• Despite the selloff in U.S. equities the night early, the FBM KLCI (+0.2%) managed to eke-out subtle gains yesterday on bargain hunting activities in selective index heavyweights. The higher crude oil prices and firmer Ringgit against the Greenback also contributed to the improved sentiment on the key index. The lower liners – the FBM Small Cap (+0.3%), FBM Fledgling (+0.2%) and FBM ACE (+0.2%) all rebounded, while the Industrial (-0.1%) and Consumer Products (-0.2%) sectors underperformed the positive broader market.

• Market breadth was slightly negative as decliners pipped advancers on a ratio of 419-to-417 stocks. Traded volume fell 12.4% to 2.21 bln shares, but remain above the 2.00 bln level on rotational play amongst the lower liners.

• Key winners on the big board were Hong Leong Financial Group (+22.0 sen), Genting Malaysia (+14.0 sen), Petronas Chemicals (+9.0 sen), Sime Darby (+7.0 sen) and Genting (+6.0 sen). Significant advancers on the broader market include Lafarge (+23.0 sen), Petron Malaysia (+23.0 sen), Panasonic (+22.0 sen) and United Plantations (+22.0 sen). HSS Engineers surged 14.0 sen to close at a fresh record high level.

• Ajinomoto (-RM1.08) remained as the biggest decliner, while other notable losers on the broader market were Batu Kawan (-18.0 sen), UMW Holdings (-13.0 sen), Transocean (-12.0 sen) and Mega First Corporation (-11.0 sen). Meanwhile, BAT (-32.0 sen), MISC (-14.0 sen), PPB Group (-10.0 sen), Petronas Dagangan (- 10.0 sen) and Axiata (-6.0 sen) topped the FBM KLCI decliners list.

• Asian benchmark indices ended mostly lower overnight as the Nikkei (-0.1%) recorded its fourth straight session of losses to close at a four-month low. The Hang Seng Index slipped 0.5%, taking cue from the weakness on Wall Street overnight, but the Shanghai Composite gained 0.03% after lingering mostly in the negative territory. ASEAN stockmarkets, meanwhile, ended mostly lower.

• Key U.S. bourses advanced, boosted by gains in energy stocks, in-tandem with higher crude oil prices. The Dow rose 0.3% while the S&P 500 (+0.3%) rallied on the back of gains in energy and consumer discretionary stocks. The Nasdaq also expanded 0.3% as major technology stocks like Facebook and Netflix rebounded from previous day’s losses.

• Key European stockmarkets rebounded from earlier losses as major automakers rallied. The FTSE (-0.3%), however, narrowed for the third-straight day, dragged down by Baratt Developments (- 4.6%) following persisting uncertainties surrounding the impact of Brexit and the property tax hike. On the other hand, the CAC gained 0.3%, while the DAX jumped 0.8%, backed by gains in Daimler (+4.3%), after a major investment bank upgraded its rating.

The Day Ahead

• Yesterday’s recovery was largely helped by the return of foreign buying and this trend looks set to persist over the near term as the geopolitical concerns over North Korea’s missile launches eases. The positive close on many key global indices overnight will also help to shore up sentiments on the local stockmarket and lead the key index higher, potentially towards the 1,773-1,775 levels, before making another pass at the 1,780 level.

• For now, however, we see the near term upsides capped by the lack of positive catalysts after the recent results reporting season failed to provide a clear direction on corporate earnings and this is likely to continue weighing on the market’s outlook over the intermediate term. Therefore, we note that the 1,780- 1,800 resistance levels will remain formidable levels to clear.

• In the interim, we expect rotational and trading interest on the lower liners and broader market shares to see increased followings as retail players take advantage of the calmer market conditions to undertake short-term trading plays. This will also help to shore up market breadth and depth over the near term.

Company Update

• Econpile Holdings Bhd has proposed a series of corporate exercise involving (i) share split entails the subdivision of every share into 2 new Econpile shares, (ii) bonus issue on the basis of 1 bonus share-for-every 4 split shares, and (iii) issue of warrants on the basis of 1 warrant-for-every 4 split shares. The proposed corporate exercise is expected to be completed by end-2017.

Comments

• We are positive on the abovementioned corporate proposal as the proposed share split and bonus issue of shares and warrants is an approach to reward existing shareholders and in turn could enhance the trading liquidity of Econpile shares. Upon completion, Econpile’s enlarged share issue will be 1.34 bln shares (from 535.0 mln shares) plus additional 267.5 mln warrants.

• The corporate proposals will not have any material impact on the group’s earnings. Therefore, we leave our earnings forecast unchanged and we maintain our HOLD recommendation with an unchanged target price of RM3.00 by ascribing a target PER of 16.0x to its FY18 EPS of 18.7 sen.

Company Briefs

• CIMB Group Holdings Bhd is expanding its stockbroking business by buying Jupiter Securities from Olympia Industries Bhd for RM55.0 mln which will be the platform for its partnership with China Galaxy International Financial Holdings Ltd.

• The purchase consideration was based on the consolidated net assets of Jupiter Securities and the realisable benefit of the unutilised tax losses and unabsorbed capital allowances carried forward of Jupiter Securities and its subsidiaries. (The Star Online)

• Vizione Holdings Bhd will acquire the entire equity stake in Wira Syukur (M) Sdn Bhd (WSSB) for RM280.0 mln. The company has obtained the green light at its EGM on 6th September 2017 to pursue with the proposed acquisition.

• The acquisition will be satisfied via the combination of cash and issuance of new ordinary shares of Vizione to be issued at an issue price of RM0.11 per share.

• WSSB has unconditionally guaranteed an aggregate profit after tax contribution of RM82.0 mln for the financial years ending 31st December 2017 and 31st December 2018. WSSB is a Grade G7 contractor with CIDB and registered with the Masters Builders. WSSB has successfully completed numerous construction projects with a total contract value exceeding RM800.0 mln. (The Star Online)

• Sona Petroleum Bhd, which is in the midst of being liquidated, has announced that the liquidator is targeting to make a final distribution from the cash trust account to shareholders in December 2017, subject to tax clearance.

• It returned 48.0 sen for every share held on 31st October 2016, marking the end of the road for the special purpose acquisition company that was listed in 2013. The interim distribution represents 97.0% of the fund held in its cash trust account. (The Edge Daily)

• Priceworth International Bhd has begun harvesting operations in its Forest Management Unit 5 (FMU5) in Sabah via its subsidiary Sinora Sdn Bhd, following the completion of infrastructure and construction works.

• The rights to manage, replant, and harvest FMU5 under a 100-year license were acquired via Priceworth's Singapore subsidiary, GSR Pte Ltd, for RM260.0 mln in October 2016. (The Edge Daily)

• Iris Corp Bhd has announced that Datuk Hamdan Mohd Hassan has retired as Deputy Managing Director, a position he held in the company since 27th August 2013.

• On 20th January 2017, Hamdan was nabbed by the Malaysian AntiCorruption Commission following allegations of graft relating to an epassport contract with the Republic of Guinea worth RM739.2 mln. (The Edge Daily)

• Former Auditor-General of Malaysia, Tan Sri Ambrin Buang, has been appointed the Independent and NonExecutive Chairman of highway concessionaire Lingkaran Trans Kota Holdings Bhd (Litrak).
   
• He will succeed Tan Sri Wan Abdul Rahman Wan Yaakob, who had been Independent Non-Executive Chairman and retired on 30th August 2017. (The Edge Daily)  

Source: Mplus Research - 7 Sept 2017