• After advancing for three consecutive sessions, profit taking activities sent the FBM KLCI to close 0.1% lower yesterday - in line with the weakness across key regional indices. The lower liners – the FBM Small Cap (+0.3%), FBM Fledgling (+0.4%) and FBM ACE (+0.8%), however, all closed higher, while the broader market ended mixed.

• Market breadth stayed positive as advancers pipped decliners by a ratio of 436-to-420 stocks. Traded volumes, however, shrank 18.6% to 2.14 bln shares.

• KLK (-14.0 sen), Westports (-8.0 sen), Petronas Chemicals (-7.0 sen), Sime Darby (-6.0 sen) and Tenaga (-6.0 sen) topped the big board decliners list. Meanwhile, amongst the biggest losers on the broader market include NPC Resources (-13.0 sen), Southern Acids (- 10.0 sen), United Plantations (-10.0 sen) and Globetronics (-7.0 sen). Hong Leong Industries declined 10.0 sen after reporting a weaker set of quarterly earnings.

• In contrast, Aeon Credit (+32.0 sen), Tasek Corporation (+30.0 sen), DKSH (+23.0 sen) and Samchem (+23.0 sen) topped the broader market gainers list. Rex Industry jumped 12.0 sen after receiving a takeover offer of RM1.65 per share. Key winners on the FBM KLCI were BAT (+30.0 sen), Petronas Gas (+10.0 sen), MISC (+8.0 sen), Genting Malaysia (+6.0 sen) and Maxis (+5.0 sen).

• Asia benchmark indices retreated as the Nikkei fell 0.4% to a two-week low after the stronger Yen vs. the U.S. Dollar hurt market sentiment. Both the Shanghai Composite and the Hang Seng Index ended 0.1% lower as the former saw the country’s foreign reserves falling for the seventh straight month in January 2017. ASEAN stockmarkets, meanwhile, closed mostly negative.

• U.S. stockmarkets finished higher overnight as the Dow added 0.2%, but gains were limited after the U.S. trade deficit hit its highest level in four years. On the broader market, the S&P 500 climbed 0.02% - led by gains in the consumer staples sector (+0.8%), while the Nasdaq (+0.2%) closed at a fresh record high at 5,674.22 pts.

• European benchmark indices closed mostly higher as the FTSE and DAX added 0.2% and 0.3% respectively, but pared off most of their intraday gains amidst a mixed bag of corporate earnings. The CAC, however, extended its losses by 0.5% on concerns over the political uncertainty amid the upcoming Presidential election.

The Day Ahead

• We still think the FBM KLCI is in a short term consolidation mode after it recent gains and this could see the key index maintaining its sideway-to-lower trend for now. We continue to view the pullback as healthy to allow the market to take a breather and for the gains to be digested.

• As it is, the general market undertone remains largely intact and is on a positive mode, thus the expected consolidation spell is likely to be mild and short-lived. Therefore, we expect the 1,680 level to provide a firm support for now, while the 1,700 points level remains the main psychological barrier for the key index.

• The lower liners and broader market shares will continue to draw retail participation and the keen trading interest is expected to drive these stocks higher over the near term.

Company Briefs

• Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) has recorded a 4Q2016 net loss of RM119.7 mln vs. a net loss of RM27.1 in the previous corresponding quarter – mainly due to lower revenue, which plunged 57.9% Y.o.Y to RM303.6 mln from RM721.1 mln in 4Q2015 as well as higher asset impairment provision.

• For 2016, MHB slipped into a net loss of RM134.3 mln compared with net profit of RM43.9 mln a year ago, while revenue dropped 51.6% Y.o.Y to RM1.19 bln, from RM2.46 mln last year. (The Star Online)

• PLB Engineering Bhd is selling a 6.0 ha. freehold agriculture land in Kulim, Kedah, to Tiong Nam Logistics Holdings Bhd for RM9.6 mln. The disposal is expected reap about RM6.6 mln in gains, which will be used to pare bank borrowings and fund working capital. (The Edge Daily)

• Mesiniaga Bhd has secured a five-year contract to build a new and advanced data exchange gateway for registration systems from the Companies Commission of Malaysia (CCM). The contract value was, however not disclosed.

• The new data exchange gateway is in-line with CCM's organisation-wide transformation programme to revamp its IT infrastructure and software ecosystem, opting for an open standard-based enterprise service bus which will be the heart of its IT network.

• Mesiniaga will migrate the services that are currently running on CCM's existing middleware platform, while developing new components to substitute and expand current services. (The Edge Daily)

• DRB-Hicom Bhd will decide on the foreign strategic partner (FSP) for its whollyowned automobile maker Proton Holdings Bhd by the 1H2017.

