• Tracking the weakness on key regional indices, the FBM KLCI (-0.6%) reversed all its previous session gains as the key index traded in the negative territory for the entire trading session The lower liners ended mostly lower with the exception of the FBM Small Cap (+0.1%), while both the Consumer Products (+0.1%) and Technology (+0.6%) sub-indices outperformed the broader market.
• Market breadth stayed negative as losers outnumbered gainers on a ratio of 456- to-327 stocks. Traded volumes rose marginally by 1.5% to 1.74 bln shares amid the positive broader market.
• Two-thirds of the key index constituents fell, dragged down by UMW (-25.0 sen), BAT (-20.0 sen), Maybank (-16.0 sen), Hong Leong Financial Group (-16.0 sen) and Public Bank (-10.0 sen). Amongst the biggest decliners on the broader market were United Plantations (-RM1.10), Dutch Lady (-50.0 sen), Chin Teck Plantations (-28.0 sen) and Fraser & Neave (-16.0 sen). Lafarge dipped 27.0 sen after reporting a weak set of quarterly earnings.
• Meanwhile, Panasonic (+28.0 sen), Globetronics (+14.0 sen), Hong Leong Industries (+14.0 sen) and Tasek Corporation (+10.0 sen) were amongst the biggest gainers on the broader market. Hwang Capital jumped 39.0 sen after announcing a voluntary takeover offer from its major shareholder. Notable advancers on the FBM KLCI include PPB Group (+32.0 sen), Hong Leong Bank (+20.0 sen), KLCC (+5.0 sen), Westports (+3.0 sen) and Axiata (+2.0 sen).
• The Nikkei slipped 0.9% as sentiment was dampened by Japan’s Finance Minister Taro Aso’s statement that there is no intention to devalue the Japanese Yen. The Shanghai Composite fell 0.8%, taking cue from weakness on Wall Street overnight, but the Hang Seng Index added 0.1%. ASEAN indices, meanwhile, closed mostly negative.
• The much stronger-than-expected new home sales in April, which jumped 16.6% M.o.M to 619,000 units – the highest in eight years, powered the Dow to close 1.2% higher. On the broader market, the S&P 500 gained 1.4%, anchored by homebuilders stocks like Toll Brothers (+8.7%), KB homes (+7.5%) and Pulte Group (+5.1%).
• Earlier, key European benchmark indices – the FTSE (+1.4%), CAC (+2.5%) and DAX (+2.2%), all closed sharply higher, taking cue from the positive data in the U.S. Notable gainers were banking stocks like Intensa Sanpaolo SA (+4.4%), BMPS SpA (+10.5%) and Unicredit (+4.9%) – the latter on expectation of appointment of a new CEO.

THE DAY AHEAD

• While we expected the FBM KLCI to sustain its minor uptrend yesterday, the selling spree returned as the Ringgit continues to wobble. This is leaving sentiments on the wayside and perpetuating the selling. However, we note that the market remains oversold and a rebound is already due.
• Consequently, we think that the positive overnight performance on the key overseas indices could provide the impetus for the FBM KLCI to mount its overdue rebound over the near term. The rebound could see the key index targeting the 1,630 level for now and if the buying sustains, the 1,640-1,650 levels will be the next targets. On the downside, the near term support remains at the 1,620 level, while the 1,600 level is the main support.

