• The FBM KLCI (-0.4%) succumbed to selling pressure last Friday in tandem with the weakness in key regional indices as markets were spooked by the renewed volatility on Wall Street. Still, the key index recorded a 1.4% Q.o.Q gain in 2Q2017. The lower liners – the FBM Small Cap (-0.2%), FBM Fledgling (-0.1%) and FBM ACE (-0.6%) all fell, while the Industrial (+0.01%), Consumer Products (+0.7%) and Properties (+0.9%) sectors outperformed the negative broader market.

• Market breadth turned negative as decliners went ahead of gainers on a ratio of 507-to-336 stocks. Traded volumes, however, gained 7.9% to 1.51 bln shares on signs of profit taking activities.

• Two-thirds the key index constituents fell, dragged down by IHH (-18.0 sen), followed by Petronas Gas (-16.0 sen), Hong Leong Financial Group (-14.0 sen), Genting (-8.0 sen) and Genting Malaysia (-8.0 sen). Amongst the biggest decliners on the broader market were Teck Guan Perdana (-22.0 sen), Ajinomoto (-20.0 sen), Malaysia Airport Holdings (-14.0 sen) and United Uli-Corporation (-13.0 sen). Kumpulan Jetson slumped 7.0 sen, despite bagging a RM919.3 mln subcontract job at Jalan Conlay.

• Consumer Products stocks like Nestle (+RM1.52), MSM (+32.0 sen), Dutch Lady (+22.0 sen) and Panasonic (+20.0 sen) anchored the gainers list, while Hai-O Enterprise added 19.0 sen. Key advancers on the FBM KLCI were PPB Group (+22.0 sen), KLCC (+19.0 sen), Hap Seng (+13.0 sen), Telekom (+4.0 sen) and MISC (+3.0 sen).

• Asia benchmark indices tracked the weakness on Wall Street as the Nikkei fell 0.9% to close marginally above the 20,000 psychological level – marking a 5.9% Q.o.Q gain in 2Q2017. The Hang Seng Index, however, declined 0.8% to close 6.9% higher Q.o.Q in 2Q2017. The Shanghai Composite added 0.1%, lifted by stronger-than-expected manufacturing data, but ended 0.9% Q.o.Q lower in the same quarter. ASEAN stockmarkets, meanwhile, ended on a negative note on Friday.

• Wall Street rebounded in the final trading day of 1H2017 as the Dow added 0.3%, buoyed by consumer and industrial stocks as it subsequently recorded 3.3% Q.o.Q gain in 2Q2017. On the broader market, the S&P 500 added 0.2%, but the Nasdaq slipped 0.1% for the day.

• Earlier, European benchmark indices traded in a similar manner – the FTSE (- 0.5%), CAC (-0.7%) and DAX (-0.7%), all extended their losses as earlier gains were erased by the firmer Euro currency and British Pound against the Greenback. U.K.’s revised 1Q2017 GDP rose 2.0% Y.o.Y, in line with economists’ expectations.

The Day Ahead

• With the key index dipping over the past few sessions, sentiments have turned weaker as there is little fresh buying interest amid the lack of fresh positive leads. Therefore, we see the Malaysia stockmarket continuing to drift as market wariness remains. This indifferent market conditions also means that the downside pressure is still prevalent and any near term rebound is likely to be mild.

• Last Friday’s market drop has left the key index at the 1,766 support level and it the level gives way, the 1,760 support level will come into play. On the upside, the near-term resistance is at the 1,770 level.

• On the broader market, sentiments also remain indifferent and the wariness is likely to see most retail players remaining on the sidelines until there is further clarity.

COMPANY BRIEF

• LB Aluminium Bhd's 4QFY17 net profit decreased 76.0% Y.o.Y to RM1.4 mln, from RM5.9 mln in the same period last year, mainly due to higher taxes, although revenue gained 14.1% Y.o.Y to RM124.5 mln, from RM109.2 mln.

• For the full year, the group’s net profit jumped to RM18.0 mln against RM15.7 mln a year earlier, lifted by revenue that was 4.8% Y.o.Y higher to RM466.0 mln, from RM444.8 mln.

• Subsequently, the group also proposed a dividend of 2.5 sen a share. The group remains cautious over the aluminium price volatility and would continue to monitor prices to protect the company's profit margin and ensure selling prices of the company's products remained competitive. (The Star Online)

• Astino Bhd's 3QFY17 net profit climbed 18.0% Y.o.Y to RM11.7 mln, from RM9.9 mln last year, on the back of higher sales and profit margin. Revenue for the quarter, meanwhile, gained marginally by 2.0% Y.o.Y to RM128.4 mln, compared with RM126.2 mln in 3QFY16.

