Written by Joseph Chin of theedgemalaysia.com
Thursday, 01 September 2011 10:05
KUALA LUMPUR: Investors are expected to stay on the sidelines in September, as they reel from the foreign selldown of key stocks in August, which saw RM97.44 billion wiped out from Bursa Malaysia’s market capitalisation during that month.
Bursa Malaysia’s market capitalisation was reduced to RM1.241 trillion during the month of August. The FTSE Bursa Malaysia 100 saw the index decline 7.32% to 9,692.8 but the broader EMAS Index fell the most, down 7.81% to 9,908.81.
Corporate results also disappointed. Investors are also not expected to draw comfort from OSK Research’s cautious report that based on the 100 companies under its coverage that have released results as of Aug 25, the corporate results were “not pretty”.
The research house said 13% outperformed and 33% underperformed for one of the poorest results since the fourth quarter of 2009.
“While small caps had already experienced more earnings downgrades than upgrades since 2Q2010, Big Caps had only seen more downgrades since 1Q2011. However, that situation accelerated this quarter with high profile downgrades of CIMB, MAS and Axiata,” it said.
Most importantly, OSK Research said the sell-off in the KLCI therefore reflects a closing of the fourth quarter gap between earnings (fundamentals) and the market (sentiment).
“We had hoped that earnings would catch up with the KLCI. Unfortunately it seems that the KLCI is catching up with declining earnings. Maintain NEUTRAL on the market with our 2012 KLCI fair value intact at 1,466,” it said.
OSK Research advised investors that now was not the time for aggressive bottom fishing but preferred its defensive buys.
“On another note, we note with distaste developments surrounding the Esso-San Miguel deal. We believe that rumoured ‘outside’ parties are generating an unhealthy newsflow for future investments in Msia. Objections over a brewery should also apply to Asahi’s takeover of Pemanis if that were truly the case,” it pointed out.
However, for Bursa Malaysia, as at Aug 29, the KLCI is down 4.72% year-to-date.
In August, the 30-stock FBM KMLCI fell 6.5% or 101.54 points to 1,447.27, aided by some late buying of key heavyweights especially Petronas Chemicals Bhd which has been earlier sold down.
Meanwhile, stocks to watch on Friday, Sept 2 are fibre optic cables manufacturer OPCOM HOLDINGS BHD [], Tambun Indah Bhd, Harrisons Holdings (Malaysia) Bhd and LION FOREST INDUSTRIES BHD [] (LFIB).
Opcom declared a special interim dividend of 22.50 sen per share and the dividend will go ex on Sept 14 and the entitlement date is Sept 19.
Its largest shareholder is M Ocean Capital Sdn Bhd with a 26.94% stake or 34.75 million shares. Datuk Seri Mukhriz Mahathir owns 23.5% or 30.31 million shares while Rezeki Tegas Sdn Bhd holds 20.93% or 27 million shares
Tambun Indah is acquiring property development company Premcourt Development Sdn Bhd for RM5.5 million which is slated to undertake a project with gross development value (GDV) of RM180 million in Bandar Jelutong on Penang island.
Harrisons Holdings (Malaysia) Bhd has declared a special interim gross dividend of 50 sen per share for the financial year ending Dec 31, 2011. The ex-date was Sept 15 and the entitlement date was Sept 20.
LFIB is acquiring 58,000 hectares under an economic land concession (ELC) in Cambodia for US$26.1 million (RM78.3 million) to cultivate oil palm and rubber trees. LFIB’s concession would not be less than 70 years under the master service agreement.
Other companies which could see trading interest are CYMAO HOLDINGS BHD [] and MYCRON STEEL BHD [].
Cymao’s earnings surged to RM2.68 million in the second quarter ended June 30, 2011 from only RM179,000 a year ago, underpinned by an 18% increase in plywood prices. This was despite that revenue fell 21% to RM26.02 million from RM33.02 million. Earnings per share were 3.17 sen vs 0.24 sen.
Mycron Steel sustained losses of RM3.29 million in the fourth quarter ended June 30, 2011, a contrast from a year ago’s earnings of RM3.34 million as it was impacted by decrease in sales volume and lower sales margin.
Revenue fell 22.2% to RM104.85 million from RM134.89 million. Loss per share was 1.85 sen compared with earnings per share of 1.88 sen.
Meanwhile, a local newspaper reports that six companies are in the running for the RM1.5 billion five-year contract to provide Internet access and a virtual learning module (VLM) platform for the 9,924 schools in the country under the 1Bestarinet project, sources said.
The six are said to be Celcom Axiata Bhd, Jaring Communications, Maxis Bhd, YTL Communications, Multimedia Synergy Corp while TELEKOM MALAYSIA BHD [] and TIME DOTCOM BHD [] submitted a joint bid.
According to the news report, the access job comes with an option to extend the contract period for another five plus five years, totalling 15 years, and this would include installation, maintenance and provision of a VLM.
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