMA (8532); Technical BUY with +36.8% potential return  

*Last: RM0.415 Target: RM0.515, RM0.63 Stop: RM0.33

*Timeframe: 2 weeks to 2 months

*Syariah: NO

3) BINACOM (0195); Technical BUY with 35.7% potential return  

*Last: RM0.42 Target: RM0.495, RM0.57 Stop: RM0.33

*Timeframe: 2 weeks to 2 months

*Syariah: YES

1) ACME (7131)

Resistance/阻力: RM0.520, RM0.550

Support/支撑: RM0.460, RM0.445

Last closing price/市价: RM0.490

2) ILB (5614)

Resistance/阻力: RM0.600, RM0.630

Support/支撑: RM0.555, RM0.535

Last closing price/市价: RM0.570

EG Industries (8907) (RM0.655): Technical Buy

Targets: RM0.73, 0.83

Stop: RM0.55

Southern Cable Group (0225) (RM0.525): Technical Buy 

Targets: RM0.58, 0.60

Stop: RM0.46

Corporate News

 •BlackRock, which holds a 1.61% stake in Top Glove Corp Bhd, voted against the election of six independent directors at the rubber glove maker's annual general meeting today, as it is of the view that the board had failed in its duty to mitigate the issues of migrant workers' health and safety. The six independent directors are Datuk Lim Han Boon, Datuk Noripah Kamso, Datuk Norma Mansor, Tan Sri Rainer Althoff, Sharmila Sekarajasekaran and Lim Andy.

•Hartalega Holdings Bhd and its two subsidiaries are suing its former executive director Danaraj Nadarajah, accusing him of having set up a competing business using one of the unit's resources during his tenure with Hartalega. They are seeking a declaration that he had breached his fiduciary duty, his duty of fidelity to the three companies, as well as his contract, and to claim for damages for his actions

•Techfast Holdings Bhd plans to diversify into petroleum trading and oil bunkering by acquiring a 35% stake in a company that supplies marine fuels. The group said it is buying the stake in CCK Petroleum Sdn Bhd from Kuah Choon Ching for RM26.25 million, of which RM16.17 million will be paid in cash and the balance via the issuance of 23.44 new Techfast shares at 43 sen per share. It added that Kuah has issued a profit guarantee of RM10 million for CCK Petroleum in FY21 and FY22. Techfast also announced a private placement of 75.29 million shares or 30% of its total share capital to raise RM28.23 million.

•LBS Bina Group Bhd plans to launch projects worth an accumulated gross development value of RM2.65 billion this year. The group continues to adapt to new norms and shift its marketing strategies through digital platforms. New developments in the pipeline in the Klang Valley include new phases at the KITA @ Cybersouth township in Dengkil which consist of  serviced apartments, single- and double-storey terraced houses and town houses.

•Censof Holdings Bhd has bagged a RM10.12 million contract from the Ministry of Finance to undertake the provision of maintenance and support services for the latter's budget management information system, MYResults. Censof said the contract carries a tenure of two years from Jan 1, 2021.

•Supercomnet Technologies Bhd will be reclassified under the healthcare sector effective from Jan 11. It is currently classified under the industrial products and services sector.

•Cymao Holdings Bhd, which was issued an unusual market activity (UMA) query by Bursa Malaysia yesterday, said it is unaware of any corporate development, apart from its proposed diversification into construction and project management. The plywood products maker said the board believes that the proposed diversification is expected to provide additional revenue streams and enhance the group's profits, thereby reducing its dependence on its existing business and subsequently improve the group's financial performance and shareholders' value. The group will also continue to secure more construction-related contracts.

•Sanichi Technology Bhd has emerged as a substantial shareholder of BCM Alliance Bhd, after acquiring 50.77 million shares or a 10.54% stake in the company via off-market trades. Sanichi purchased the said stake for RM21.83 million, according to a filing with Bursa Malaysia yesterday. In short, this means Sanichi spent 43 sen on each share in BCM Alliance. The acquisition was funded by internally-generated funds.

