The FBM KLCI (+0.7%) snapped a streak of four straight sessions of losses yesterday as the key index traded in the positive territory throughout the entire trading session. The lower liners, however, ended mostly lower as the FBM Fledgling and FBM Ace fell 0.4% each, while the Technology (-0.1%), Properties (-0.01%) and Mining (-1.7%) sectors underperformed in the mostly positive broader market.

Market breadth stayed positive as gainers outstripped losers on a ratio of 415-to- 364 stocks. Traded volumes added 16.2% to 1.60 bln shares, driven by the positive market sentiment.

BAT (+RM1.22) topped the big board advancers list, followed by PPB Group (+22.0 sen), Hong Leong Bank (+20.0 sen) and KLCC (+20.0 sen). SapuraKencana Petroleum added 4.0 sen after bagging a RM461.0 mln contract in Mexico. Amongst the biggest gainers on the broader market include Heineken Malaysia (+30.0 sen), Hartalega (+14.0 sen), Alliance Financial Group (+11.0 sen) and Hong Leong Industries (+11.0 sen). FGV rose 9.0 sen after aborting its plan to acquire a 30% stake in Indonesia’s PT Eagle High Plantations Tbk.

Significant losers on the broader market were United Plantations (-32.0 sen), Malaysia Sugar Mills (-22.0 sen), Atlan Holdings (-12.0 sen) and Pharmaniaga (- 12.0 sen). Ajiya dipped 39.0 sen after reporting a weak set of quarterly earnings. There were only three decliners on the key index – Westports (-2.0 sen), Tenaga (-2.0 sen) and IOI Corporation (-1.0 sen).

The Nikkei (-0.04%) extended its losses, dragged down by profit taking in the eleventh trading hour on the firmer Japanese Yen against the U.S. Dollar. The Shanghai Composite (+0.1%) staged a mild recovery, while the Hang Seng Index (+0.1%) also closed positive in the final trading hour. ASEAN stockmarkets, meanwhile, ended mostly higher.

U.S. stockmarkets fell overnight as the Dow closed 0.4% after the stronger U.S. Dollar against a basket of currencies weighed on metal prices, whilst crude oil prices slipped to a 3-months low after the oil rig count rose for the fourth straight week to 371. On the broader market, the S&P (-0.3%) retreated from the all-time high level as nine-of-the ten main sectors fell.

Earlier, European benchmark indices closed mostly higher as the CAC and DAX added 0.2% and 0.5% respectively as the latter was shored up by stronger-than-expected Ifo business climate index, which stood at 108.3 in July. The FTSE, however, fell 0.3% after the weakness in commodity prices pressured stocks like Tullow Oil (-5.4%) and Randgold Resources (-3.4%).

THE DAY AHEAD

Despite the key index positing a strong recovery yesterday, the general market sentiments remain on the cautious side, in our view, amid the continuing 1MDB issue and the lack of fresh positive leads. Therefore, we see yesterday’s gains as mostly bargain hunting activities and we think quick profit taking activities may filter through the stockmarket.

The mild profit taking activities are likely to slow the key index’s near term ascend with the 1,670 level likely to serve as the near term resistance level, while the 1,660 level remains the immediate support.

On the broader market and lower liner stocks, we continue to expect the mixed trading environment to prevail, while market breadth will remain mostly on the thin side.

COMPANY BRIEF

A joint venture (JV) between Bina Puri Holdings Bhd and Cahya Mata Sarawak Bhd was awarded a RM1.36 bln contract from Lebuhraya Borneo Utara Sdn Bhd for the proposed development and upgrading of the Pan Borneo Highway in Sarawak.

The project includes the construction of roads and bridges for Phase 1 of the highway from Sg Awik to Bintangor Junction in Sarawak which is slated for completion in 47 months.

The JV is split on a ratio of 70:30 between Cahya Mata Sarawak and Bina Puri respectively. (The Star Online)

The recent suit filed by Scomi Engineering Bhd (SEB) against Prasarana Malaysia Bhd over the latter’s termination of a contract has been dismissed by the High Court. However, SEB was granted a court injunction preventing Prasarana from terminating the contract before the court decides if the injunction should be further extended on 26th July, 2016. (The Edge Online)

Following Bank Negara Malaysia’s Overnight Policy Rate (OPR) cut, Public Bank Bhd has announced the reduction of its base rate (BR) and base lending rate (BLR) or base financing rate by 23.0 basis points (bps), effective from 27th July 2016. Its BR will be lowered to 3.52%, while the BLR will be at 6.72%.

TH Heavy Engineering Bhd (THHE), which was reported to be close to clinching a deal worth over RM700.0 mln from the Malaysian Maritime Enforcement Agency, was slapped with an Unusual Market Activity (UMA) query from Bursa Malaysia over the recent spike in its share price and volume.

The group announced that is in preliminary discussions with the relevant government agency to secure a contract for the supply of offshore patrol vessels. THHE added appropriate announcements will be made if or when it the project materialises. (The Edge Online)

VS Industry Bhd (VSI) has acquired a 20.0% shareholding in the maker of Diamond water filter, NEP Holdings (Malaysia) Bhd's for RM60.0 mln in cash. The group and the major shareholder of NEP, Lim Chang Huat had signed a conditional subscription agreement on 25th July 2016 for the share subscription.

The RM60.0 mln cash consideration is split into two tranches of equal value with the first tranche's payment already completed. The second tranche will be released within six months after completion of the first tranche.

NEP’s unaudited FY16 net profit stood at RM29.1 mln, a rise from RM21.4 mln in the previous corresponding year, while its revenue rose to RM185.4 mln from RM153.2 mln.

As per the acquisition terms, Lim Chang Huat had also given a profit guarantee of at least RM40.0 mln for FY17. Based on the guarantee, the acquisition is pegged at a reasonable PER of 7.5x. (The Star Online)

Cycle & Carriage Bintang Bhd registered a 9.9% Y.o.Y fall in its 2Q2016 net profit to RM19.7 mln from RM21.8 mln a year ago, in line with the 10.5% Y.o.Y decrease in sales to RM422.8 mln.

Meanwhile, its cumulative 1H2016 net profit was up 2.5% Y.o.Y to RM29.2 mln, mainly due to stronger revenue contribution and lower income tax charged. Revenue grew slightly by 0.3% Y.o.Y to RM737.9 mln, from RM735.5 mln in 1H2015.

Moving forward, the group hopes that the new E-Class model will bring positive results to the group, despite the challenging business environment. (The Edge Online)

ManagePay Systems Bhd has received the licence to conduct domestic fund transfer activities among its e-Money users via its MPay Portal and MPay Wallet from the central bank.

The Class B Licence allows the company to carry out money services business such as the issuance of electronic money for a one-year period from 13th July 2016 to 12th July 2017. The license is renewable annually. (The Edge Online)

SapuraKencana Petroleum Bhd has secured a contract worth US$113.0 mln (RM461.0 mln), which includes the procurement and construction of a 36 inch × 18 km sour gas pipeline in Ciudad del Carmen, Campeche, Mexico.

The scope of work comprises transportation and installation of pipelines, crossings, top side modifications and subsea works, including procurement and project management - scheduled to be carried out from July 2016 to March 2017. (The Star Online)

Source: M+ Online Research - 26 Jul 2016