• The FBM KLCI (+0.1%) closed higher on Friday after clawing back earlier losses – helped by last minute buying in selected plantations heavyweights. The Main Board also ended up by 0.1% W.o.W to finished marginally above the 1,791.0 psychological mark. The lower liners finished mixed, while the broader market was mostly lower, with the exception of the consumer products (+0.5%), finance (+0.2%) and plantations (+1.1%) subsectors.

• Market breadth was tepid as losers outrunning winners on a ratio of 525-to- 359 stocks. Traded volumes rose marginally by 0.3% to 2.0 bln shares on the back of buying-support from local funds.

• Plantations heavyweights like KLK (+56.0 sen) and IOI Corporation (+11.0 sen) pushed the local bourse higher on Friday, followed by PPB Group (+28.0 sen), Hong Leong Bank (+22.0 sen) and Hong Leong Financial Group (+14.0 sen). Meanwhile, other chart-toppers include Kotra Industries (+39.0 sen), Ajinomoto (+36.0 sen), Aeon Credit Service (+24.0 sen), Fraser & Neave (+22.0 sen) and Southern Acids (+18.0 sen).

• On the flipside, Hap Seng Consolidated (- 32.0 sen), Maxis (-13.0 sen), Genting (- 11.0 sen), Genting Malaysia (-10.0 sen) and Petronas Gas (-8.0 sen) underperformed its peers on the Main Board. Significant losers on the broader market were Dutch Lady (-48.0 sen), Heng Yuan Refining (-16.0 sen), Atlan Holdings (-15.0) and SCGM (-14.0 sen). Top Glove also lost 19.0 sen after posting a 20.0% Y.o.Y fall in its cumulative 9MFY17 earnings.

• Key regional indices ended mostly higher – led by the Nikkei (+0.6%), following the Bank of Japan’s decision to keep its interest rates unchanged. The Hang Seng (+0.2%) also finished positively, buoyed by gains in telecommunication services (+0.7%) and financials (+0.6%) related stocks. The Shanghai Composite index (- 0.3%), however, bucked the general market trend to close in the red, dragged down by lower-than-expected investment data and slower housing market amid tighter credit conditions. The majority of ASEAN bourses rallied on Friday’s close.

• U.S. benchmark indices eked-out marginal gains on Friday, after the market was weighed down by declines in retailers following Amazon’s announcement that it is acquiring Whole Foods for US$13.7 bln. The Dow (+0.1%) inched higher with gains capped by losses in Wal-Mart (-4.7%), amid disappointing retail sales. On the broader market, the S&P 500 flatlined while the Nasdaq finished 0.2% lower.

• European equities rebounded as investors cheered the latest bailout agreement struck between Greece and the European Union (EU). The FTSE (+0.6%) snapped four consecutive days of losses, supported by the rally in energy stocks, alongside higher crude oil prices. The CAC also gained 0.9% on expectations that President Emmanuel Macron will win the majority in Parliament, while the DAX gained 0.5% to close above the 12,750.0 psychological level.

The Day Ahead

• We continue to think that the general market environment is still largely lackluster amid the combination of stretched valuations and lack of convincing leads that will continue to leave the market in a state of flux. However, we still think that there remains selective support on the index heavyweights and this will keep the FBM KLCI afloat over the near term. ? Consequently, we expect the key index to continue lingering within the 1,790 and 1,795 levels over the near term with the continuing market support.

• Nevertheless, the broader market and lower liners will continue to see insipid trading as there are fewer compelling buys with many stocks already fairly valued. Therefore, we think market volumes will likely remain on the moderate side for the foreseeable future.

Company Briefs

• Eastern & Oriental Bhd (E&O) is selling its entire stake in E&O Express Sdn Bhd, the owner-operator of Lone Pine Hotel in Batu Feringghi, Penang for RM85.0 mln to with duty-free goods trader, Langkawi Saga Shopping Centre Sdn Bhd and liquor and cigarette wholesaler Lubritrade Trading Pte Ltd.

