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OCK Group Bhd – 1st Mar 21

We attended the post quarter results analyst briefing and came away feeling re-assured on OCK Group Bhd (OCK) recovery moving into FY21f. FY20 was largely affected by the slowdown of sites deployment due to the Covid-19 pandemic with domestic mechanical & engineering works were halted for several months. Moving into the FY21f, we note that the re-implementation of Movement Control Order (MCO 2.0) will be less severe given the relaxation of business operations, whilst the deployment of Covid-19 vaccination may provide some relieve, particularly towards end-2021.

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market pulse

On better footing

The FBM KLCI is expected to build onto its previous session gains with the focus now shifting back towards the economic recovery progress. Still, we remain cautious as there were few domestic leads over the near-term outlook and this will further curtail any extended potential upsides. Nevertheless, the general market undertone is improving and this will allow the lower liners to develop decent recovery after a difficult two-month period that has seen many stocks veering into the oversold region.

market pulse

Sentiment still murky

The FBM KLCI extended its losses after a volatile session due to persistent selling
activities as Covid-19 infection rates stayed high amid the Delta variant. However,
we believe the high numbers in Covid-19 cases may shift investors’ focus on
healthcare sector, while broader market sentiment could stay tepid without any
fresh catalysts. Investors may watch Malaysia’s inflation rate which will be
released tomorrow. Commodities wise, oil price has staged a rebound in
expectation for a higher demand amid economic recovery.

technical focus

Technical Focus – TSH

Plantation operations span over 42,000-ha across Sabah and Indonesia, while 67.0%-owned subsidiary; Ekowood International Bhd has a production capacity up to 27.0m sqf of engineering hardwood flooring (EHF) per annum. Disposal of 2 oil palm estates and 1 palm oil mill in Sabah for RM248.0m to Kuala Lumpur Kepong Bhd (KLK) is expected to generate a divestment gain of RM104.0m which will unlock the land value as well as pare down borrowings. Following the rising CPO prices (above RM4,000/MT), we expect average selling prices to remain on a higher ground over the foreseeable future. Technically, price has experienced a consolidation breakout above RM1.02, targeting the next resistance of RM1.06-1.09, with long term target at RM1.15.

market pulse

Still sideways

The FBM KLCI retreated on Monday due to last minute profit taking activities prior
to the Hari Raya Haji public holiday, mirroring the weakness across the regional
markets. Nevertheless, buying interest emerged in selected recovery theme sectors
after the EMCO was lifted in Selangor and Kuala Lumpur. Despite the rebound on
Wall Street, we expect some initial selling activities on the local bourse before
recovering for the session, but upside is likely to be capped amid the high number
of daily Covid-19 cases, which may be a concern that could dampen the pace of
the economic recovery.

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