The FBM KLCI lost 0.2% on late selling of selected heavyweights due to investors’ month-end portfolio rebalancing. Meanwhile, the lower liners were mostly higher, with the exception of the FBM Ace, which lost 1.1% amid a mixed broader market.

Market breadth was negative as decliners slightly overpowered gainers on a ratio of 409-to-419 stocks. Traded volumes however, jumped 34.3% to 2.0 bln shares.

Key losers on the Main Board include BAT (-54.0 sen) Genting (-20.0 sen), Maybank (-8.0 sen), SapuraKencana Petroleum (- 6.0 sen) and Maxis (-5.0 sen). Meanwhile, broader market decliners were led by Carlsberg (-30.0 sen), Latitude Tree Holdings (-30.0 sen), KESM Industries (- 25.0 sen) and Lay Hong (-25.0sen). UMW Holdings fell 28.0 sen following a 2Q2016 net loss of RM12.1 mln, against RM68.4 mln net profit in the previous corresponding period.

On the other side of the play, Dutch Lady (+64.0 sen), Hong Leong Industries (+35.0 sen), Nestle (+34.0 sen), Kossan (+24.0 sen) and Felda Global Ventures Holding (+17.0 sen) led the broader market higher. Petronas-linked companies like Petronas Dagangan and Petronas Gas rose 24.0 sen and 8.0 sen respectively, trailed by PPB Group (+10.0sen), Westports Holdings (+10.0 sen) and Astro Malaysia Holdings (+7.0 sen).

Key Asian benchmark indices finished mixed-to-higher as investors remained cautious ahead of the U.S. payroll data due Friday. The Nikkei (+1.0%) gained momentum as the weaker Yen boosted export-related counters, while the Shanghai Composite index added 0.4% to close higher. The Hang Seng index, meanwhile, bucked the general negative sentiment and of ASEAN stockmarkets were mostly in the green.

Key benchmark U.S. indices sunk into the red overnight as crude oil prices tanked on the back of higher-than-expected U.S. crude oil inventories. The Dow edged 0.3% lower as weak energy shares pushed the key index lower. Similarly, the S&P 500 and the Nasdaq closed 0.2% lower, in-line with the general dampened market sentiment.

European stockmarkets slid – dragged down mainly by losses among the mining and energy-related counters. After lingering mostly in the negative region, the FTSE fell 0.6% amid losses in mining heavyweights such as Fresnillo (-5.0%) and Anglo American (-4.6%), albeit slightly offset by the gains in financial stocks. Meanwhile, the CAC contracted 0.4% and the DAX ended 0.6% lower after a choppy trading session.

THE DAY AHEAD

The mixed-to-lower trend looks to stay as there remain few catalysts from both domestic and overseas sources to lift the FBM KLCI significantly higher over the near term. The lower crude oil prices will also dampen the performance of oil and gas stocks on Bursa Malaysia, potentially sending the key index further below the 1,680 level now that the level is breached.

Below the above level, there will be support at the 1,670 level which may be retested amid the ongoing insipid market conditions. The 1,680 level is the immediate resistance, followed by the major resistance at 1,700 points level.

The lower liners and broader market shares are also expected to stay mixed-to-lower as retail investors are likely to maintain a cautious view on the market.

MACRO BRIEF

Malaysia's producer price index (PPI) for July 2016 fell 2.1% Y.o.Y to 99, owing to the fall in the mining index (-17.5% Y.o.Y) and the manufacturing sector (-2.0% Y.o.Y).

Meanwhile, the index for agriculture, forestry and fishing; water supply and electricity and gas showed increases of +10.7% Y.o.Y, +2.9% Y.o.Y and +0.6% Y.o.Y respectively. The PPI for local production declined 0.9% M.o.M from June 2016. (Bernama)

COMPANY UPDATE

Protasco Bhd has proposed a bonus issue on the basis of one bonus share-for-every four existing shares. The issuance of up to 85.0 mln bonus shares will be subject to shareholders approval at an Extraordinary General Meeting held at a later date and is expected to be complete by 4Q2016.