COMPANY BRIEFS

• Kossan Rubber Industries Bhd saw its net profit rise 12.9% Y.o.Y to RM51.3 mln in the 1Q2016 on the back of improved group revenue of 11.7% Y.o.Y to RM412.3 mln from RM369.3 mln in 1Q2015.
• Further, the group plans to construct another new plant with an output capacity of 4.50 bln pieces of gloves per year by end of the year in Bestari Jaya and the plant is expected to be completed by 1Q2018. (The Edge Online)
• Alam Maritim Resources Bhd fell into the red after reporting a 1Q2016 net loss of RM19.2 mln, compared to a net profit of RM8.6 mln in the previous corresponding period due to poor performance in the offshore support vessels (OSV), subsea services/offshore installation and construction (OIC) segments. Revenue for the quarter lost 34.0% Y.o.Y to RM48.6 mln from RM73.7 mln in 1Q2015.
• The group expects the market condition to remain volatile in the interim period due to slower project rollouts and softening charter rates. (The Edge Online)
• Teo Seng Capital Bhd's 1Q2016 net profit dropped 79.0% Y.o.Y to RM3.6 mln in comparison to RM17.5 mln in 1Q2015 due to a sharp fall in contribution from poultry farming, while revenue shrank 9.5% Y.o.Y to RM101.9 mln.
• Despite the falling earnings, the company declared a 1.2 sen dividend. (The Edge Online)
• Ajinomoto (Malaysia) Bhd recorded a higher 4QFY16 net profit at RM6.6 mln, representing an increase by 16.0% Y.o.Y due to higher domestic sales in the Umami and Food & Seasoning segments and better margins from export sales arising from the appreciation in the U.S. Dollar. Its quarterly revenue for 4QFY16 climbed 36.0% Y.o.Y to RM110.2 mln.
• Meanwhile, Ajinomoto’s FY16 net profit was up by 37.2% Y.o.Y to RM40.8 mln from RM29.7 mln in FY15, underpinned higher revenue, which rose by 17.6% to RM400.2 mln from RM340.4 mln a year ago.
• Moving forward, the group expects the recent change in the Malaysian government's policy on foreign worker recruitment to adversely impact its production workforce. (The Edge Online)
• UMW Holdings Bhd’s 1Q2016 net profit slumped 90.0% Y.o.Y to RM16.6 mln from RM165.2 mln in the previous corresponding period due to low crude oil prices and stronger Greenback, while, revenue for the quarter fell 32.0% Y.o.Y to RM2.20 bln from RM3.24 bln in 1Q2015.
• UMW expects to continue its cost-cutting measures to control the impact of market volatility on the group's performance. (The Edge Online)
• Petron Malaysia Refining & Marketing Bhd reported a significant drop in its 1Q2016 net profit by 70.7% Y.o.Y to RM16.6 mln from RM56.8 mln a year earlier due to margin squeeze. Meanwhile, its revenue shed almost 10.0% Y.o.Y to RM1.65 bln in 1Q2016 from RM1.8 bln in 1Q2015. (The Edge Online)
• Genting Bhd's 1Q2016 net profit was slashed by 78.9% Y.o.Y to RM130.8 mln, on the back of a 38.0% Y.o.Y decline in its earnings before interest, taxes, depreciation and amortisation (EBITDA).
• Additionally, the previous corresponding period's also saw the inclusion of a disposal gain from available-for-sale financial assets totalling to RM217.8 mln and the reversal of previously recognised impairment losses.
• Quarterly revenue, however, rose 7.6% Y.o.Y to RM4.7 bln from RM4.4 bln in 1Q2015, as contributions improved from Resorts World Sentosa, its casino business in the UK, its leisure and hospitality business in the U.S. and the Bahamas, as well as its power division. (The Star Online)
• AirAsia X Bhd (AAX) logged in a net profit of RM179.5 mln for 1Q2016 compared with a net loss of RM125.9 mln in 1Q2015, while, quarterly revenue expanded 25.2% Y.o.Y to RM970.7 mln.
• The turnaround was attributed to the positive results of its turnaround plan implemented in 2015, strong earnings from its China and Australian markets as well as forex gains. (The Star Online)
• IGB Corp Bhd posted a 1Q2016 net profit of RM51.8 mln, a drop by 20.5% Y.o.Y from RM65.2 mln in the previous corresponding period, dragged down by lower contribution from property development and property investment segments.
• Meanwhile, revenue weakened 16.2% Yo.Y to RM280.2 mln in comparison to RM334.3 mln in the last corresponding period. (The Edge Online)
• Hong Leong Financial Group Bhd reported a 13.0% Y.o.Y fall in its 3QFY16 net profit to RM315.1 mln, on the back of declining net interest and non-interest income, coupled with higher expenses and bad loan allowance. Revenue declined to RM1.03 bln from RM1.05 bln in the previous corresponding period.
• Similarly, its cumulative 9MFY16 net profit slipped 18.2% Y.o.Y to RM965.4 mln from RM1.18 bln in 9MFY15, mainly due to higher interest expense and allowance for impairment losses. Revenue, however, rose to RM3.34 bln compared to RM3.27 bln in 9MFY15. (The Edge Online)
• Felda Global Ventures Holdings Bhd sunk into the red in 1Q2016 with a net loss of RM65.5 mln from a net profit of RM3.6 mln in 1Q2015, resulting from weaker crude palm oil (CPO) production in its palm upstream segment. Its quarterly revenue, however, was up 38.6% Y.o.Y to RM3.76 bln. (The Star Online)
• Ann Joo Resources Bhd is planning a renounceable rights issue of up to 125.1 ml new Redeemable Convertible Cumulative Preference Shares (RCPS) on the basis of one RCPS-for-four existing ordinary shares held, to raise up to RM62.6 mln for working capital purposes.
• The company has also proposed the establishment of a long-term incentive plan of up to 15.0% of the issued and paid-up ordinary share capital of Ann Joo for selected key personnel or senior management and a dividend reinvestment plan.
• Separately, its 1Q2016 net profit grew 3.7% Y.o.Y to RM5.5 mln from RM5.3 mln in 1Q2015, supported by favourable forex gains and improved cost structure. Its quarterly revenue, however, lost 6.0% Y.o.Y from RM520.7 mln in 1Q2015 to RM489.5 mln in the period under review. (The Edge Online)

Source: M+ Online Research - 25 May 2016