• The FBM KLCI (-0.4%) extended its losses to close below the 1,700 psychological level last Friday in tandem with the weakness across key regional indices and subsequently recorded a 0.5% W.o.W decline. The lower liners also edged mostly lower as the FBM Small Cap and FBM Fledgling indices fell 0.5% and 0.1% respectively, while the broader market ended mixed.

• Market breadth remained negative as losers outnumbered advancers on a ratio of 530-to-358 stocks. Traded volume, however, added 7.9% to 3.01 bln shares trading interest amongst the lower liners remained firm.

• Axiata (-24.0 sen) and IHH (-24.0 sen) topped the FBM KLCI decliners list after reporting a weak set of corporate earnings, while other big board losers were BAT (-30.0 sen), KLK (-22.0 sen) and Genting Malaysia (-19.0 sen). Meanwhile, Tasek (-28.0 sen), Malaysia Airport Holdings (-23.0 sen), Ta Ann (-17.0 sen), Tecnic Group (-12.5 sen) and Latitude Tree (-12.0 sen) were amongst the biggest decliners on the broader market. Complete Logistics fell 11.0 sen after reporting a weak set of quarterly earnings.

• Notable advancers on the broader market include consumer products stocks like Dutch Lady (+68.0 sen), Panasonic (+38.0 sen) and Oldtown (+22.0 sen), while IGB and Goldis added 38.0 sen and 29.0 sen respectively. Key winners on the FBM KLCI were Maybank (+20.0 sen), IOI Corporation (+9.0 sen), MISC (+6.0 sen), Petronas Chemicals (+4.0 sen) and Hong Leong Bank (+4.0 sen).

• Asian benchmark indices closed mostly lower as the Nikkei slipped 0.5%, dragged down by the stronger Japanese Yen against the U.S. Dollar. The Hang Seng Index extended its losses by 0.6% on weakness in technology stocks, while the Shanghai Composite added 0.1% after trading mostly in the negative territory. ASEAN stockmarkets, meanwhile, closed mostly negative.

• U.S. stockmarkets rallied in the eleventh hour last Friday to reverse all their intraday losses ahead of Donald Trump’s speech to the Congress. The Dow (+0.1%) advanced for the eleventh-straight day, while the S&P 500 added 0.2%, lifted by the utilities sector (+0.8%) as both indices closed at record highs.

• European benchmark indices – the FTSE (-0.4%), CAC (-0.9%), and DAX (-1.2%), however, all extended their losses as profit taking activities escalated from recent highs. The weakness in corporate earnings giants – Vivendi SA (-3.5%), BASF (-3.1%) and Royal Bank of Scotland PLC (-4.5%) also dampened the market sentiment.

The Day Ahead

• We see the market environment staying nonchalant over the near term amid the lack of fresh catalysts and insipid overseas market conditions, albeit the general market sentiments are still largely on the positive side.

• This is likely to see the key index prolonging its consolidation trend after the key index slipped below the 1,700 points level last Friday. The bouts of profit taking and rotational plays will likely dominate the trading trend over the near term and this could see the consolidation trend extending for longer. On the downside, the key near term support is at 1,680, while the resistance is at the 1,700 points level.

• Notwithstanding the continuing consolidation trend, we think that the lower liners and broader market shares could see the strong following from retail players sustaining and this will prolong the positive market breadth over the near term.

Company Briefs

• Cahya Mata Sarawak Bhd (CMS) posted a 20.0% Y.oY increase in its 4Q2016 net profit to RM101.5 mln vs. RM84.6 mln in 4Q2015 – largely on a gain of RM25.0 mln from a land sale, although quarterly revenue declined 11.0% Y.o.Y to RM450.3 mln, from RM508.3 mln.

• Full year net profit shrank 32.0% Y.o.Y to RM169.2 mln, from RM248.1 mln last year, while revenue lost 1.0% Y.o.Y RM1.55 bln, from RM1.79 bln in 2015.

• The group also proposed a final single-tier dividend of 6.3 sen for 2016. (The Star Online)

• KNM Group Bhd sunk into the red after reporting a 4Q2016 net loss of RM330.4 mln against a net profit of RM6.0 mln in the previous corresponding period, mainly due to losses in its Canadian and Kuantan operations, forex losses and unforeseen logistic costs. Revenue also fell 10.0% Y.o.Y to RM411.1 mln, compared to RM457.4 mln in 4Q2015.

• The underperformance in the quarter under review drove KNM to post its first annual net loss of RM311.7 mln (from RM49.5 mln last year) since 2011, although revenue came in slightly higher at RM1.65 bln, from RM1.64 bln in the previous year. (The Star Online)

• Kim Hin Industry Bhd's 4Q2016 net profit jumped 250% Y.o.Y to RM13.1 mln, from RM3.7 mln a year earlier, attributed to a higher revenue, which was up by 21.5% Y.o.Y to RM118.8 mln, from RM97.7 mln, on the back of contributions from the group's Australian operations.

• The group’s 2016 net profit, however, shrank 11.9% Y.o.Y to RM30.3 mln vs. RM34.4 mln in the last corresponding year, while revenue gained 9.8% Y.o.Y to RM403.4 mln, from RM367.4 mln in 2015. The lower bottomline was due to weaker profit margin. (The Edge Daily)

• Perisai Petroleum Teknologi Bhd has posted a 4Q2016 net profit of RM10.3 mln, from a net loss of RM724.6 mln a year ago – on lower impairment losses. Revenue, however, declined 30.7% Y.o.Y to RM38.3 mln, from RM55.6 mln.

• For 2016, Perisai's net loss narrowed to RM289.8 mln, compared with its previous year's net loss of RM706.3 mln, despite a 13.8% Y.o.Y drop in revenue to RM185.2 mln, from RM214.8 mln in 2015.

• Ibraco Bhd announced an 80.0% Y.o.Y contraction in its 4Q2016 net profit to RM3.3 mln, from RM16.6 mln a year ago, alongside revenue which plunged 68.0% Y.o.Y to RM26.7 mln, from RM84.0 mln last corresponding year.

• The weaker performance was attributed to changes in its product mix, the sales and completion of its properties as well as higher raw material and labour costs. (The Edge Daily)

• For its full year, Ibraco's net profit declined 41.0% Y.o.Y to RM27.1 mln, from RM46.0 mln in 2015, while revenue was 37.0% Y.o.Y lower from 254.0 mln last year, to RM158.8 mln.

• Karex Bhd’s 2QFY17 net profit shed 56.0% Y.o.Y to RM10.0 mln, in comparison to RM22.6 mln a year earlier, mainly due to higher distribution and marketing expenses, as well as one-off expense related to a corporate exercise and trademark and registration. Revenue however, saw a slight 1.0% Y.o.Y increase to RM97.6 mln, from RM96.6 mln in 2QFY16.

• Cumulative 1HFY17 net profit also plunged 60.0% Y.o.Y to RM18.1 mln, from RM44.9 mln in the last corresponding year, although revenue grew 3.0% Y.o.Y to RM177.6 mln against RM172.7 mln in 1HFY16. (The Edge Daily)  

Source: Mplus Research - 27 Feb 2017