• The FBM KLCI (-0.3%) extended its losses for the third-straight day, dragged down by profit-taking activities in selected heavyweights. The lower liners was also shrouded with a negative tone – led by the FBM Ace (-0.9%) in an equally bearish broader market that saw most subindices closing in the red. The technology (+0.6%) sub-sector, however, bucked the overall weak sentiment to close higher.

• Market breadth was negative as losers outpaced winners on a ratio of 311-to- 544. Traded volumes continued to fall by 6.3% to 1.69 bln shares as investors retire to the sidelines ahead of the long weekend.

• Significant key-index decliners were BAT (-RM1.18), Genting Malaysia (-9.0 sen), IHH Healthcare (-9.0 sen) and Hong Leong Bank (-8.0 sen). Tenaga also shed 14.0 sen after the Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB) reduced their stakes in the former. Meanwhile, in the broader market, Sam Engineering & Equipment (-38.0 sen), Petron Malaysia (-36.0 sen), Heng Yuan Refining Company (-30.0 sen), Hume Industries (-17.0 sen) and MSM Malaysia (-14.0 sen) underperformed its peers.

• On the other hand, Dutch Lady (+34.0 sen), Time Dotcom (+27.0 sen), Ajinomoto (+22.0 sen), Vitrox (+18.0 sen) and Kawan Food (+14.0 sen) pushed the broader market higher. Main Board outperformers were energy stocks like Petronas Dagangan (+56.0 sen), MISC (+7.0 sen) and Petronas Gas (+4.0 sen), trailed by Hong Leong Financial Group (+16.0 sen) and Public Bank (+6.0 sen). that rallied on Wednesday’s close

• Key regional benchmark indices ended broadly lower, weighed down by the persistent weakness in crude oil prices. The Nikkei finished down by 0.5% - led by losses in Toshiba (-5.2%), while the Hang Seng index dipped 0.4% after coming off intra-day high to close slightly above the 3,500.0 psychological level. The Shanghai Composite index (+0.5%), however, managed to closed positively as investors cheered the inclusion of China’s A-shares into MSCI’s benchmark indexes, while majority of ASEAN stockmarkets closed lower.

• U.S. equities ended mostly lower, following a volatile trade, as rising U.S. shale production and global output hammered crude oil prices into the bearmarket territory. The Dow (-0.3%) continued its descent, weighed down by energy and industrial stocks, while the S&P 500 inched lower after paring back some of its earlier losses. The Nasdaq, however, gained 0.7%, lifted by healthcare and technology shares.

• European stockmarkets were painted in red, alongside falling crude oil prices and uncertainties in the European political background. The FTSE finished 0.3% lower, dragged down by loses in financial, energy and consumer goods-related companies, while the CAC trimmed 0.4%, following the departure of President Emmanuel Macron’s key ally. The DAX also lost 0.3% after lingering in the negative territory for the entire session.

The Day Ahead

• There is no change to our immediate market view and we continuing to think the market will succumb to further selling due to the weaker market sentiments and fewer compelling buys. Also, the buying interest is waning ahead of the Hari Raya break and this could leave sentiments on the downside for longer.

• As it is, the 1,770 support level is now coming into play and if it gives way, the key index could dip further to the major support of 1,750 level. Meanwhile, we think any rebound will be weak and inconsequential due to the lack of buying interest. Therefore, the 1,780 level will again become the major resistance.

• The lower liners and broader market shares will also endure more lackluster conditions amid the weaker market sentiments that are resulting in more retail players staying on the sidelines. MACRO BRIEF

• The inflation rate, as measured by the Consumer Price Index (CPI), rose 3.9% Y.o.Y in May 2017, driven by higher fuel prices. However, the CPI was below economists’ forecast of a 4.1% Y.o.Y increase. Among the major groups which recorded increases were the indices for transport (+13.1% Y.o.Y), food and nonalcoholic beverages (+4.4% Y.o.Y), recreation services and culture (+2.9% Y.o.Y), health (+2.9% Y.o.Y), restaurants and hotels (+2.3% Y.o.Y), housing, water, electricity, gas and other fuels (+2.2% Y.o.Y). For the period January to May 2017, the CPI registered an increase of 4.3% Y.o.Y. (The Star Online)

Company Update

• Kumpulan Perangsang Selangor Bhd (KPS) is raising its stake to 51.0% from 30.0% in KPS-HCM Sdn Bhd, an infrastructure and road maintenance firm that it jointly owns with Protasco Bhd. KPS is paying RM1.7 mln to acquire the additional 21.0% stake from Protasco's wholly-owned unit, HCM Engineering Sdn Bhd. (The Edge Daily) Comments
   
• We are neutral on the abovementioned disposal and despite a potentially minor decline in contribution to Protasco, KPS-HCM intend to broaden the scope of its business activities to include general civil engineering works, building construction and maintenance works, in addition the existing business activities that includes construction, maintenance, refurbishment and rehabilitation of roads.

• We made no changes to our earnings forecast. We maintain our BUY recommendation on Protasco with an unchanged target price RM1.25. Our target price is based on a sum-of-parts basis by ascribing an unchanged target PER of 11.0x to its 2017 construction earnings as well as a target PER of 8.0x (unchanged) to its 2017 concession and engineering services’ earnings. Its education and trading units valuations remain pegged at target PERs of 6.0x respectively due to their smaller scale businesses, while its property development division’s valuation is from ascribing an unchanged at 0.6x of its BV. COMPANY BRIEF

• Ekovest Bhd’s unit, Ekovest KL Bund Sdn Bhd, has received the approval-inprinciple from the government for the proposed development of the Kuala Lumpur (KL) River City in Gombak. Further details on the development would be made upon the finalisation of the privatisation terms and conditions for the proposed project.

