• The FBM KLCI (-0.1%) finished on soft footing despite paring back some of its earlier losses, dragged down by selling pressure on selected heavyweights. The lower liners – the FBM Small Cap (-0.7%), the FBM Fledgling (-0.9%) and the FBM Ace (-2.6%) also declined. Meanwhile, eight out-of-ten sub-sectors ended in the negative territory at Monday’s close.

• Market breadth stayed negative as decliners outweighed advancers by more than three-fold. Traded volumes declined by 3.5% to 1.93 bln shares as investors gauge the political events in the Europe.

• Significant blue-chip decliners on Monday were Kuala Lumpur Kepong (-40.0 sen), PPB Group (-30.0 sen), Hong Leong Bank (-14.0 sen), IOI Corporation (-8.0 sen) and CIMB (-6.0 sen). Heineken Malaysia (-34.0 sen), KESM (-30.0), Petron Malaysia (- 29.0 sen) and Aeon Credit Service (-22.0 sen) also weighed on the broader market. Heng Yuan Refining shed 25.0 sen, on profit-taking after announcing its plans to invest RM700.0 mln in two projects at Port Dickson, Negeri Sembilan.

• On the other hand, United Plantations (+90.0 sen), Ajinomoto (+50.0 sen), SAM Engineering (+43.0 sen), Fraser & Neave (+14.0 sen) and LTKM (+13.0 sen) dominated the gainers’ list. Meanwhile, telco giants like Axiata (+8.0 sen) and Digi (+5.0 sen) advanced, followed by Hap Seng Consolidated (+20.0 sen), MISC (+9.0 sen) and Astro (+7.0 sen).

• Key regional stockmarkets closed positively ahead of the start of the Brexit negotiations between the U.K. and the European Union. The Nikkei notched up a 0.6 gain on optimism that Japan is on the road to recovery after registering the highest increase in exports since January 2015. The Shanghai Composite index (+0.7%) also ended higher, boosted by the central bank’s capital injections into the money markets, while the Hang Seng jumped 1.2% to 25,924.6 points. The majority of ASEAN bourses ended in the green on Monday.

• U.S. equities finished in the positive territory, amid bargain hunting in technology stocks following last week’s selldown. The Dow rose 0.7% - led by gains in Apple (+2.9%) and JP Morgan Chase (+2.2%). Similarly, the tech-heavy Nasdaq also rallied 1.4% while, the S&P 500 notched 0.8%, fuelled by gains in information technology and healthcare stocks.

• Key European bourses advanced overnight, as investors shrugged off the terror attacks in London and Paris ahead of U.K and the European Union’s scheduled meeting to discuss the former’s exit from the EU. The FTSE (+0.8%) extended its gains for the second-straight day, buoyed by the strength in materials-related stocks. The CAC (+0.9%) also advanced, lifted by President Emmanuel Macron’s parliamentary win, while the DAX rallied 1.1% with nine-of-ten sectors in the green.

The Day Ahead

• After lagging the performance of regional bourses yesterday, we expect the FBM KLCI to play catch up to the regional gains over the near term following the strong overnight performance of key global indices that would also permeate to Bursa Malaysia.

• However, the upsides may be limited due to the generally tepid market sentiments and lack of convincing buying opportunities. Therefore, we think the upsides may be limited to around the recent high of 1,795 level. Interest among the lower liners may also return on bargain hunting activities, but we see quick profit taking activities and lack of follow through buying may also limit their upsides.

Company Update

• Barakah Offshore Petroleum Bhd has clinched a US$14.3 mln (RM61.0 mln) contract to help in the decommissioning of the Petroliam Nasional Bhd (Petronas)- operated Chinguetti field, offshore Mauritania. The Chinguetti deepwater field is located about 80 km west of the coastline and approximately 90 km from the Mauritanian capital, Nouakchott.

• The project involves temporary plugging of 15 wells. The contract is for the provision of well intervention vessel (WIV), platform supply vessel, and all necessary parts, spares, repairs, refurbishments and/or modifications to the WIV and all coordination, technical support and supervisory works. The job is expected to commence this month. (The Star Online)

Comments

• The abovementioned project marks its second project secured in 2017. Barakah’s unbilled orderbook now stands at approximately RM950.0 mln will provide earnings visibility over the next two years. Moving forward, the group will continue to focus on cost optmisation and focus on securing contracts from the domestic market.