• The group is currently waiting for the submission of bids from potential FSPs, after which an evaluation will commence. The group said that the entry of an FSP will enable Proton to revitalise itself through access to new platforms, powertrains and technologies, which will further improve the carmaker's range of products and quality.

• Earlier this month, a local media reported that Chinese automaker Geely Automobile Holdings Ltd is reportedly leading a threeway race to be the technical partner for Proton Holdings Bhd, alongside French carmakers PSA Group and Renault SA. (The Star Online)

• Kenanga Investment Bank Bhd (KIBB) has re-designated its Independent Director Izlan Izhab as its new Non-Executive Chairman, replacing Datuk Paduka Tengku Noor Zakiah Tengku Ismail, who had completed her term on 28th January 2017. The latter was the co-founder of the company and had served as its Executive Chairman since January 2007.

• The cessation of Datuk Paduka’s office term was in-line with the new regulatory requirement for Boards of Directors (BoD) to have a majority of independent directors.

• Datuk Chay Wai Leong - KIBB’s Executive Director has also ceased to hold office, but will remain as the group’s Managing Director. (The Edge Daily)

• Vitrox Holdings Bhd and Pentamaster Corp Bhd are buying a piece of 5.0-ac. land in the Batu Kawan Industrial Park in Penang from state-owned Penang Development Corporation for RM3.5 mln.

• The land will be used to develop and operate a small and medium automation industry cluster, in order provide a wider range of high-end automated inspection equipment, moving forward.

• The automation cluster is expected to commence construction in the 2H2017 over a development period of two years, at an estimated cost of RM23.0 mln.

• The land will be parked under the Penang Automation Cluster, which will 35.0%-owned by both Vitrox and Pentamaster, while the remainder 30.0% equity interest will be held by Walta Engineering Sdn Bhd. (The Edge Daily)

• Fraser & Neave Holdings Bhd’s (F&N) 1QFY17 net profit declined 16.0% Y.o.Y to RM127.3 mln, from RM151.7 mln in 1QFY16 – as it incurred higher organisational restructuring costs and the inclusion of a forex gain of RM18.2 mln from the early redemption of the zero-coupon bond by F&N Dairies (Thailand) Ltd in the previous corresponding quarter.

• Revenue, however, expanded slightly by 2.0% Y.o.Y to RM1.09 blnon the back of improved operations in both Malaysia and Thailand.

• F&N’s operating profit from food and beverages (F&B) in Malaysia, however, fell 26.0% Y.o.Y to RM60.4 mln due to higher raw material costs (such as sugar), organisational restructuring costs, and higher trade and consumer promotion spending. (The Star Online)

• SAM Engineering & Equipment (M) Bhd‘s 3QFY17 net profit shrunk 33.0% Y.o.Y to RM9.7 mln, from RM14.7 mln a year earlier, mainly attributed to lower group revenue and new projects start-up cost. Revenue for the quarter also narrowed 14.5% Y.o.Y to RM132.5 mln against RM155.0 mln in 3QFY16.

• Cumulative 9MFY17 net profit stood at RM25.2 mln, representing a 44.9% Y.o.Y fall from RM45.7 mln in 9MFY16 - dragged down by weaker revenue contribution, which was down 16.8% Y.o.Y at RM381.2 mln, from RM458.1 mln in the previous corresponding period. (The Edge Daily)

• Borneo Aqua Harvest Bhd is proposing to undertake a private placement of up to 59.2 mln new shares, representing up to 10.0% of the total number of issued shares of the company. The proceeds from the proposed exercise will be used for capital expenditure and working capital for the mining operation, in-line with the company’s business plan to grow its mining business without incurring additional interest cost compared to other means of financing.

• Assuming an issue price of 90.0 sen per placement share - a discount of approximately 4.3% to its five-day weighted average market, the proposed private placement is expected to raise a minimum RM49.2 mln and up to a maximum of RM53.3 mln.

• YTL Power International Bhd is one of the four firms pre-qualified to submit their proposals for the development of a fifth desalination plant on Jurong Island, Singapore. Other pre-qualified applicants include Keppel Infrastructure Holdings, Sembcorp Utilities and Tuas Power.

• The plant will be built under a designbuild-own-operate (DBOO) arrangement and is expected to be completed by 2020. It will also add another 137,000 cubic metres or about 30.0 mln gallons of desalinated water (mgd) a day to Singapore’s water supply enhancing water supply resilience.

• The desalination plant will be co-located within the successful applicant’s existing facility such as a power plant or steam generation plant on Jurong Island, for potential synergies in resources such as seawater intake and outfall structures or energy.

• It was noted that YTL Power’s subsidiary, YTL PowerSeraya Pte Ltd, has a 10,000 meter cube per day Seawater Reverse Osmosis (SWRO) desalination plant located at its Pulau Seraya Power Station on Jurong Island. The plant was established in 2008.  

Source: Mplus Research - 8 Feb 2017