Comments

The above mentioned corporate exercise will not have any impact on Protasco's earnings going forward. However, we view this positively as not only will it boost the stock's liquidity, but also a decent reward to the shareholders.

We reiterate our BUY recommendation on Protasco with a unchanged target price of RM2.10 (RM1.70 ex-bonus issue). Our target price is derived from ascribing an unchanged target PER of 11.0x to its 2016 construction earnings, a target PER of 8.0x to its concession and engineering services’ earnings, while its education and trading earnings remain pegged at a target PERs of 6.0x respectively due to their smaller scale businesses. Its property development division’s valuation remains unchanged at 0.6x of its BV over the next two years.

COMPANY UPDATE

Coastal Contracts Bhd registered a net profit of RM12.7 for the April to June 2016 quarter (vs. RM34.8 mln for April to June 2015 quarter), while its revenue came in RM200.9 mln (+22.4% Y.o.Y). The decline in earnings was due to lesser profitability margins realised from its shipbuilding division and impairment losses on its receivables.

For the 18 months period ended June 2016, the company recorded a cumulative net profit of RM167.1 mln on the back of a revenue of RM2.00 bln. Its earnings were partly contributed by the bareboat charter income derived from the charter of its Jack Up Gas Compression Services Unit (JUGCSU). There is no comparison for this period as Coastal has changed its financial year end from December to June.

Comments

The aforementioned financial performance was slightly below our expectations as its cumulative net profit only accounts to 91.0% of our forecast (RM183.7 mln). Despite the company’s financial performance and outlook negatively affected alongside with other oil players, Coastal, however, managed to stay resilient owing to the company’s diversification strategy into the liquefied natural gas regasification and storage services market which was able to provide some cushion from the severe repercussions of overreliance on the OSV sub sector.

We maintain our HOLD recommendation with an unchanged target price of RM1.65 by ascribing an unchanged target PER of 8.0x, to our unchanged FY18 EPS estimate of 20.4 sen per share as the company’s near-to-short term earnings visibility remains well underpinned by its sizeable and enviable cumulative orderbook size of approximately RM2.20 bln (RM1.00 bln for its OSV business segment, while the JU GCSU/rig business segment has an orderbook value of RM1.20 bln - with approximately two years of earnings visibility).

COMPANY BRIEFS

Top Glove Corporation Bhd is buying a 3.4-ha. plot of freehold land that comes with a factory located in the Sungai Puloh industrial area near Klang for RM51.5 mln to expand its production lines. The land and factory was bought from steel product maker YKGI Holdings Bhd. The proposed acquisition is expected to be completed by 1Q2017. (The Star Online)

UEM Sunrise Bhd’s 2Q2016 net profit fell 34.8% Y.o.Y to RM54.7 mln due to higher other income from the dividend distribution from a subsidiary under creditors’ voluntary liquidation, and recognition of liquidated ascertained damages from a contractor and interest income recorded in the previous corresponding quarter. Revenue for the quarter, however, gained 44.5% Y.o.Y to RM537.8.

For 1H2016, cumulative net profit slipped 57.9% Y.o.Y to RM57.7 mln. Revenue for the period, however, rose marginally by 0.7% Y.o.Y to RM795.6 mln. (The Star Online)

Silk Holdings Bhd’s 2Q2016 net loss stood at RM16.9 mln on the back of a revenue of RM41.2 mln, due to headwinds still affecting the company’s oil and gas business. There were no comparison figures as the company changed its financial year-end to 31st December from 31st July, effective from the end of last year. (The Star Online)

Telekom Malaysia Bhd's (TM) 2Q2016 net profit fell 34.2% Y.o.Y to RM139.5 mln on lower operating profit, higher finance cost and foreign exchange losses on its borrowings, arising from the weaker Ringgit against the U.S. Dollar. Revenue for the quarter, however, rose 7.4% Y.o.Y to RM3.05 bln.

