Following the weakness in U.S. stockmarkets overnight, coupled with the reversal in crude oil prices, the FBM KLCI (-0.5%) erased all its previous session’s gains yesterday. Both the lower liners and the broader market were painted in red with the Industrial (-1.2%) sector taking the heaviest beating.

Market breadth remained negative as losers outstripped gainers on a ratio of 579-to-263 stocks. Traded volumes fell 1.0% to 1.84 bln shares on profit taking activities.

Despite reporting a stronger set of quarterly earnings, Sime Darby (-34.0 sen) topped to big board losers list, followed by BAT (-18.0 sen), Axiata (-12.0 sen), Genting (-9.0 sen) and Genting Malaysia (-9.0 sen). Amongst the biggest decliners on the broader market were Dutch Lady (-48.0 sen), Ajinomoto (-30.0 sen), Carlsberg (-22.0 sen) and Goldis (- 15.0 sen). Southern Steel dipped 9.0 sen after reporting a sizable impairment loss in the latest quarterly earnings.

In contrast, Nestle (+16.0 sen), KESM Industries (+11.0 sen), SLP Resources (+11.0 sen) and Oldtown (+10.0 sen) were among the biggest advancers on the broader market. EITA Resources jumped 18.0 sen after reporting a strong set of quarterly earnings. Key winners on the FBM KLCI were KLCC (+7.0 sen), AmBank (+4.0 sen), Maxis (+3.0 sen), Petronas Gas (+2.0 sen) and Tenaga (+2.0 sen).

Asian benchmark indices closed mixed as the Nikkei declined 0.6% after the Japanese Manufacturing PMI for August fell for the sixth straight month to 49.6. The Hang Seng Index managed to recover all its intraday losses before closing flat, while the Shanghai Composite added 0.2% on gains from transportation and raw material shares. ASEAN indices, meanwhile, ended mostly lower.

The upbeat economic data from new home sales that jumped to nine years high in July sent the Dow 0.1% higher overnight, but gains were capped ahead of the U.S.’ Federal Reserve meeting at Jackson Hole at the end of the week. On the broader market, the S&P 500 added 0.2% with eight-of-the ten main sectors advancing, while the Nasdaq closed 0.3% higher.

Earlier, European benchmark indices - the FTSE (+0.6%), CAC (+0.7%) and DAX (+0.9%), all rebounded and recovered previous session’s losses. Meanwhile, the Eurozone’s Markit Composite PMI for August rose to 53.3 – above economists’ estimates of 53.1.

THE DAY AHEAD

There is no change to our near term view and we expect the FBM KLCI to retain its rangebound trend within the 1,680 and 1,700 levels as there are still no significant catalysts to lift the market beyond the 1,700 resistance level. At the same time, there should also be ample support to ensure that the key index remains above the 1,680 level. The sideway trend is also in tandem with the direction of most key overseas stockmarkets.

After yesterday’s afternoon selldown, however, we think there could be some mild rebound on the FBM KLCI, which is helped by the positive performance of overseas stockmarkets overnight. This could help lift the key index back to the 1,690 levels.

The lower liners and broader market shares are seeing reduced following the recent selldown of selected stocks and we think the trend will persist.

COMPANY BRIEFS

Sime Darby Bhd registered a 13.4% Y.o.Y increase in its 4QFY16 net profit to RM1.13 bln, from RM1.0 bln a year earlier – on the back of the recognition of an Indonesian special tax incentive, despite an 8.8% Y.o.Y drop in its revenue to RM11.73 bln, from RM12.86 bln last year.

Sime Darby’s FY16 net profit fell slightly by 0.9% Y.o.Y to RM2.41 bln vs RM2.43 bln in FY15, attributed to higher operating expenses. Revenue, however, gained less than 1.0% Y.o.Y to RM43.96 bln, from RM43.73 bln in the last corresponding year. The group also proposed a final single tier dividend of 21.0 sen a share.

Separately, the group is planning to issue up to 316.4 mln new shares (5.0% of its existing share base) to local and foreign inventors yet to be identified. The proposed private placement is expected to reap a gross proceed of approximately RM2.37 bln.

About half of the proceeds will be used to pare down the group’s debt, 40.0% to fund capital expenditure, while the remainder will be used for working capital and expenses for the placement exercise. The share issue is expected to be completed by end-2016. (The Edge Daily)

IOI Corp Bhd edged into the red with a 4QFY16 net loss of RM59.0 mln, from a net profit of RM112.7 mln last year - due to decreased contribution from its manufacturing segments, while revenue lost 3.9% Y.o.Y to RM2.82 bln, from RM2.93 bln a year earlier.

Its FY16 net profit, however, rose more than 12x to RM629.7 mln, from RM51.9 mln last year, mainly attributed to a lower net foreign currency translation loss on foreign currency denominated borrowings and improved performance by its manufacturing segments. Revenue was also up 1.7% Y.o.Y to RM11.74 bln, compared with RM11.54 bln in the same corresponding period. (The Edge Daily)

AWC Bhd’s 4QFY16 net profit tripled to RM6.5 mln, from RM2.2 mln in 4QFY16, on the back of improved performance from all of its divisions, while revenue rose more than two-fold to RM76.0 mln, from RM33.7 mln a year earlier

The group’s FY16 net profit jumped 113.0% Y.o.Y to RM17.2 mln, from RM8.1 mln in FY15 – mainly due to the commencement of several new projects secured, including the renewal of a major concession contract. Revenue also surged nearly 95.0% Y.o.Y to RM249.3 mln, from RM128.0 mln. A final single-tier dividend of one sen per share was proposed, bringing its FY16 total payout to 2.5 sen a share. (The Edge Daily)

AirAsia X Bhd (AAX) registered a 2Q2016 net profit of RM1.0 mln vs. a net loss of RM132.9 mln a year ago, due to higher revenue contribution, which was up by 35.2% Y.o.Y at RM883.2 mln, from RM653.0 mln a year ago and also lower fuel cost.

