• The FBM KLCI (+1.1%) started off the week on a strong footing as the key index looks to take another stab at the 1,730 resistance level after closing at 1,727.36 points yesterday. The lower liners – the FBM Small Cap (+0.7%), FBM Fledgling (+0.9%) and FBM ACE (+0.4%), all traded positively on spillover effects from the positive sentiment on the local bourse, while the Properties (-0.04%) sector underperformed the broader market.

• Market breadth turned positive as advancers outpaced decliners on a ratio of 567-to-358 stocks. Traded volume, however, fell 11.7%, but was above the 3.0 bln mark with 3.01 bln shares exchanging hands.

• More than two third of the key index constituents advanced, led by BAT (+RM1.30), followed by Hong Leong Financial Group (+36.0 sen), Genting (+25.0 sen), CIMB (+24.0 sen) and Genting Malaysia (+23.0 sen). Significant advancers on the big board were Dutch Lady (+26.0 sen). HCK Capital (+25.0 sen), Panasonic (+18.0 sen), Lafarge (+16.0 sen), SAM Engineering (+16.0 sen) and Malaysia Airport Holdings (+15.0 sen).

• In contrast, consumer products stocks like Ajinomoto (-14.0 sen), Padini (-14.0 sen), Magni-Tech (-10.0 sen) and Apollo retreated, while Negri Sembilan Oil Palms fell 15.0 sen. There were only two decliners on the big board –Petronas Dagangan (-40.0 sen) and AmBank (-4.0 sen).

• Japanese equities extended their losses as the Nikkei declined 0.5% on rising geopolitical tensions in North Asia after North Korea launched several missiles. The Shanghai Composite gained 0.5% despite lowering its targeted GDP growth to 6.5% in 2017, while the Hang Seng Index closed 0.2% higher. ASEAN stockmarkets, meanwhile, closed mostly higher.

• Wall Street retreated overnight as the Dow fell 0.2% on uncertainties over the Trump's administration economic policy as details are still lacking. On the broader market, the S&P 500 declined 0.3% with only the energy sector (+0.3%) advancing, while the Nasdaq ended 0.4% lower.

• Earlier, European stockmarkets – the FTSE (-0.3%), CAC (-0.5%) and DAX (- 0.6%), all fell on weakness in banking shares. Deutsche Bank AG’s stock tanked 7.9% after unveiling its plan to raise US$8.5 bln in in bid to strengthen its capital position, while other notable decliners were Credit Suisse Group AG (- 4.3%), Royal Bank of Scotland PLC (- 2.6%) and BNP Paribas (-1.0%).

The Day Ahead

• The Malaysian stockmarket certainly confounded expectations with its strong gains yesterday despite the generally cautious environment as foreign funds were nibbling on the index heavyweights.

• After yesterday’s strong gains, however, we think that a pullback could be imminent with quick profit taking activities likely to take hold over the near term. The overnight weakness in key global stock indices, coupled with the lack of fresh leads, is likely to hasten the short-term consolidation.

• Still, we think the pullback will be mild for now and the key index should find ample support at the 1,710-1,710 levels, while the 1,730 level is the immediate resistance.

Company Briefs

• KKB Engineering Bhd has secured two contracts worth RM100.7 mln which is expected to boost its earnings in 2018. The first contract is from CMS Infra Trading Sdn Bhd (CMSIT) and is for the supply of concrete-lined mild steel pipes and mechanical coupling to JKR Central Unallocated Stores in Tanah Puteh, Kuching.

• The second contract is from Boustead Petroleum Marketing Sdn Bhd for the supply of LPG cylinders valid until 3Q2017. (The Star Online)

• Hovid Bhd has been reissued the manufacturing licence for its plant in Chemor, Perak, from the National Pharmaceutical Control Bureau, a unit under the Ministry of Health Malaysia. The license is valid from 6th March 2017 and is to be renewed three months before its expiry on 31st December 2017.

• The group’s license for its Ipoh plant, however, is pending the completion of corrective actions currently in progress. (The Star Online)

• PDZ Holdings Bhd intends to raise up to RM43.5 mln through a rights issue with free warrants on a basis of four rights shares together with three free warrantsfor-every two PDZ shares held by entitled shareholders after the capital reduction and share consolidation.

• Assuming the rights shares are issued at 10.0 sen, the group will be able to raise up to RM43.5 mln under a maximum subscription scenario. (The Edge Daily)

• Kumpulan Jetson Bhd has proposed a private placement to raise as much as RM7.8 mln to finance its working capital within a one-year period, with an indicative issue price of 35.0 sen per placement share. The group expects the corporate exercise to be completed by the 2Q2017. (The Edge Daily)

• KYM Holdings Bhd is partnering Swedish paper manufacturer, BillerudKorsnäs AB for the manufacture and distribution of industrial sacks in the Southeast Asian region.

• The group willmanufacture up to 80.0 mln of industrial paper sacks annually for BillerudKorsnäs for supply throughout the region. The seven-year contract is expected to triple the company’s export sales and increase its market share in Southeast Asia’s growing multiwall industrial paper sack market. (The Edge Daily)

• Managepay Systems Bhd is acquiring equity stakes in two sports management companies as it targets to introduce a mobile app for sports facilities and equipment.

• NVBA Petaling Jaya BC Sdn Bhd (PJBC) and Stark Events Sdn Bhd have both accepted letters of intent (LOI) from Managepay for the proposed acquisitions of 24.0% in PJBC for RM155,000, and 29.7% in Stark Events for RM45,000.

• The group will then subscribe to an additional 450,000 shares and 90,000 shares in PJBC and Stark Events for a cash consideration of RM450,000 and RM90,000 respectively. Managepay is expected to hold about 60.0% equity interest in PJBC and 59.9% equity interest in Stark Events following the acquisitions.

• PJBC is primarily involved in badminton coaching, organising badminton competitions and sports facilities management, while Stark Events organises, promotes and manages sports events. (The Edge Daily)

• Sumatec Resources Bhd has announced that will not experience any financial impact from the alleged default on loans totalling RM121.4 mln by its associate, Semua Shipping Sdn Bhd, as its substantial shareholder has consented to pay the amount should the need arises.

• To recap, Semua Shipping had received a legal notice from Malayan Banking Bhd (Maybank) for allegedly defaulting on six term loans for six vessels and one overdraft facility for which Sumatec is the guarantor last Friday.

• The group said that the six vessels are in the progress of being sold. If the sale takes place, the financial impact of the loan default on the group will be minimal. (The Edge Daily)

• Techway Engineering Sdn Bhd (TESN), a supplier and contractor of engineering and technical services and products relating to renewable energy, is seeking a listing on the ACE Market of Bursa Malaysia through a backdoor listing of Guidance Note 3 company Wintoni Group Bhd.

• The latter has signed a Memorandum of Understanding with the vendors of TESB and a new company to be incorporated by the vendors (NewCo) under a proposed reverse takeover exercise.

• The group targets to sign the definitive agreements on or before 30th September 2017. (The Star Online)  

Source: Mplus Research - 7 Mar 2017