• Cumulative 9MFY17 net profit expanded 34.0% Y.o.Y to RM29.4 mln, from RM21.9 mln in 9MFY16, as revenue rose 4.0% Y.o.Y to RM375.8 mln, from RM360.9 mln a year earlier, buoyed by higher steel price and stronger overseas market demand. (The Star Online)

• Goldis Bhd has revised the options for its takeover offer for IGB Corp Bhd. To recap, the former originally offered three options to IGB shareholders — cash only, or a cash plus Goldis shares on a 30:70 ratio respectively, or cash plus new Redeemable Convertible Cumulative Preference Shares (RCCPS) on a 20:80 ratio respectively. Meanwhile, shareholders owning fewer than 100 IGB shares would be offered cash only.

• Under the revision, Goldis is planning to allow all scheme shareholders to have the same election rights, whereby those with fewer than 100 IGB shares can elect for the cash option, the cash and share option or the revised cash and new RCCPs option.

• Secondly, the proportion of cash to new RCCPS to be offered under the cash and new RCCPS option has been revised from 20.0% in cash and 80.0% New RCCPS to 12.0% in cash and 88.0% new RCCPS. (The Edge Daily)

• Borneo Oil Bhd posted a 50.8% Y.o.Y drop in its 1QFY17 net profit to RM5.3 mln, from RM10.7 mln a year ago as the previous corresponding period’s financials included a one-off property disposal gain of RM4.3 mln. Revenue also plunged 98.7% Y.o.Y to RM19.4 mln, from RM1.5 mln a year ago. (The Edge Daily)

• Prolexus Bhd’s 3QFY17 net profit declined 54.0% Y.o.Y to RM1.6 mln from RM3.5 mln a year ago, attributed to lower contributions from its apparels division, while quarterly revenue was 15.0% Y.o.Y lower at RM61.7 mln compared with RM72.9 mln in the previous corresponding period.

• For 9MFY17, Prolexus’s net profit fell 14.0% Y.o.Y to RM15.7 mln vs. RM18.2 mln 9MFY16, while revenue lost 7.0% Y.o.Y at RM258.1 mln, from RM277.5 mln. The group has proposed an interim dividend of 1.25 sen per share, at an entitlement date to be determined later. The group expects the business environment to be challenging, moving forward.

• Cypark Resources Bhd registered a 24.0% Y.o.Y fall in its 2QFY17 net profit to RM11.6 mln, from RM15.3 mln a year earlier, mainly due to accounting expenses on the grant of equity-settled share options to its employees. If the grant were to be excluded, net profit would have been at RM16.8 mln.

• Revenue, meanwhile, was up 9.9% Y.o.Y at RM83.9 mln, in comparison to RM76.4 mln in the same quarter last year.

• For 1HFY17, the group’s net profit decreased 9.9% Y.o.Y to RM22.9 mln, from the RM25.5 mln in 1HFY16, despite a higher revenue which gained 11.9% Y.o.Y to RM162.4 mln. The group noted that several of the tenders are at advance stages of negotiations and could be secured this year. (The Edge Daily)

• Pelikan International Corp Bhd is planning to dispose its underperforming printer consumable business in Germany, France, Czech Republic and China for RM30.0 mln, due to declining volume and changes in the market.

• The aforementioned businesses are undertaken primarily via Pelikan Hardcopy Production AG (PHP), Pelikan Hardcopy Distribution GmbH & Co. KG (PHD) and Pelikan France S.a.s, and accounts for RM123.1 mln or 9.3% of the group’s 2016 revenue. (The Edge Daily)

• Subur Tiasa Holdings Bhd made a turnaround with a 3QFY17 net profit of RM536,000, from a net loss of RM13.9 mln, contributed by higher average export selling prices for timber and fresh fruit bunches (FFB) and lower production cost of FFB. Quarterly revenue was also up 4.7% Y.o.Y to RM115.4 mln, from RM110.2 mln in 3QFY16.

• Cumulative 9MFY17 net loss, meanwhile, narrowed by 47.4% Y.o.Y to RM8.2 mln, from RM15.6 mln in the previous corresponding period, although revenue declined 9.5% Y.o.Y to RM377.4 mln vs. RM416.9 mln a year ago.

• Moving forward, the group expects the oil palm plantation segment to contribute positively to the group as the upcoming peak crop season will lead to an increase in FFB production in its oil palm plantation. (The Edge Daily)  

Source: Mplus Research - 3 Jul 2017