• The FBM KLCI (-0.4%) sank deeper into the red yesterday after hovering the negative territory throughout the entire trading session as investors turned cautious ahead of the two-day U.S. Federal Reserve meeting. The lower liners – the FBM Small Cap (-0.1%), FBM Fledgling (-0.4%) and FBM ACE (-0.6%), all retreated, while the Consumer Products sector (+0.1%) outperformed the negative broader market.

• Market breadth remained negative as losers outnumbered gainers on a ratio of 517-to-337 stocks. Traded volumes, however, added 1.0% to 2.01 bln shares as profit taking activities escalates.

• CIMB (-23.0 sen) led the big board decliners list, followed by KLK (-10.0 sen), Genting Malaysia (-9.0 sen), BAT (-8.0 sen) and Westports (-7.0 sen). Amongst rhe biggest losers on the broader market include TimedotCom (-21.0 sen), Malaysia Airport Holdings (+18.0 sen), Bison (-18.0 sen), Suiwah Corporation (-17.0 sen) and Unisem (-17.0 sen).

• Significant advancers on the broader market were Panasonic (+RM1.02), Ajinomoto (+60.0 sen), LPI Capital (+40.0 sen) and Allianz (+34.0 sen). Salcon added 1.0 sen after bagging a contract for the Selangor pipe replacement project. Banking giants like RHB Bank (+5.0 sen), Hong Leong Financial Group (+4.0 sen) and Public Bank (+2.0 sen) advanced while Hap Seng and Maxis added 2.0 each.

• Asia benchmark indices ended mixed as the Nikkei surged 2.0% to close above the 20,000 psychological level, taking cue from the positive developments in Wall Street overnight. The Shanghai Composite fell 0.2%, while the Hang Seng Index slipped 0.4% on profit taking in property shares. ASEAN stockmarkets, meanwhile, ended mostly lower.

• U.S. stockmarkets inched higher overnight as the U.S. Federal Reserve begun their two-day meeting to finalise the details on shrinking the US$4.5 trl balance sheet. The Dow (+0.2%) recorded its eighth consecutive session of winning streak while the S&P 500 added 0.1% on gains in the financial sector (+0.8%).

• Earlier, European benchmark indices – the FTSE (+0.3%), CAC (+0.2%) and DAX (+0.02%), all extended their gains after erasing their intraday losses, underpinned by the recovery in Eurozone’s ZEW Economic Sentiment that rose to 31.7 in September 2017. Meanwhile, France trimmed its budget-deficit forecasts for both 2017 and 2018 on stronger-thanexpected economic growth.

The Day Ahead

• Hopes for a mild rebound evaporated yesterday amid the renewed selling pressure on some index heavyweights that also dragged the lower liners and broader market down. The renewed selling has left the market on a dour note and an uncertain outlook again after the key index fell below the 1,780 level – a sign that the above level remains a difficult level to clear.

• The near term outlook is looking hazy with the buying interest likely to stay muted ahead of the shortened trading week as market players will likely stay on the sidelines, awaiting for new a trading direction. Therefore, we think the selling pressure will persist for now with the 1,770 level the next support level. Any rebound will be modest and capped at the 1,780 level.

• Lower liners and broader market shares are also likely to remain on the wayside with trading activities waning due to the guarded market environment and few convincing trading catalyst.

Company Update

• AWC Bhd was awarded an IFM contract worth RM24.4 mln to maintain the Palace of Justice in Putrajaya, which houses the Federal Court and Court of Appeal by the Public Works Department (JKR). The 5- year contract is valid until September 2022 and will commence next month.

Comments

• The IFM contract from JKR falls within our orderbook replenishment estimates, thus there is no change to our earnings forecast, although new contracts moving forward could be a potential re-rating catalyst for AWC. Consequently, we maintain our BUY recommendation on AWC with an unchanged target price of RM1.20.

• Our target price is derived from ascribing an unchanged target PER of 14.0x to its FY18 EPS of 8.7 sen. The targeted PER is based on a discount to its nearest competitor UEM Edgenta Bhd, due to the AWC’s smaller market capitalisation.

Company Briefs

• Scientex Bhd’s 4QFY17 net profit jumped 33.2% Y.o.Y to RM72.1 mln, from RM54.1 mln last year – marking its record quarterly performance in the group’s history, lifted by the strong performance of its packaging and property development division. Revenue for the quarter, meanwhile, jumped 15.2% Y.o.Y to RM646.1 mln, from RM561.1 mln in the same quarter last year. ? Consequently, the group has declared a final single-tier dividend of 10.0 sen per share, bringing total payout for FY17 to 16 sen per share or RM77.4 mln. (The Edge Daily)

• EcoFirst Consolidated Bhd has been charged by the Inland Revenue Board of some RM35.5 mln in additional tax and penalty. The latter had raised additional income tax assessment amounting to RM30.7 mln for its unit Pujian Development Sdn Bhd (PDSB) for assessment year 2004.

• PDSB’s solicitors are of the view that there are reasonable grounds to challenge the claims, although the company is not able to ascertain the financial impact arising from the claims. The claims, however, are not expected to have any material operational impact on the EcoFirst Group. (The Edge Daily)

• Comfort Gloves Bhd posted a 51.9% Y.o.Y plunge in its 2QFY18 net profit to RM9.1 mln against RM18.9 mln in 2QFY17, due to a one-off insurance compensation claim of RM12.1 mln in the previous corresponding year. Revenue for the quarter, however, surged 79.0% Y.o.Y to RM114.6 mln, from RM63.9 mln last year. (The Edge Daily)

• Chemical Company of Malaysia Bhd is planning to acquire the remaining 20.0% equity interest in CCM Chemicals Sdn Bhd for RM40.0 mln cash by purchasing a 10.0% stake from both Lanjut Setia Sdn Bhd and Permodalan Nasional Bhd (PNB) respectively

• Currently, CCM Chemicals is an 80.0%- owned subsidiary of CCM Usaha Kimia (M) Sdn Bhd, which is CCM’s whollyowned subsidiary. (The Edge Daily)
   
• Malaysian Resources Corp Bhd (MRCB) has clinched two infrastructure construction jobs for a total contract sum of RM204.7 mln. The first package is related to the construction and completion of elevated stations and other associated works at the Cyberjaya City Centre and Putrajaya Sentral (Package S210) for MRT Corp Sdn Bhd, for a contract sum of RM145.8 mln.

• Meanwhile, the second contract worth RM58.9 mln is for the construction of Larkin Indoor Stadium in Johor Bahru for Johor Land Bhd. The indoor stadium job is expected to take 18 months to complete from the date of site possession. (The Star Online)

• WCT Holdings Bhd has secured a RM199.5 mln contract to build two elevated stations under the Sungai Buloh-Serdang-Putrajaya Mass Rapid Transit (MRT2) project; namely the Kuchai Lama and Taman Naga Emas stations. The contract was awarded by Mass Rapid Transit Corp Sdn Bhd and followed an earlier contract that it had secured last November, which entailed the construction of viaduct guideway and related works from Bandar Malaysia South Portal to Kampung Muhibbah, worth RM896.4 mln. (The Star Online)

• KESM Industries Bhd’s 4QFY17 net profit jumped 67.0% Y.o.Y to RM13.4 mln, from RM8.1 mln, boosted by stronger revenue contribution, which was 20.0% higher at RM89.8 mln, from RM74.5 mln. The group has also proposed a final dividend of six sen for FY17, bringing its total FY17 payout to 12.5 sen. (The Edge Daily)  

Source: Mplus Research - 20 Sept 2017