•AwanBiru Technology Bhd (Awantec), formerly known as Prestariang Bhd, is collaborating with Huawei Technologies (Malaysia) Sdn Bhd to drive and promote the adoption of Huawei Cloud and artificial intelligence (AI) products and services in the public sector. Under this collaboration, Huawei will act as Cloud and AI Service Provider, offering its cloud products and services. Awantec, on the other hand, will act as managed services partner and drive demand and adoption for Huawei's products and services.

•Yong Tai Bhd, which last month proposed the development of a China-based company’s Covid-19 vaccine in Malaysia, today signed up Tiong Nam Logistics Holdings Bhd to provide distribution services for the vaccine. Under the deal, Tiong Nam’s subsidiary Tiong Nam Logistics Solutions Sdn Bhd will provide logistics services, which also include transportation and warehouse space storage for the vaccine. On Dec 4 last year, Yong Tai inked a heads of agreement with Shenzhen Kangtai Biological Products Co Ltd for the development and exclusive commercialisation of the latter’s inactivated Covid-19 vaccine in Malaysia. Today, Yong Tai signed an extension letter with the Chinese company to work towards a more definitive commercialisation agreement by Feb 3.

•SP Setia - More launches in the pipeline for FY21F (Maintain Add with a TP of RM1.06)

The top gainers and losers on Bursa in 2020

 

Technical Analyzer

EG Industries (8907)
Outlook: Pending breakout MYR0.61
Levels: MYR0.69, MYR0.75
Exit: MYR0.57
(time frame: 2-4 weeks)

JHM Consolidation (0127)
Outlook: Pending breakout MYR1.97
Levels: MYR2.10, MYR2.20
Exit: MYR1.87
(time frame: 2-4 weeks)

FoundPac (5277)
Outlook: Breakout MYR0.97
Levels: MYR1.05, MYR1.10
Exit: MYR0.97
(time frame: 2-4 weeks)

D’nonce Technology (7114)
Outlook: Breakout MYR0.495
Levels: MYR0.53, MYR0.56
Exit: MYR0.495
(time frame: 2-4 weeks)

SKP Resources (7155) (RM2.20): Technical Buy

Targets: RM2.29, 2.40

Stop: RM2.04

Greatech Technology (0208) (RM9.70): Technical Buy 

Targets: RM10.50, 11.00

Stop: RM8.91

Corporate News

•* Top Glove Corp Bhd* sprang a surprise on investors by announcing that the company will be declaring a special dividend of 20% for the remaining financial quarters in the financial year ending Aug 31, 2021 (FY21).Top Glove said 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% payout ratio on profit after tax and minority interests (PATAMI). Top Glove shareholders will receive 70% of the company’s PATAMI as dividend.

•* 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 Oct 2, 2020 were only for construction works done up to end-June 2020. MRCBGK said Prasarana’s delayed payments of more than RM700 million were from July 2020 to October 2020, which have been certified for payment by Prasarana’s independent consultant KL Prima Consult Sdn Bhd. As of October 2020, the certified payment owed to the contractor is RM723.89 million, while November 2020’s payment amount is still pending certification. Prasarana's non-executive chairman Datuk Seri Tajuddin Abdul Rahaman told a press conference today that Prasarana had paid RM3.47 billion to MRCBGK up to Oct 2, 2020. He also said Prasarana had not withheld any payments to MRCBGK.

•* 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 Oct 3, 2020. The contract is also for the supply of safety and survival equipment to the RMAF. The contract ceiling is about RM30.37 million.

•* 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 Nov 25, 2020, other than saying it is based on prices stipulated in the contract, and that the agreement's effective date is Feb 1, 2020.

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

•* 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. Aeon Credit said the amount sought from the financial services company, inclusive of penalties, has been brought down to RM10.31 million, from RM96.82 million previously. It added that 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.

•* Ageson Bhd’s* 75%-owned subsidiary Ageson Holdings Sdn Bhd (AHSB) has inked a development rights agreement with Menteri Besar Inc (Perak) to develop a mixed development with an estimated gross development value of RM1.24 billion on some 475 acres of land in  Batang Padang district in Perak. The development will comprise a District Health Department Office, a District and Land Office, a District Council Office, a Community Development Department Tapah office, together with 365 units of shop offices, 1,038 units of terrace houses, 332 units of semi-detached houses, 191 units of detached houses, and 33 units of industrial lots. The project, which is expected to commence in the first quarter of this year and be completed in 15 years. Separately, it announced that it will pay part of an outstanding sum it owed to RHB Bank Bhd. Ageson did not disclose the sum involved. RHB had filed a suit against the group over a RM33 million term loan.