• The RM85.0 mln purchase consideration includes the settlement of the redemption sum owing by E&O Express to a local financial institution of RM21.8 mln and a RM11.1 mln settlement of inter-company loan owing to Eastern & Oriental Hotel.

• The cost of investment in the shares being sold was RM51.5 mln and the company is expected to realise an estimated gain on disposal after taxation of about RM23.3 mln. (The Star Online)

• Top Glove Corporation Bhd’s 3QFY17 net profit gained 24.4% Y.o.Y to RM77.7 mln, following an increase in the average selling price as a result of a surge in raw material prices. Revenue for the quarter rose 29.3% Y.o.Y to RM869.6 mln despite a challenging business environment characterised by sharp increases in raw material prices.

• For 9MFY17, cumulative net profit fell 21.1% Y.o.Y to RM234.4 mln. Revenue for the period, however, added 15.7% Y.o.Y to RM2.51 bln. An interim dividend of 6..0 sen, payable on 17th July 2017 was declared. (The Star Online)

• Fajarbaru Builder Group Bhd has bagged a RM12.8 mln contract from Petronas Dagangan Bhd (PetDag) to build an underground pipeline foundation at KLIA2. The contract is for 34 weeks starting 16th June 2017 and entails engineering, procurement, construction and commissioning of phase two of Jet-A1 underground pipeline foundation and associated works for PetDag's subsidiary, Kuala Lumpur Aviation Fuelling System Sdn Bhd. (The Edge Daily)

• Boustead Holdings Bhd’s 51%-owned subsidiary, MHS Aviation Bhd (MHS) was given a 90-day notice by Petronas Carigali Sdn Bhd's (PCSB) over the latter's intention to terminate a contract originally signed in June 2011. MHS received the letter notifying of PCSB’s intention to terminate, without cause, the contract for the provision of rotary wing aircraft, equipment and services for Heavy Type Aircraft EC225.

• MHS was originally engaged by PCSB to provide it with five EC225 helicopters to be used in PCSB's oil and gas exploration and production operations. However, the use of the helicopters was unilaterally suspended by PCSB after two forced landings in the North Sea in May and October 2012 involving EC225 helicopters that were unconnected to the parties in the present case. (The Edge Daily)

• Hengyuan Refining Company Bhd is investing US$160.0 mln (RM700.0 mln) in two projects at its refining complex in Port Dickson, Negri Sembilan. The investment in the first project, estimated at US$135.0 mln, would enable the group to economically produce Euro 4M Mogas with the installation of an integrated complex.

• The second project, estimated at US$25.0 mln, involves the replacement of the top dome and catalyst separation system of the regenerator reactor of the Long Residue Catalytic Cracking Unit (LRCCU). (The Edge Daily)

• Rev Asia Bhd has asserted that its core business will remain in the technology sector following the sale of its 70.0%- owned digital media subsidiary to Media Prima Bhd. In May 2017, the Internet media company sold its subsidiary, Rev Asia Holdings Sdn Bhd (RAHSB) to Media Prima for RM105.0 mln, thereby divesting its entire stake in the digital media arm.

• The sale is expected to be completed by 3Q2017 and the group will award shareholders with the proposed dividend of 44.0 sen per share. On completion of the sale, Rev Asia would have up to RM8.0 mln cash, which will be used for new business acquisition. (The Edge Daily)

• NetX Holdings Bhd has proposed to issue and allot up to 500.0 mln new shares to Australian investment bank Macquarie Bank for about RM25.5 mln, which it will use to fund the development of a mobile payment exchange (MPex) system.

• Macquarie Bank will not seek the nomination of any person to the board or the removal or replacement of any person from the board, or to participate in the management or decision-making of the company.

• Of the RM25.5 mln gross proceeds expected to be generated from the exercise — based on an indicative subscription price of 5.1 sen per subscription share, RM20.0 mln will be used to develop and market the MPex system, whereas RM4.7 mln will be used as working capital. (The Edge Daily)  

Source: Mplus Research - 19 Jun 2017