• Tracking the weakness on Wall Street last Friday, the FBM KLCI (-0.3%) started off the week on a dour note as the key index traded in the negative territory throughout the trading session. The lower liners, however, ended mostly in the green as the FBM Fledgling and FBM ACE gained 0.2% and 0.7% respectively, while the Consumer Products (+0.4%) and Industrial Products (+0.1%) outperformed the negative broader market.

• Market breadth stayed negative as decliners outpaced gainers on a ratio of 444-to-379 stocks. Traded volumes, however, added 15.6% to 1.68 bln shares on an uptick in profit taking activities.

• Westports (-13.0 sen) topped the FBM KLCI decliners list, followed by Genting Malaysia (-11.0 sen), BAT (-1.0 sen), MISC (-9.0 sen) and RHB Bank (-7.0 sen). Significant losers on the broader market include KESM Industries (-42.0 sen), SAM Engineering & Equipment (-26.0 sen), Far East Holdings (-20.0 sen) and Petron (- 11.0 sen). Enra Group slipped 14.0 sen after reporting a weak set of quarterly earnings.

• Notable advancers on the broader market were United Plantations (+40.0 sen), Nestle (+38.0 sen), Tasek Corporation (+30.0 sen), Heng Yuan (+27.0 sen) and Panasonic (+22.0 sen). On the big board, PPB Group (+26.0 sen), Hong Leong Financial Group (+6.0 sen), Hong Leong Bank (+4.0 sen), IHH (+2.0 sen) and Maxis (+2.0 sen) were amongst the biggest gainers.

• Japanese equities extended their slide as the Nikkei fell 0.4%, dragged down by weakness in financial companies like Nomura Holdings (-1.9%) and Mitsubishi UFJ Financial Group (-1.3%). Both the Hang Seng Index and Shanghai Composite added 0.4%and 0.6% respectively on gains in technology and energy shares. ASEAN stockmarkets, meanwhile, ended mixed.

• Wall Street closed mostly higher overnight as the Dow (+0.1%) recovered all its intraday losses as investors shift their focus towards the Federal Reserve meeting at Jackson Hole, Wyoming in the coming weekend. On the broader market the S&P 500 added 0.1%, but the Nasdaq (- 0.1%) recorded its third consecutive session of decline.

• Earlier European benchmark indices – the FTSE (-0.1%), CAC (-0.5%) and DAX (- 0.8%), all extended their losses on renewed geopolitical tension between U.S. and North Korea. In spite of that, notable advancers include Fiat Chrysler jumped 6.9% after China’s Great Wall Motor expressed interest in a takeover.

The Day Ahead

• There appears to be renewed weakness on the KLCI as foreign investors continue to lock-in their recent profits. We see this trend to persist over the near term amid the insipid overseas market conditions coupled with the absence of fresh buying catalyst.

• In lieu of the absence of fresh buying interest, we expect the market to continue consolidating over the near term with the key support remains at the 1,770 level, whilst the 1,780 will serve as the major resistance on the local bourse.

• Despite there was a minor resurgence on trading activities, we expect the lower liners and broader market shares to see further retracement amid the lack of fresh catalyst. Nevertheless, rotational play is likely to prolong as the selling pressure is relatively mild.

Company Briefs

• Luxchem Corporation Bhd’s shareholders has unanimously approved the group’s proposed share split, which involves the subdivision of one share into three shares at an extraordinary general meeting (EGM). Subsequently, the proposed exercise is expected to be completed by 4Q2017 and will result in the current 280.0 mln outstanding shares to rise to 840.0 mln shares. (The Star Online)

• Malakoff Corporation Bhd’s 2Q2017 net profit declined to RM103.3 mln, from RM129.6 mln last year – dragged down by lower contributions from Tanjung Bin Energy’s power plant, although revenue was higher at RM1.73 bln, from RM1.53 bln. The group has also declared a singletier interim dividend of 2.5 sen per share, payable on 6th October, 2017.

• Cumulative 1H2017 net profit, meanwhile, shed 5.5% Y.o.Y to RM202.1 mln, from RM213.7 mln last corresponding year, despite a 22.5% Y.o.Y jump in revenue to RM3.52 bln, from RM2.87 bln in 1H2016. (The Star Online)

• Scomi Energy Services Bhd maintains its positive view on the prospects of the oil and gas industry, on the back of more business opportunities amid stabilising oil prices and the pickup of exploration activities this year. The group is still holding onto some of its O&G assets, as it has seen rising oil rig activities and is looking to expand its oil services business by offering more production cycle chemicals to new customers. Scomi also sees potential opportunities under the chemical sub-segment, which might include diversifying its chemical products into other industries outside of O&G. (The Star Online)

• APM Automotive Holdings Bhd registered a 60.6% Y.o.Y drop in its 2Q2017 net profit to RM2.5 mln vs RM6.4 mln a year earlier, mainly due to a 10.1% Y.o.Y fall in revenue to RM275.5 mln, from RM306.5 mln previously, as well as higher operating costs from its newly-completed plants. Even so, the group has proposed an interim dividend of 4.5 sen a share, payable on 29th September, 2017.