Cumulative 1H2016 net profit stood at RM180.5 mln, against a net loss of RM258.9 mln in 1H2015, while revenue gained almost 30.0% Y.o.Y to RM1.85 bln, from RM1.43 bln previously. The improved bottom line is also attributed to the lower operating expenses and a forex gain of RM91.5 mln. (The Edge Daily)

SP Setia Bhd‘s 2Q2016 net profit was at RM125.8 mln, while revenue stood at RM1.01 bln. No comparative figures were given following SP Setia’s decision to change its financial year-end from 31st October to 31st December. Meanwhile, cumulative 1H2016 net profit was RM249.2 mln, while revenue stood at RM1.92 bln.

The group had also declared an interim dividend of 4.0 sen per share.

Further, SP Setia has lowered its property sales target for the year to RM3.5 bln, from RM4.0 bln three months ago, due to persisting weak sentiment in the Malaysian property sector. Todate, the group has achieved sales of RM1.35 bln, with total unbilled sales of RM8.2 bln, anchored by 29 ongoing projects and remaining landbank of 3,805 ac., with a potential gross development value (GDV) of RM71.5 bln as of 30th June this year. (The Edge Daily)

Carlsberg Brewery Malaysia Bhd’s 2Q2016 net profit surged 62.0% to RM51.4 mln, from RM31.7 mln in the previous corresponding period, as 2Q2015’s results included a one-time impairment loss from the divestment of Luen Heng F&B Sdn Bhd (LHFB). However, quarterly revenue fell slightly by 1.6% Y.o.Y to RM395.8 mln, from RM402.3 mln in 2Q2015.

Cumulative 1H2016 net profit jumped by 44.8% Y.o.Y to RM114.3 mln, from RM78.9 mln registered a year earlier - mainly as a result of the higher revenue and effective cost management, while revenue inched 2.4% Y.o.Y higher to RM851.6 mln vs. RM831.8 mln in 1H2015. The group has declared a single-tier interim dividend of five sen apiece, which will go ex on 21st September 2016. (The Edge Daily)

MISC Bhd has secured a contract worth US$230.0 mln (RM927.5 mln) for the lease and operation of a floating storage and offloading vessel (FSO) to Chevron's FSO Benchamas 2 Project in the Gulf of Thailand. The contract awarded by Chevron Offshore (Thailand) Ltd (COTL) is for a tenure of about ten years, subject to up to five extensions of one year each.

The scope of work consists of the engineering, procurement, construction, installation, commissioning, lease and operations for the FSO Benchamas 2 Project, which is expected to commence operations by the 2Q2018. (The Edge Daily)

Kossan Rubber Industries Bhd's 2Q2016 net profit shrank by 13.6% Y.o.Y to RM41.0 mln, from RM47.4 mln a year ago – mainly due to persistent industry-wide selling pressures and lower production output, due to scheduled revamp works in one of its plants and labour shortage. However, revenue for the quarter came in 4.7% Y.o.Y higher at RM403.8 mln, against RM385.8 mln a year ago.

For 1H2016, net profit fell slightly by 0.7% Y.o.Y to RM92.3 mln, from RM92.9 mln last year, despite higher revenue, which rose 8.1% Y.o.Y to RM816.1 mln, compared with RM755.0 mln a year ago. (The Edge Daily)

DKSH Holdings (M) Bhd's 2Q2016 net profit doubled to RM20.4 mln vs RM10.0 mln in the previous corresponding year, attributed to improved contribution from non-telecommunications clients and lower operating costs. Revenue for the quarter, however, lost 1.2% Y.o.Y to RM1.35 bln from RM1.37 bln in 2Q2015.

Cumulative 1H2016 net profit surged 42.5% Y.o.Y to RM31.7 mln, from RM22.2 mln last year, despite revenue falling 3.7% Y.o.Y to RM2.69 bln, from RM2.8 bln in 1H2015. The higher net profit was contributed by lower operating expenses of RM2.64 bln, compared to RM2.76 bln a year ago. (The Edge Daily)

WCT Holdings Bhd’s 2Q2016 net profit rose marginally by 3.3% Y.o.Y to RM32.1 mln, from RM31.1 mln – mainly due to higher revenue contribution from the local construction segment. Meanwhile, group revenue surged 37.6% Y.o.Y to RM581.1 mln, from RM422.3 mln in 2Q2015.

WCT’s cumulative 1H2016 net profit, however, plunged 36.4% Y.o.Y to RM40.9 mln from RM64.3 mln previously, on the back of an unrealised foreign exchange loss, although revenue came in 37.7% Y.o.Y higher at RM1.07 bln, in comparison to RM773.9 mln in 1H2015. The group’s outstanding order currently stands at RM4.3 bln. (The Edge Daily)

Source: M+ Online Research - 24 Aug 2016