Weaker external sentiment weighs on KLCI

KUALA LUMPUR: The FBM KLCI remained in negative territory at mid-morning on Thursday, Oct 20 as the opaque global economic outlook continued to keep investors at bay.

Asian stocks fell on Thursday, as growing investor caution about taking risks ahead of a key European leaders' summit at the weekend weighed on riskier assets across the board and supported safe-haven government bonds, according to Reuters.

The FBM KLCI was down 7.36 points to 1,442.89 at 10am.

Losers led gainers by 229 to 164, while 167 counters traded unchanged. Volume was 311.28 million shares valued at RM142.33 million.

At the regional markets, Hong Kong’s Hang Seng Index fell 1.38% to 18,057.44, Japan’s Nikkei 225 lost 0.87% to 8,696.65, the Shanghai Composite Index was down 0.71% to 2,360.52,Taiwan’s Taiex lost 0.62% to 7,308.13, Singapore’s Straits Times Index fell 0.31% to 2,711.71 and South Korea’s Kospi edged down 0.21% to 1,851.98.

BIMB Securities Research in a note Oct 20 said it was a case of news indigestion for many investors as developments in Europe, the economic progress and earnings reporting in the US had overwhelmed the markets.

In the end, investors preferred to pay heed to the reported earnings figures which are deemed not too sanguine by most, it said.

It said that as a result, the Dow Jones Industrial Average dipped 72 points to close the session a tinge above the 11,500 level.

Meanwhile, the prolonged bailout package for Europe was still being deliberated and further delays would aggravate investors’ prevailing uneasiness, it said.

Nonetheless, major European indices all ended on a high with the Asian counterparts closed at a mixed, it said, adding that locally, the FBM KLCI closed just above the support level of 1,450, up 10.31 points.

“However we noticed that institutional participation was rather subdued with bulk of yesterday’s volume dominated by the lower liners.

“Today we believe the index may gravitate to the south with the 1,440 as the immediate support,” it said.

On Bursa Malaysia, the top loser at mid-morning was Dutch Lady that fell 34 sen to RM18.30; Malayan Flour Mills fell 21 sen to RM7.43, Petronas Gas 16 sen to RM12.94, MISC 15 sen to RM6.58, Shell 14 sen to RM9.32, PPB 12 sen to RM16.58, IJM Corp 11 sen to RM5.28, Petronas Dagangan 10 sen to RM16.10 and Lafarge Malayan Cement eight sen to RM7.12.

Hard disk drive maker JCY continued to be actively traded with 26.2 million shares done. The stock added 1.5 sen to 59.5 sen.

Other actives included Sinotop, Asia EP, Jotech and Uli-Corp.

Gainers at mid-morning included AIC, BAT, Aeon, CI Holdings, Batu Kawan and IJM PLANTATION []s.

JCY continues to chalk up gains

KUALA LUMPUR: JCY International Bhd shares continued to be actively traded on Thursday, Oct 20 as investors viewed the hard disk drive manufacturer as less affected from the severe flooding in Thailand which had impacted other players.

At 9.40am, JCY rose 2.5 sen to 60.5 sen with 21.79 million shares done.

The floods in Thailand have forced the shutdown of the facilities some of the Malaysian HDD makers with operations in that country.

An analyst with MIDF Research on Wednesday said while JCY’s plant located in Saraburi, Thailand was also affected, it was possible that the impact was not as significant.

“Looking at their latest quarterly result, Malaysia accounts for 76% of its revenue, while the rest are lumped together as others and individually fall below the 10% threshold of a reportable segment.

“So with the flooding in Thailand affecting HDD makers there, it could redirect some of the demand towards Malaysia based manufacturer such as JCY to fill in the gap,” he said.

Meanwhile, CIMB Research on Oct 20 downgraded the stock to Trading Sell and said that while JCY’s Thai plant is, unlike most of its rivals, unaffected by the flood, a concern was the potential negative impact of a drop in orders from its two HDD customers, WD and Seagate, especially if the halt in production is protracted.

“JCY’s share price may have reacted positively to news that it could benefit from its competitors’ woes due to the flood in Thailand.

“Investors should take advantage of the recent share price spike to take profits. We downgrade the stock to Trading Sell,” said CIMB Research.

RAM: F&N to weather impact of Thai floods

KUALA LUMPUR: RAM Rating Services is monitoring the flood situation in Thailand, which has affected Fraser and Neave Holdings Bhd’s dairy plant.

It had on Thursday, Oct 20 cited F&N’s announcement that its plant in Rojana Industrial Park, Ayutthaya, had ceased production following severe flooding.

“At this juncture, the extent of the damage is still unknown as employees have yet to gain access to the facility. Similarly, it is uncertain whether F&N Holdings can resume operations there in the immediate term,” it said.

RAM Ratings noted that the affected plant accounted for about 25% and 15% of the group’s revenue and profit, respectively.