•* 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 the first quarter of this year. Focus Dynamics said as at Dec 29, 2020, the group’s issued share capital stood at RM203.79 million, comprising 6.15 billion shares.

Range bound mode pending further fresh catalysts

KLCI: 1608.3 (+5.8 pts)

DOW: 30391 (+167 pts)

FCPO: RM3755/ MT (+31)

BRENT: US$53.6 / bbl (+2.6)

USD: 4.0162(+0.0107 pts)

SGD: 3.0430 (-0.0006 pts)

EUR: 4.9260 (+0.0044 pts)

GBP: 5.4418 (-0.0444 pts)

US: 10-yr yield (+0.04 to 0.95%)

BNM: 10-yr yield (-0.01 to 2.58%)

Cut off time: 8.15 am (6 Jan 2021)

Global Asian markets ended on a mixed tone as investors braced for the outcome of a Georgia Senate runoff elections and concerns that the ever-rising number of Covid-19 cases would delay a global economic recovery. Pending the outcome of the Georgia election run-offs, the Dow rose 167 pts higher to 30391, boosted by energy stocks as Brent rallied 4.8% to USD53.6 amid a surprise Saudi production cut to offset a rise in output from OPEC+, led by Russia and Kazakhstan. 

Malaysia KLCI slid as much as 18.5 pts to 1589.8 as sentiment was hit by the resumption of RSS and elevated Covid-19 cases and clusters in Malaysia, before staging a strong rebound to end 5.8 pts higher at 1608.4, led by the recovery in glove companies, IHH, TENAGA and MAXIS. Overall, market breadth was still negative, with losers thumped gainers by 676-479 whilst a total of 6.25bn securities were traded for RM4bn vs 7.42bn shares valued at RM5.9bn on 4 Jan. After net disposal of RM852m on 4 Jan, foreign investors turned into net buyers (RM42m) whilst the local institutional investors and retailers were the net sellers with RM20m and RM22m in equities, respectively. 

Outlook In the absence of immediate-term drivers, KLCI may continue to extend consolidation (weekly supports: 1562-1575; resistances 1618-1638), as investors digest more news flows about the resurgence of Covid-19 pandemic, vaccine distributions and challenges faced by nations in vaccinating their citizens coupled with the resumption of RSS. Nevertheless, optimism on economic recovery amid the multiple Covid-19 vaccine breakthroughs, a combination of continuing fiscal and monetary stimulus, the low-interest rates environment and China's firmer economic recovery will continue to underpin interests on the equity market. Meanwhile, surging oil prices, soybean prices and FCPO may provide some trading interests among the O&G  (ARMADA, SERBADK, MISC, DIALOG and DAYANG) and plantation (HSPLANT, IJMPLNT, FGV, TSH, CBIP and  JTIASA) sectors. 

Astro Malaysia - A new Astro: remaking of a growth story (Maintain Add with a TP of RM1.18)

Agribusiness - Palm oil stock preview for Dec 2020 (Maintain Neutral)

Tech Manufacturing Services - What to look out for in CY21F (Maintain Overweight)

Short Selling

 

Technical Analyzer

Unisem (M) (5005)
Outlook: Breakout MYR6.15
Levels: MYR6.65, MYR7.00
Exit: MYR6.15
(time frame: 2-4 weeks)

Dufu Technology (7233)
Outlook: Breakout MYR3.30
Levels: MYR3.65, MYR4.00
Exit: MYR3.30
(time frame: 2-4 weeks)

Pertama Digital (8532)
Outlook: Breakout MYR0.35
Levels: MYR0.395, MYR0.42
Exit: MYR0.35
(time frame: 2-4 weeks)

Ranhill Utilities (5272)
Outlook: Breakout MYR0.84
Levels: MYR0.915, MYR0.98
Exit: MYR0.84
(time frame: 2-4 weeks)

Corporate News

 •* Top Glove Corp Bhd* sprang a surprise on investors by announcing that the company will be declaring a special dividend of 20% for the remaining financial quarters in the financial year ending Aug 31, 2021 (FY21).Top Glove said 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% payout ratio on profit after tax and minority interests (PATAMI). Top Glove shareholders will receive 70% of the company’s PATAMI as dividend.

