The FBM KLCI snapped a streak of four consecutive days of losses to close in the positive territory, fueled by buying interest among selective heavyweights. On the broader market, the FBM Small Cap fell slightly by 0.1%, but the FBM Fledging and FBM Ace advanced 0.1% and 0.4% respectively.

Market breadth remained negative as losers outweigh gainers on a ratio of 409- to-311 stocks. Traded volumes rose by 4.4% to 1.53 bln shares as investors bargain hunted for undervalued stocks after the recent sell-down.

Leading the key index advancers were Genting (+13.0 sen) Maybank (+13.0 sen), Axiata (+4.0 sen), IOI Corp (+4.0 sen) and Telekom (+4.0 sen). Notable gainers on the broader market include Consumerrelated counters such as Dutch Lady (+RM1.0), F&N (+84.0 sen), Huat Lai (+29.0 sen), LPI (+18.0 sen) and United ULi Corporation (+16.0sen).

On the other hand, the key losers on the broader market include Calsberg (-28.0 sen), Berjaya Food (-15.0sen), DKSH (- 15.0 sen), Malaysia Pacific Industries (- 14.0 sen) and Malaysia Airport Holdings (- 12.0 sen). Key index laggards were Petronas Gas (-16.0 sen), Hong Leong Financial Group (-14.0 sen), BAT (-10.0 sen), Tenaga (-6.0 sen) and AmBank (-4.0 sen). Top Glove shed 11.0 sen after reporting weaker 3QFY16 earnings, which shed 13.5% Y.o.Y at RM62.5mln due to higher cost of materials.

Asian stockmarkets advanced despite China-A shares saw rejection for a third time for inclusion into the MSCI Global indices. The Nikkei, Shanghai Composite index and the Hang Seng was up 0.4% 1.6% and 0.4% respectively as they reverse some of the losses earlier in the week. Similarly, most ASEAN stockmarkets also closed in the green.

US stockmarket retreated following the Federal Reserve’s decision to put off an interest rate hike in June and weakerthan- expected U.S. Industrial output (- 0.4%) data. The Dow, the S&P500 and the Nasdaq surrendered their earlier gains in the final trading hour, with the above indices each closing 0.2% lower.

European key benchmark indices, however, recovered some of its previous losses as investors expect the U.S. interest rate to remain unchanged at the Federal Reserve policy meeting. The FTSE gained 0.7%, helped by higher metal prices, which benefitted the mining stocks. Similarly, the DAX expanded 0.9%, while the CAC (+1.0%) rallied to close at 4,171.6 points.

THE DAY AHEAD

The Fed’s decision to delay its interest rate hike bodes well for stocks as the prevailing low interest rate environment should keep funds invested in Emerging Market stockmarkets for their potentially higher returns compared to fixed income securities. Hence, we also expect Malaysian stocks to continue their recovery over the near-term and temporarily cast aside the Brexit concerns.

For now, however, the upsides appear limited amid a still cautious trading environment and the rebound is mainly technical in nature. Therefore, we think the near term recovery could be capped at around the 1,630 levels, on the back of the nibbling on selected index heavyweights. The 1,620 level, meanwhile, remains the near term support.

There may also be selected interest on the lower liner and broader market stocks after their near term weakness as retail investors might use the calmer conditions to undertake some trading activities.

COMPANY NEWS

OCK Group Bhd’s CEO, Yap Wai Khee will take on the role of interim Chief Financial Officer effective 15th June 2016, after the resignation of Liew Kok Seong. Yap would assume the role and respective responsibilities to ensure no interruption to the group’s operating activities and financial management. The group has initiated a search for a permanent successor after Liew has accepted a senior management position at another public-listed company.

Comments

We believe the changes will not impact the group significantly as the interim position, which will be held by current CEO, will ensure a seamless transition for the next CFO. Hence, we believe that OCK’s expansion plans remain on track and we continue to like the group for its strong growth prospects, backed by its long-term regenerative earnings from both domestic and overseas operations.

Consequently, we made no changes to our earnings forecast and we maintain our BUY recommendation on OCK with an unchanged target price of RM1.00. Our target price is derived from a sum-ofparts (SOP) approach as we valued its telecommunication network services and green energy & power solutions business segments on a discounted cash flow approach (key assumptions include a WACC of 9.0%, terminal growth rate of 1.5%) to reflect its ability to generate recurring revenues and steady earnings growth over the longer term.

Meanwhile, we ascribe a 15.0x PER to both its fully-diluted trading and mechanical & electrical engineering services business, based on their potential earnings contribution in 2017.

COMPANY BRIEFS

Top Glove Corp Bhd’s 3QFY16 net profit fell 13.5% Y.o.Y to RM62.5 mln, impacted by the stronger Ringgit against the U.S. Dollar, coupled with the significant hike in in raw material prices. Revenue for the quarter, however, gained 1.7% Y.o.Y to RM672.3 mln.