“While we understand that F&N Holdings has insurance coverage on its Thai-based facility, it is too early to determine the success of its claims and the timing of the corresponding insurance compensation.

“For now, the group will increase production at its Petaling Jaya dairy plant and also source from other suppliers to help cater to demand from Thailand. However, this may cause its Thai-based facility to operate at a loss due to heftier logistics costs although this may be compensated under the insurance policy,” it said.

RAM Ratings said due to the group’s robust financial profile, it should have sufficient headroom to weather this temporary disruption.

However, its concern was that a prolonged state of such affairs that could lead to loss of market share or deterioration in its financials might have negative impact on the group’s credit profile.

RAM Ratings said it would reassess F&N Holdings’ credit profile upon more clarity on this issue.

F&N Capital Sdn Bhd is a treasury company wholly owned by F&N Holdings. F&N Capital’s RM1 billion commercial papers/medium-term notes programme (2008/2015) (CP/MTN) currently carries AA1(s)/P1(s) ratings from RAM Ratings.

The CP/MTN is backed by a corporate guarantee from F&N Holdings. As such, the debt ratings are based on the credit-risk profile of F&N Holdings as a group.

Hua Yang rises on strong 2Q earnings

KUALA LUMPUR: HUA YANG BHD [] shares advanced on Thursday, Oct 20 after the company’s net profit for the second quarter ended Sept 30, 2011 surged to RM13.89 million from RM4.31 million a year earlier, due mainly to steady CONSTRUCTION [] progress and better sales.

At 9.20am, Hua Yang added four sen to RM1.64 with 670,800 shares traded.

Its revenue for the quarter more than doubled to RM76.13 million from RM35.63 million in 2010.

Reviewing its performance, Hua Yang said the sales achieved during the quarter under revised was 119% higher year-on-year with total unbilled sales of RM395.24 million, giving it improved earnings visibility in the remaining period of FY2012.

KLCI slips in early trade as Asian markets fall

KUALA LUMPUR: The FBM KLCI slipped into negative territory in early trade on Thursday, Oct 20 in line with lower overnight close at Wall Street and the weaker opening at regional markets.

Asian stocks fell on Thursday, as growing investor caution about taking risks ahead of a key European leaders' summit at the weekend weighed on riskier assets across the board and supported safe-haven government bonds.

At 9.05am, the FBM KLCI lost 12.58 points to 1,437.67, weighed by losses at blue chip stocks.

Losers beat gainers by 117 to 51, while 81 counters traded unchanged.

Among the early decliners were DiGi, KLK, PPB, MISC, Petronas Gas, Hong Leong Bank, UMW, Genting and Petronas Dagangan

CIMB Research has technical buy on Scomi Group

KUALA LUMPUR: CIMB Equities Research has a technical buy on Scomi Group at 29 sen at which it is trading at a price-to-book value of 0.4 times.

It said on Thursday, Oct 20 Scomi Group is still consolidating in a huge descending wedge pattern.

“Looking at the chart, we think a short term bottom may have formed near the 25 sen low,” it said.

CIMB Research said aggressive traders may start to accumulate now while others should wait for a push above its 200-day SMA before going long. Buying momentum should pick up when prices push above the resistance channel, now at 30.5 sen.

“As long as prices hold on above the 25 sen low, we think the bulls have the upper hand. Once the RM level is taken out, prices should re-rate towards 32.5 sen and 36 sen next,” it said.

HDBSVR: KLCI to come under selling pressure, may test 1,445

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) said the key FBM KLCI will likely come under selling pressures on Thursday, Oct 20.

“Technically speaking, the benchmark index could test and break below its immediate support level of 1,445 ahead,” it said.

HDBSVR said on the external front, sentiment is expected to turn cautious following news that it would not be easy for the European nations to come to an agreement on how to resolve the regional sovereign debt problems.

Reacting to this concern, major U.S. equity indices dropped between 0.6% and 2.0% at the closing bell last night.

Back home, stocks that may be of interest today include: (a) Redtone International, after its managing director said the telecommunications service provider might return to the black this year; (b) Harvest Court, whose managing director cum major shareholder has offered to buy the entire stake held by Affin Bank comprising 31.4m shares and 7.9m warrants at RM0.20 per share; and (c) BAT Malaysia, which is due to announce its financial results for the Jul-Sep quarter this evening.

Affin Research maintains Buy on Bonia, TP RM2.50

KUALA LUMPUR: Affin Investment Bank Research is maintaining its Buy call on Bonia Corp with an unchanged target price of RM2.50, pegged to a PE target of 10 times on CY12 EPS.

It said on Thursday, Oct20 Bonia will continue to benefit from: 1) its 2010 acquisition of the Singapore-based Jeco Group, and; 2) sturdy consumer spending from income growth and upcoming festive sales.

“Key risks to the stock are a slowdown in consumer spending and potentially higher food/fuel prices due to the government’s agenda in rolling back subsidies,” it said.