• For the 1H2017, net profit shed 16.9% Y.o.Y to RM13.1 mln, from RM15.7 mln a year earlier, while revenue finished marginally lower by 2.2% Y.o.Y to RM570.0 mln, from RM582.6 mln. (The Edge Daily)

• Inix Technologies Holdings Bhd has secured a contract to develop and maintain an integrated legal information system for the Attorney-General’s Chambers worth RM11.8 mln, from Inter XS Sdn Bhd — a privately-held firm. The project runs for a period of 4 months. (The Edge Daily)

• TH Plantations Bhd posted a 5.1% Y.o.Y fall in its 2Q2017 net profit to RM7.2 mln, from RM7.6 mln in the last corresponding period, despite a 17.4% hike in quarterly revenue to RM155.4 mln, from RM132.4 mln, weighed down by higher effective tax rates.

• Cumulative 1H2017 net profit, however, jumped more than forty two-times to RM18.4 mln, from RM433,000 a year ago, backed by a 45.0% Y.o.Y increase in revenue to RM321.5 mln, from RM221.9 mln last year, coupled with stronger margins. (The Edge Daily)

• Serba Dinamik Holdings Bhd is buying a 30.0% stake (or 14,000 shares) in Almurisi Development Sdn Bhd (ADSB) for RM18.3 mln cash. The proposed acquisition will include a piece of 70-acre land worth RM61 mln in Pengerang, Kota Tinggi, Johor owned by ADSB, which will be used for a mixed residential and commercial development. The property development named Pengerang Northshore Residence, will encompass landed residential properties, affordable apartments, shop offices and community complex as well as other amenities. (The Edge Daily)

• Evergreen Fibreboard Bhd’s 2Q2017 net profit plummeted 62.0% Y.o.Y to RM6.2 mln, from RM16.5 mln a year ago, attributed to higher log and glue costs. Revenue for the quarter, however, gained 5.0% Y.o.Y to RM259.0 mln, from RM246.2 mln in 2Q2016.

• Cumulative 1H2017 net profit weakened 55.0% Y.o.Y to RM16.7 mln compared with RM37.1 mln in the same period last year, although revenue inched up 3.0% Y.o.Y to RM508.5 mln, from RM493.0 mln due to the aforementioned reasons. (The Edge Daily)

• Malaysia Building Society Bhd's (MBSB) 2Q2017 net profit surged 44.6% Y.o.Y to RM91.1 mln, from RM63.0 mln last year – led by higher income from net financing/loans, investment activities and lower cost of funds, although revenue only grew slightly by 0.1% to RM813.4 mln against RM812.5 mln.

• Cumulative 1H2017 net profit also expanded 96.6% Y.o.Y to RM192.4 mln, from RM97.8 mln a year ago, even as revenue narrowed to RM1.62 bln, from RM1.63 bln 1H2016. (The Star Online)

• Petronas Dagangan Bhd registered a 14.0% gain in 2Q2017 net profit to RM246.0 mln, compared to RM215.0 mln a year ago, boosted by improvements in both its retail and commercial segments. Revenue for the quarter was also 22.0% Y.o.Y higher at RM6.51 bln, from RM5.33 bln last year. The group has also proposed an interim dividend of 14 sen per share, payable on 19th September, 2017.

• For the cumulative 1H2017, net profit rose 15.0% Y.o.Y to RM499.2 mln, from RM434.35 mln previously, in-tandem with a 29.0% Y.o.Y growth in revenue to RM13.19 bln, from RM10.24 bln a year ago. (The Edge Daily)

• RHB Bank Bhd and AMMB Holdings Bhd have requested a suspension of its share trading activities today, pending a material announcement regarding their proposed merger. Subsequently, the two lenders have until the end of August 2017 to discuss the merger deal on an exclusive basis. (The Star Online)

• Tropicana Corp Bhd independent director Tan Sri Othman Abd Razak has been redesignated as Chairman with immediate effect, following Tan Sri Rastam Isa retirement in May. Tan Sri Othman is also serving as an adviser to the Prime Minister. Tropicana has also announced a first interim dividend of 2.0 sen per share. (The Edge Daily)  

Source: Mplus Research - 22 Aug 2017