•* 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 Oct 2, 2020 were only for construction works done up to end-June 2020. MRCBGK said Prasarana’s delayed payments of more than RM700 million were from July 2020 to October 2020, which have been certified for payment by Prasarana’s independent consultant KL Prima Consult Sdn Bhd. As of October 2020, the certified payment owed to the contractor is RM723.89 million, while November 2020’s payment amount is still pending certification. Prasarana's non-executive chairman Datuk Seri Tajuddin Abdul Rahaman told a press conference today that Prasarana had paid RM3.47 billion to MRCBGK up to Oct 2, 2020. He also said Prasarana had not withheld any payments to MRCBGK.

•* 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 Oct 3, 2020. The contract is also for the supply of safety and survival equipment to the RMAF. The contract ceiling is about RM30.37 million.

•* 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 Nov 25, 2020, other than saying it is based on prices stipulated in the contract, and that the agreement's effective date is Feb 1, 2020.

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

•* 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. Aeon Credit said the amount sought from the financial services company, inclusive of penalties, has been brought down to RM10.31 million, from RM96.82 million previously. It added that 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.

•* Ageson Bhd’s* 75%-owned subsidiary Ageson Holdings Sdn Bhd (AHSB) has inked a development rights agreement with Menteri Besar Inc (Perak) to develop a mixed development with an estimated gross development value of RM1.24 billion on some 475 acres of land in  Batang Padang district in Perak. The development will comprise a District Health Department Office, a District and Land Office, a District Council Office, a Community Development Department Tapah office, together with 365 units of shop offices, 1,038 units of terrace houses, 332 units of semi-detached houses, 191 units of detached houses, and 33 units of industrial lots. The project, which is expected to commence in the first quarter of this year and be completed in 15 years. Separately, it announced that it will pay part of an outstanding sum it owed to RHB Bank Bhd. Ageson did not disclose the sum involved. RHB had filed a suit against the group over a RM33 million term loan.

•* 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 the first quarter of this year. Focus Dynamics said as at Dec 29, 2020, the group’s issued share capital stood at RM203.79 million, comprising 6.15 billion shares.

RHB Research Buy Call: Dialog, MISC, Armada & Magnum

Dialog, which operates as a technical service provider in the oil, gas (O&G) and petrochemical sectors, was upgraded to "buy" from "neutral" as its recent share price weakness offers an opportunity to accumulate the stock. The stock's target price (TP) was maintained at RM4.

“Although the firm may not be able to achieve growth in FY21 (the financial year ending June 30, 2021) as there are no signs of retracement in tank terminal rates, Dialog deserves a premium valuation as its growth trajectory is expected to return in FY22,” noted RHB Research analyst Sean Lim.

He explained that while downstream activities would recover gradually from the first quarter ended Sept 30, 2020 (1QFY21), on a full-year basis they would still record a decline.

"Management guided for joint venture (JV) and associate contributions to grow 10% year-on-year (y-o-y) in FY21. Further growth may be seen in FY22, with commercialisation of the 430,000 cbm Phase 3A capacity expansion
dedicated for BP by mid-2021," he said.

“It may also take longer than expected to seal the new additional tank terminal capacity expansion for Pengerang's Phase 3 as most clients are spending cautiously at present”, said Lim.

Lim also pointed out that Dialog’s Pengerang Independent Terminals Sdn Bhd (PITSB) had been operating at optimal capacity despite the recent spike in oil prices. Meanwhile, rates were hovering above USS$6 to USS$7 per cubic metre (cbm).

"Based on our crude oil price forecasts of US$51-US$55/bbl for 2021-2022, there is a possibility of onshore storage prices softening slightly from peak rates, but this could be sustained at USS$5.50 per cbm. Recall that the average contract tenure for PITSB is about 12 months," he noted.