• Given that it falls within our orderbook replenishment of RM300.0 mln for 2017, we made no changes to our valuations and maintain our SELL recommendation with an unchanged target price of 25.0 sen. Our target price is arrived by ascribing an unchanged target PER of 14.5x to our 2018 fully diluted EPS estimate of 1.6 sen.

Company Briefs

• Maxis Bhd could raise up to RM1.72 bln from its proposed placement of 300.0 mln shares at prices ranging from RM5.52 and RM5.75 per share. The price for the share placement was 2.2% to 6.1% below the last closing price of RM5.88. The shares represent about 4.0% of its existing share capital.

• The funds would be would be used to pare down its debts and to partly fund its 700MHz spectrum payment, which may be allocated in 2018 and investments in adjacent businesses. The private placement is expected to be completed by end of July 2017. (The Star Online)

• Felda Global Ventures Holdings Bhd (FGV) saw the appointment of Independent and Non-Executive Director Tan Sri Sulaiman Mahbob as its new Chairman, replacing Tan Sri Mohd Isa Abdul Samad who has resigned. MSM Malaysia Holdings Bhd, meanwhile, reported Mohd Isa has stepped down as Non-Independent and Non-Executive Chairman to focus on personal undertakings. It’s Director, Datuk Rosini Abd Samad would replace Mohd Isa as the group’s interim Chairman. (The Edge Daily)

• Sapura Energy Bhd’s 1QFY18 net profit sank 75.0% Y.o.Y to RM27.5 mln amid higher taxation and lower topline contribution from the drilling and exploration segment as well as its production segment. Revenue for the quarter fell 8.8% Y.o.Y to RM1.77 bln. (The Edge Daily)

• Mesiniaga Bhd has bagged a RM10.2 mln contract for work at one of Universiti Sains Malaysia’s faculty buildings in Penang. The group has received a letter of award from the university to supply, deliver, install, configure, test and commission core and distribution switche, as well as DDI solution (DNS, DHCP and IP address management solution) and IPV6 (Internet Protocol version 6) implementation for the campus' Pusat Pengetahuan Komunikasi dan Teknologi. The contract period is for two months commencing 19th June 2017, followed by a one-year maintenance period. (The Edge Daily)

• Yinson Holdings Bhd’s 1QFY18 net profit surged 169.4% Y.o.Y to RM60.3 mln, mainly due to higher revenue from its marine business, lower foreign exchange loss of RM10.2 mln as well as higher contribution from joint ventures and associates of RM3.6 mln. Revenue for the quarter gained 49.4% Y.o.Y to RM172.4 mln. (The Edge Daily)

• Heitech Padu Bhd has secured a contract worth RM10.1 mln to supply hardware, software and network equipment to Hospital Raja Perempuan Zainab II in Kota Baru, Kelantan. The group received a letter of award for the supply, delivery, installation, configuration, integration, testing and commissioning of hardware, software, and network equipment for the implementation of Picture Archiving and Communication System (PACS) and improve the Radiology Module, Sistem Pengurusan Pesakit (SPP). (The Edge Daily)

• Icon Offshore Bhd has bagged a RM3.4 mln job to provide an anchor handling tug supply vessel to support PCPP Operating Co Sdn Bhd's (a 40% Petronas-owned associate) plug and abandonment programme at Block SK305 in Sarawak. The contract is for 166 days beginning 19th June 2017 with PCCP —. (The Edge Daily)

• Malaysia Building Society Bhd (MBSB) has submitted an application to Bank Negara Malaysia (BNM) for approval of its proposed merger with Asian Finance Bank Bhd (AFB), which is expected to help give MBSB full Islamic banking status. The application had been submitted within the stipulated six month time frame to seek the approvals of BNM and/or the Ministry of Finance. (The Edge Daily)  

Source: Mplus Research - 20 Jun 2017