• The FBM KLCI (-0.4%) halted a streak of three straight days of gains last Friday in tandem with the weakness across key regional indices. Nonetheless, the key index managed to add 0.6% W.o.W and maintained its stance above the 1,700 points psychological level. The lower liners, however, closed mostly higher as the FBM Small Cap and FBM Fledgling added 0.2% each, while the broader market ended mostly negative.

• Market breadth turned negative as decliners outnumbered advancers on a ratio of 5-to-4 stocks. Traded volume, however, grew 8.9% to 3.41 bln shares on rotational play amongst the lower liners.

• Key decliners on the FBM KLCI were BAT (-60.0 sen), PPB Group (-26.0 sen), Petronas Gas (-16.0 sen), Genting (-12.0 sen) and Public Bank (-10.0 sen). Amongst the biggest decliners on the broader market were Aeon Credit (-28.0 sen), Lafarge (-21.0 sen), Dutch Lady (- 20.0 sen), Tasek Corporation (-14.0 sen) and Kawan Food (-13.0 sen).

• Iskandar Waterfront City (+27.0 sen) took the top spot on the broader market advancers list, followed by United Plantations (+20.0 sen), Advanced Packaging (+14.0 sen), Affin (+14.0 sen) and Mieco Chipboard (+23.0 sen). Meanwhile, KLK (+6.0 sen), Tenaga (+4.0 sen), IHH (+3.0 sen), CIMB (+2.0 sen) and Petronas Chemicals (+2.0 sen) topped the key index winners list.

• Asia benchmark indices retreated as the Nikkei fell 0.5% on rising expectation of an U.S. interest rate hike but managed to post 1.0% W.o.W gain. Both the Shanghai Composite and the Hang Seng Index extended their losses by 0.4% and 0.7% respectively as the latter hit a one-month low, dragged down by property stocks. ASEAN stockmarkets, meanwhile, closed mostly lower.

• U.S. stockmarkets closed on a flat note as the Dow (+0.01%) inched marginally higher to record 0.9% W.o.W gain after Federal Reserve Chairwoman Janet Yellen signaled a likelihood of rate hike later this month. On the broader market, the S&P 500 managed to reverse all its intraday losses to close 0.1% higher, led by gains in the financial sector (+0.4%).

• European stockmarkets, however, closed mostly lower as the FTSE and DAX fell 0.1% and 0.3% respectively on cautiousness on the potential U.S. interest rates hike, while the U.K.’s Markit Services PMI declined to 53.3 in February 2017 – the lowest level since September 2016, while the CAC added 0.6%.

The Day Ahead

• We think that market conditions remain unsettled over the near term ahead of the U.S. interest rate decision in mid-March, where a hike looks increasingly probable in view of the release of improved economic data recently. The rate hike could also be a harbinger of further hikes ahead as the U.S. economic prognosis appears to be strengthening.

• Consequently, we expect stocks on Bursa Malaysia to linger on a sideway trend over the near term amid the increasing market wariness and we think the key index is likely to linger within the 1,700 and 1,710 levels.

• Still, we think that market breadth is likely to stay elevated as market interest remains firm and this will continue to encourage rotational play as market players switch to laggards.

Company Briefs

• Tiger Synergy Bhd is aborting its proposed plan to issue Irredeemable Convertible Preference Shares (ICPS) with warrants, which was supposed to raise as much as RM41.7 mln in cash. The group, however, is currently in the midst of exploring the feasibility of other fundraising proposals.The termination of the ICPS is not expected to have a significant impact on the group.

• Separately, the company is disposing 28 plots of freehold land in Kuala Pilah, Negeri Sembilan, for RM2.0 mln to finance its working capital needs. The tracts are located in Ampang Tinggi and is expected to reap a net gain of RM476,766. The group also expects the sale to be completed within four months. (The Edge Daily)

• PPB Group Bhd said that is not planning to dispose of its Golden Screen Cinemas Sdn Bhd (GSC) unit, stressing that it has plans to expand the cinema business instead. The group also said that about RM215.0 mln of PPB’s earmarked RM401.0 mln of capex this year will be used to expand its film exhibition and distribution arm. GSC is one of the core businesses in PPB group, with nine new cinemas in the pipeline.

• PPB is set to open three new GSC branches comprising 39 screens this year, with six new cinemas in Vietnam totalling 38 screens via its 40%-owned Galaxy Studio JSC. The group will also add three more screens to its existing GSC Summit outlet in Petaling Jaya.