For 1H2016, cumulative net profit gained 35.5% Y.o.Y to RM461.9 mln. Revenue for the period climbed 5.1% Y.o.Y to RM5.90 bln. A first interim single tier dividend of 9.3 sen per share, payable 7th October 2016, was declared. (The Edge Daily)

Lingkaran Trans Kota Holdings Bhd’s (Litrak) 1QFY17 net profit jumped 40.5% Y.o.Y to RM61.1 mln, mainly attributable to higher revenue recognised from the toll rates increase for the LDP on 1st January 2016. Revenue for the quarter grew 41.4% Y.o.Y to RM136.0 mln. A single tier interim dividend of 10.0 sen per share was declared. (The Edge Daily)

Global Oriental Bhd announced that its Chief Operating Officer (COO), Ranjeet Singh Sarjit Singh has stepped down from his post with immediate effect to pursue his own interest. He has been the COO at Global Oriental since 1st April 2009 and joined the group as Group Senior General Manager in June 2008. (The Edge Daily)

Muhibbah Engineering (M) Bhd's 2Q2016 net profit rose 39.2% Y.o.Y to RM26.8 mln, following higher contribution from its construction, shipyard and concession divisions. Revenue for the quarter improved 1.2% Y.o.Y to RM406.3 mln.

For 1H2016, cumulative net profit gained 18.8% Y.o.Y to RM50.6 mln. Revenue for the period increased 14.8% Y.o.Y to RM888.1 mln. (The Edge Daily)

Karex Bhd’s 4QFY16 net profit fell 25.8% Y.o.Y to RM12.6 mln, attributable to the selling price adjustment due to forex exchange changes. Revenue for the quarter, however, gained 3.5% Y.o.Y to RM82.3 mln.

For FY16, cumulative net profit rose 12.8% Y.o.Y to RM67.2 mln. Revenue for the year expanded 15.1% Y.o.Y to RM343.2 mln. (The Edge Daily)

NetX Holdings Bhd has aborted its tie-up with a United Arab Emirates (UAE) firm for the distribution of mobile payment software, solution and/or service, excluding hardware, in Iran and the UAE.

The Memorandum of Understanding (MoU) NetX had inked with UAE-registered Blackrockme Pvt Ltd has been called off, as neither party could agree on the terms of a definitive agreement. (The Edge Daily)

Mikro MSC Bhd's 4QFY16 net profit rose 23.8% Y.o.Y to RM2.4 mln, mainly due to higher revenue and better gross margin recorded. Revenue for the quarter increased 17.9% Y.o.Y to RM12.5 mln.

For FY16, cumulative net profit gained 25.3% Y.o.Y to RM10.3 mln. Revenue for the year improved 23.4% Y.o.Y to RM48.1 mln. A final single tier dividend of 0.5 sen per share and a special dividend of 0.5 sen per share were declared. (The Edge Daily)

Bina Puri Holdings Bhd's 2Q2016 net profit fell 30.9% Y.o.Y to RM0.9 mln on deferred tax charges amounting to RM3.3 mln and lower contribution from the quarry division which was affected by lower pricing. Revenue for the quarter, however, rose 13.6% Y.o.Y to RM302.6 mln.

For 1H2016, cumulative net profit decreased 32.7% Y.o.Y to RM1.7 mln. Revenue for the quarter slipped 1.3% Y.o.Y to RM597.1 mln. (The Edge Daily)

Cahya Mata Sarawak Bhd’s (CMSB) 2Q2016 net profit dipped 80.6% Y.o.Y to RM7.9 mln, mainly due to the share of exceptional losses of an associate of the group. Revenue for the quarter, however, climbed 5.8% Y.o.Y to RM398.8 mln.

Source: M+ Online Research - 1 Sep 2016

For 1H2016, cumulative net profit plunged 90.9% to RM9.0 mln. Revenue for the period fell 14.1% Y.o.Y to RM745.7 mln. (The Edge Daily)