For 9MFY16, cumulative net profit rose 66.8% Y.o.Y to RM295.4 mln. Revenue for the period improved 20.3% Y.o.Y to RM2.17 bln. A dividend of 6.0 sen a share, payable on 15th July 2016 was declared. (The Star Online)

Eastern Steel Sdn Bhd (ESSB), Hiap Teck Venture Bhd’s 55%-owned steel manufacturing joint venture with the Shougang Group of China, has attracted another major Chinese steel industry player, Ansteel Group Corp. ESSB, whose plant in Kemaman began trial production early 2015, had signed a Memorandum of Understanding with Ansteel Group’s unit Angang Group Hong Kong Co Ltd (Angang-HK) on 15th June 2016 to explore, discuss and negotiate areas of cooperation between them.

The discussion will include the resumption of production at ESSB, future expansion of ESSB’s production capacity and product range, as well as Angang- HK’s participation in the equity of ESSB. (The Star Online)

Hap Seng Consolidated Bhd plans to undertake two mixed development projects in Kuala Selangor with an estimated gross development value (GDV) of RM9.30 bln. It’s unit, Euro-Asia Brand Holding Company Sdn Bhd had signed two agreements to acquire from Shalimar (Malay) PLC a 734.8-ac. (proposed acquisition A) plot of land for RM121.5 mln and a 714.7-ac. (proposed acquisition B) plot of land from Indo Malay PLC for RM107.2 mln.

The two projects is expected to take 15- years to be completed. For the proposed acquisition A, the project comprises a modern guarded and gated lifestyle residential properties and commercial components with an estimated GDV of RM5.0 bln.

For the second land acquisition, Hap Seng targets to build a township to meet the increasing demand for affordable properties with an estimated GDV of RM4.30 bln.

The proposed acquisitions would increase the group’s gross gearing ratio from 0.99x to 1.04x. The proposed acquisitions are to be completed in 3Q2016. (The Star Online)

Malaysia Smelting Corp Bhd (MSC) is buying three plots of industrial land in Port Klang, along with the buildings and machinery on them, for RM50.0 mln from the de-listed lead product maker Metal Reclamation Bhd (MRB). The land, measuring a total of 48,754 sq.m., comprises of buildings (including a double-storey office building, a singlestorey warehouse, a smelter and refinery, and a double-storey chemical laboratory).

The assets and property purchase are expected to be completed by end-2016, would be funded via internally generated funds and bank borrowings. (The Star Online)

Hock Seng Lee Bhd is seeking a RM6.9 mln payment from Brahim's Holdings Bhd's 60%-owned company, Admuda Sdn Bhd over the non-payment of progress claims for works done in relation to the design and building of a sugar refinery factory.

Aside from the RM6.9 mln, Hock Seng Lee is also seeking interest thereon as the court deems fit from 24th June 2014 until full and final settlement as alleged damages. (The Edge Daily)

Rex Industry Bhd has disposed of its entire equity interest in Jie Yang Rex Foods Co., Ltd. (JYR), to the group’s major shareholder and Executive Chairman Lee Chai Seng, for RM21.0 mln cash. The proceeds arising from the disposal will be mainly utilised for its expansion plan in the Indonesian market, as well as working capital.

The exceptional gain from the disposal was about RM0.3 mln. JYR is principally involved in the manufacturing and exporting of canned food and frozen food, which include tuna, sardine, crabmeat, mushroom and others. (The Edge Daily)

Kossan Rubber Industries Bhd plans to partner with the Tong Tech Metro Vibration Control Co Ltd (TMVC) of the Shanghai Tongji University, to jointly design and manufacture anti-vibration system for railways, buildings and bridges along the railways for the China market. The glove producer had, on 15th June 2016, entered into a Memorandum of Agreement (MoA) with TMVC for the purpose of a strategic alliance for the above venture. The MoA was inked via Kossan's 70%-owned subsidiary, Doshin Rubber Products (M) Sdn Bhd.

Doshin will manufacture the floating flab, base plate vibration isolation technology and rubber pad based on designs supplied by TMVC. It will also undertake joint product development, design, trial production and the manufacturing of the products, besides conducting technical seminars.

TMVC will promote other relevant products manufactured by Doshin for China's projects, undertake joint product development and design, provide technical support to any projects outside China upon request, and undertake market development and provide technical service for the venture. (The Edge Daily)

Glomac Bhd's 4QFY16 net profit fell 26.0% Y.o.Y to RM21.9 mln, mainly due to provisions made for foreseeable loss and liquidated and ascertained damages (LAD) totalling RM31.7 mln. Revenue for the quarter, however, added 1.3% Y.o.Y to RM171.7 mln.

For FY16, cumulative net profit declined 7.8% Y.o.Y to RM80.2 mln. Revenue for the year, however, grew 26.5% Y.o.Y to RM599.0 mln. A single-tier final dividend of two sen per ordinary share was proposed. (The Edge Daily)

Source: M+ Online Research - 16 June 2016