• KL River City project, also known as the River of Life”, is a riverfront development that would be stretching 3.0 km along the Gombak River. It covers a potential development area of about 129.5 ha., comprising the EkoGateway, EkoPark Place, EkoAvenue, EkoTitiwangsa and EkoQuay developments. (Bernama)

• Bumi Armada Bhd has suspended the provision of floating, production, storage, and offloading vessel (FPSO) services to Erin Petroleum Nigeria Ltd after Bumi Armada’s units issued notices of suspension to the subsidiary of Texas-headquartered Erin Energy Corp, an independent oil and gas player that focuses on energy resources in sub-Saharan Africa.

• The bareboat charter contract and operation and maintenance (O&M) contract involving FPSO Armada Perdana is suspended due to longstanding delays in the charterparty payments due to Armada Oyo Ltd as well as rregular payments for the O&M services provided by Bumi Armada (Singapore) Pte Ltd. Bumi Armada did not disclose how long the problems had persisted or what was the amount due.

• The two Bumi Armada units had inked the contracts with Erin Energy group member, Oceanic Consultants Nigeria Ltd on 12th February 2014. Each of the contracts was for an initial period of seven years starting from 1st January 2014, with an automatic extension for two additional terms of 12 months each.

• The combined value of the contracts for the initial period was about US$381.0 mln (RM1.63 bln), with a further aggregate value of US$108.0 mln (RM463.4 mln) if the extension options were fully exercised. (The Star Online)

• Kronologi Asia Bhd will establish a data back-up centre in Hong Kong via its partnership with Singapore Technologies Electronics Ltd (ST Electronics). The data protection service provider plans to invest up to US$2.4 mln (RM10.0 mln) in new equipment to be installed at ST Electronics' existing data centre there, making it the group’s second physical location after Singapore. Kronologi expects to roll out its services in Hong Kong in 2H2017. (The Edge Daily)

• Bina Puri Holdings Bhd hopes to increase the bottom line contribution of its power business by 20.0% per annum with the listing of its 80.0%-owned Indonesian subsidiary, PT Megapower Makmur Tbk on the Indonesian stock exchange on 5th July 2017. Following the listing, the group will consider further expansion plans for the power plant there in the near future. (The Edge Daily)

• Comfort Gloves Bhd’s 1QFY18 net profit stood at RM10.2 mln vs. a net loss of RM9.4 mln in the previous corresponding quarter, which the latter was affected by a fire outbreak incurred at a subsidiary in March 2016, costing the company RM12.8 mln in write-offs. Revenue for the quarter gained 79.2% Y.o.Y to RM93.7 mln. (The Edge Daily)

• Glomac Bhd’s 4QFY17 net profit slumped 94.4% Y.o.Y to RM1.3 mln, dragged down by losses in other operating income and slower sales due to completion of Glomac Centro and Reflection Residences, whilst the Saujana Rawang project is at tail-end. Revenue for the quarter fell 16.1% Y.o.Y to RM158.9 mln.

• For FY17, cumulative net profit added 36.5% Y.o.Y to RM110.4 mln. Revenue for the year, however, declined 5.6% Y.o.Y to RM581.8 mln. A final dividend of 1.5 sen per share was announced. (The Edge Daily)

• Berjaya Media Bhd (BMedia) fell into Practice Note 17 (PN17) status as its shareholders’ equity on a consolidated basis of less than RM40.0 mln represented 25.0% or less of its issued capital.

• Separately, BMedia’s 4QFY17 net loss widened to RM14.0 mln, from RM3.5 mln in the previous corresponding quarter, largely due to RM12.0 mln impairment loss on publishing rights. Revenue for the quarter, however, gained 6.1% Y.o.Y to RM9.1 mln.

• For FY17, cumulative net loss widened to RM21.1 mln, from RM15.9 mln recorded in the previous corresponding year. Revenue for the year fell 4.0% Y.o.Y to RM42.8 mln. (The Edge Daily)

• Ire-Tex Corp Bhd’s directors filed a suit in the High Court against former director and shareholder, Datuk Tey Por Yee and 19 others, seeking damages to be assessed against the persons sued for conspiracy to injure, breach of duty of care towards the directors. (The Edge Daily)

• O&C Resources Bhd’s 3QFY17 net profit stood at RM1.1 mln vs. a net loss of RM1.3 mln recorded in the previous corresponding quarter, mainly due to higher profit contribution from its construction segment. Revenue for the quarter jumped 172.6% Y.o.Y to RM23.4 mln.

• For 9MFY17, cumulative net profit stood at RM2.4 mln vs. a net loss of RM0.7 mln recorded in the previous corresponding period. Revenue for the period jumped 123.9% Y.o.Y to RM64.2 mln. (The Edge Daily)

• Scomi Engineering Bhd has filed a suit in the High Court against Prasarana Malaysia Bhd and Rapid Rail Sdn Bhd, seeking damages over statements made in relation to its four-car monorail trains. The statements had highlighted safety concerns or risk associated with the design and/or manufacture of the trains by Scomi Engineering's whollyowned subsidiary, Scomi Transit Projects Sdn Bhd (STP). (The Edge Daily)

• My E.G. Services Bhd (MyEG) is going to lease a plot of land in Johor for RM10.8 mln from state investment entity Johor Corp to build its own hostel facilities. MyEG has accepted the offer on 21st June 2017 for the 30-year lease, which comes with an option to renew for another 30 years. (The Edge Daily)  

Source: Mplus Research - 22 Jun 2017