MISC, which provides international energy-related maritime solutions and services, had its "buy" call maintained but its TP lowered to RM8.11 from RM8.53, in tandem with reduced valuation of its petroleum segment to 1.1 times price-to-book value from 1.3 times prior.

"We believe the recent share price weakness has factored in the sluggish tanker market and this could be an accumulation opportunity to position for a rate recovery in 2021. Post earnings adjustment, we still expect
its operating cash flow to grow 9% to 10% in the next two years, anchored by new asset additions. [Its] dividend yield is still decent and any special dividend will be a positive surprise," said Lim in a separate research note.

He believes that recovery will be gradual as OPEC+ slowly increases production of oil with a monthly cap of 500,000 barrels per day, depending on market conditions, but is optimistic that an economic recovery will happen in the second half of the year (2H21), thanks to positive vaccine developments.

"Thus, we should see spot charter rates improve from current levels, benefiting from improving tanker demand, coupled with persistence of low slow fleet growth as evident from its multi-year low order book level. A higher term-to-spot ratio of 65:35 in 3Q20 (from 76:24 in 2Q20) is likely to increase its exposure to weak spot rates in 4Q20," he said.

Lim noted that MISC had also recently taken possession of two Dynamic Positioning Shuttle Tankers and the first of its Very Large Ethane Carriers, and is expected to take possession of more ships over the next two years. "Most of these vessels have long-term contracts and will then gradually strengthen its recurring cash flow," he said.

Bumi Armada, which is an international offshore oilfield services provider, also had its "buy" call maintained with a new TP of 43 sen from 38 sen earlier.

"We continue to like Bumi Armada for its improved earnings and cash flow visibility, underpinned by stable FPSO (floating production storage and offloading) contributions masking weaker offshore marine services (OMS) weakness. Its risk-reward profile looks attractive as the current 5.2 times FY21 (the financial year ending Dec 31, 2021) price-to-earnings and 0.5 times FY20 price-to-book value (-1.5 standard deviations to its three-year mean) reflects an elevated 2.6 times net gearing as at 3Q20," said Lim in another statement.

Its TP, meanwhile, was raised after narrowing the discounted cash flow of the Armada Kraken FPSO to 10% from 20% earlier, due to better vessel stability. He noted that its FPSO earnings could have risen on a quarterly basis in 4QFY20 on higher contributions from Armada Kraken after its scheduled maintenance was completed in September.

"Our new TP implies 6.4 times FY21F (forecasted) price-earnings ratio and 0.6 times FY21 forward price-to-book value. Our base-case assumption is that Bumi Armada will refinance the borrowings due in May, so no equity fundraising would be required," he said, referring to RM656 million in short-term debt due that month.

Lim said while the OMS segment is expected to still face headwinds in 4Q20 — in the absence of subsea work orders and potentially lower offshore service vessel (OSV) utilisation rates due to the monsoon season — he believes that OSV contributions could improve in 2021. "This may stem from higher vessel demand on drilling and related projects, while Bumi Armada pushes for better spot charter rates."

Magnum, which operates as a gaming or numbers forecasting lottery business, was maintained at "buy" with a higher discounted cash flow-derived TP of RM2.97 from RM2.73.

“This was due to the tax review finally being concluded after the final settlement of the tax and penalty payment was agreed with the Inland Revenue Board (IRB) for an amount lower than expected," said analysts Loo Tungwye and Lee Meng Horng in a research note. Magnum made a settlement of tax payment with the IRB at RM80.6 million, 56% lower than the RM182.8 million initially expected.

The analysts said their projected earnings for 2020 to 2022 remained unchanged as the tax settlement was a non-recurring item, while their dividend per share estimates for 2020 to 2021 also stayed the same as they believe that Magnum's operations can generate enough cash flow to cover the settlement and maintain its regular dividend.

“Magnum remains our preferred pick as a pure-play numbers forecast operator (NFO) on account of its resilience in the 4D business that could benefit from ongoing government efforts to curb illegal gambling”, said the analysts.

They added that ticket sales had improved significantly since its outlets reopened in June, and sales were now at around 85% to 90% of pre-pandemic levels.

"Further earnings upside could come from the legislation of stricter gambling laws and potential monetisation of its stake in U-Mobile," the analysts said.