• The proposed expansion will bring the GSC's total screens to 348 screens in 36 locations, with Galaxy Studio owning 81 screens in 13 locations.

• Mudajaya Group Bhd’s joint-venture (JV) coal-fired independent power production (IPP) project in India is finally commencing after a long delay. Mudajaya has received a notification letter from the JV company RKM Powergen Pvt Ltd, on its intention to supply power to Uttar Pradesh Power Corp Ltd (UPPCL). RKM is 74.0%-owned by India-based RK Powergen Pvt Ltd, while MCB holds the remaining 26.0%.

• To recap, RKM inked a 25-year power purchase agreement for the supply of 350 megawatt power to several power distribution companies in Uttar Pradesh state in March last year.

• The tariff was subsequently approved by Uttar Pradesh Electricity Regulatory Commission on 1st February 2017, although UPPCL filed a review petition seeking certain modifications later.

• Following the approval of the modifications, UPPCL will issue the notice of despatch for the commencement of power supply by RKM.

• PUC Founder (MSC) Bhd is planning a 10.0% placement or up to 109.4 mln shares to raise RM9.3 mln for the expansion of its technology business, which would enhance the group’s performance.

• The expansion includes its electronic commerce and payment, advertising and media and related business including research and development and software and intellectual property software.

• The indicative issue price is 8.5 sen per placement share, representing a discount of 9.6% to the five-day weighted average market price up to 28th Februar, 2017 of 9.4 sen.

• Scomi Engineering Bhd and Prasarana Malaysia Bhd have mutually agreed to drop their charges against each other over a contractual disagreement and signed a new agreement today that will allow Scomi Engineering to complete the construction of a new depot for the Kuala Lumpur Monorail fleet expansion.

• The new agreement is a third supplemental contract to a primary agreement that was signed between the two parties in 2011 and will see Scomi Engineering delivering 12 sets of new four-car trains to Prasarana for the project.

• Additionally, the new contract will also require both parties to appoint an independent consultant to resolve all claim issues.

• IHH Healthcare Bhd is selling its 6.1% (or 8.4 mln shares) equity stake in India’s Apollo Hospitals Enterprise Ltd, reducing its shareholding in the latter to 4.8%. The group expects to earn a sale gain of RM312.0 mln from the disposal, which will be used to fund its working capital needs.

• IHH said that there were multiple purchasers, almost all of which were institutional shareholders. The disposal is part of its ongoing review of its investment portfolio to maximise return to its stakeholders.

• Sumatec Resources Bhd’s associate Semua Shipping Sdn Bhd has received a legal notice from Malayan Banking Bhd (Maybank) for allegedly defaulting on loans totalling RM121.4 mln.

• The group said it received the notice after Semua Shipping defaulted on six term loans for six vessels and one overdraft facility with Sumatec as guarantor.

• Separately, Sumatec said its NonExecutive Director, Chan Yok Peng has tendered his resignation due to personal matters. Mr. Chan was Sumatec’s Managing Director from 2003 to 2013 before being re-designated as a Non- Independent Non-Executive Director in 2013.

• Hock Seng Lee Bhd (HSL) has clinched a four-year wastewater treatment plant and sewer network project in Miri from the Sewerage Services Department Sarawak (Jabatan Perkhidmatan Pembentungan Sarawak) worth RM333.1 mln, via an open tender exercise.

• The scope of works encompasses the construction and commissioning of the wastewater treatment plant and sewer network as well as property connections. The contract will commence on 30th March 2017.

• Nexgram Holdings Bhd received an offer from Oriental Mace Sdn Bhd (OMSB) to undertake projects worth US$77.0 mln (RM338.8 mln) in total.

• The group was appointed as the principal contractor on 11th February 2017 to undertake engineering, procurement and construction contracts (EPC projects) on supplemental agreements entered into between AJ Biologics Sdn Bhd, AJ Research & Pharma Sdn Bhd and AJ Research Center Sdn Bhd (AJ Group) with OMSB.

• The projects include plans to build a vaccine manufacturing plant and a pharmaceutical and neutraceutical manufacturing plant, as well as a research and development laboratory and formulation development centre in Bandar Baru Enstek, Seremban.  

Source: Mplus Research - 6 Mar 2017