• The FBM KLCI (-0.2%) retreated for the third straight session yesterday after the Ringgit declined against the Greenback, while foreign fund turned into net selling position for the past two consecutive sessions. The lower liners – the FBM Small Cap (+1.0%), FBM Fledgling (+0.2%) and FBM ACE (+0.3%), however, all rebounded, while the broader market ended mostly negative.

• Market breadth stayed negative as losers outpaced gainers on a ratio of 476-to-377 stocks. Traded volumes, however, jumped 56.5% to 3.15 bln shares on rotational play amongst the lower liners.

• CIMB (-15.0 sen) took the top spot on the FBM KLCI decliners list after Mitsubishi UFJ Financial Group was divesting its entire 4.56% stake, while other big board losers include KLK (-8.0 sen), Petronas Chemicals (-7.0 sen), Tenaga (-6.0 sen) and Sime Darby (-5.0 sen). Plantation companies like Far East Holdings (-60.0 sen), United Plantations (-22.0 sen) and Chin Teck Plantations (-20.0 sen) fell, while other broader market decliners were Ajinomoto (-30.0 sen) and MPI (- 24.0 sen).

• Significant advancers on the broader market were KESM Industries (+92.0 sen), Lii Hen (+21.0 sen), Hibiscus Petroleum (+18.5 sen), New Hoong Fatt (+12.0 sen) and Scientex (+12.0 sen). Key winners on the local bourse were PPB Group (+12.0 sen), BAT (+10.0 sen), Hong Leong Bank (+10.0 sen), Hong Leong Financial Group (+10.0 sen) and Genting Malaysia (+8.0 sen).

• Asia benchmark indices advanced yesterday as the Nikkei (+0.1%) recorded its third consecutive winning streak after trading in a lackluster manner. The Shanghai Composite gained 0.3%, while the Hang Seng Index closed 0.3% higher as investors await the outcome of the U.S. Federal Reserve policy meeting. ASEAN stockmarkets, meanwhile, ended mixed.

• After enduring a volatile trading session, U.S. stockmarkets recouped all its intraday losses to close higher overnight. The Dow added 0.2% after the U.S. Federal Reserve kept its benchmark interest rates unchanged and will trim its balance sheet starting with US$10.0 bln amount per month. The S&P 500 gained 0.1%

• European benchmark indices ended on a mixed note as the FTSE fell 0.1% after the British Pound surged against the Greenback, offseting the stronger-thanexpected retail sales data that rose 1.0% Y.o.Y in August 2017. Both the CAC and DAX, however, rose 0.1% each as investors eyed the U.S. Federal Reserve policy meeting.

The Day Ahead

• The market is still in a dour note with few noteworthy leads with fresh buying also still mostly on the tepid side. With another extended weekend in the offing, there appears to be little reprieve and we see market conditions remaining tepid with many participants unwilling to hold on to their open positions. Therefore, we expect the weak market trend to persist amid the continuing profit taking activities.

• This could also press the key index to the 1,770 support level, which we think will hold up for now. Although there is little upside bias for now, the immediate resistance is at the 1,780 level.

• We also think that there will be increased profit taking on the lower liners after yesterday’s uptick that saw increased trading activities on selected shares. MACRO BRIEF

• Malaysia's Consumer Price Index (CPI) rose 3.7% Y.o.Y to 119.9 in August 2017 – exceeding a forecast of a 3.4% Y.o.Y increase, mainly fueled by higher petrol prices. The average price of one litre of RON95 petrol was RM2.12 in August 2017 vs. RM1.75 a year ago.

• On a seasonally adjusted term, the overall CPI for August 2017 increased 0.9% M.o.M. For 8M2017, CPI climbed 3.9% Y.o.Y. (The Star Online)

Company Update

• Econpile Holdings Bhd has secured an RM18.0 mln contract on the Pavilion Damansara Heights Phase 2 mixed development project. Econpile will undertake contiguous bored pile and the contract is for 27 weeks with expected completion in April 2018. (The Edge Daily)

Comments

• The abovementioned contracts marks the first contract secured by the group in FY18. Although the value of the contract is significantly lower vs. the Phase 1 contract valued at RM570.4 mln, we gather that the bore pile works for Phase 2 will be separated into multiple packages. The group’s unbilled orderbook of approximately RM1.20 will provide earnings visibility over the next 2-3 years.

• With the contract falling within our targeted orderbook replenishment rate of RM700.0 mln for FY18, we leave our earnings forecast unchanged. Consequently, 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. The higher ascribed PER is in tandem with the general uptick in the construction sector’s valuations.

Company Briefs

• Daya Materials Bhd is planning to channel its resources into infrastructure, especially rail-related jobs, following its exit from its lossmaking offshore subsea construction business after selling Siem Daya 1 – Daya’s subsea construction vessel.

• Consequently, the group is attempting to secure rail engineering contracts, which if successful could contribute positively to the group’s earnings over the next few years. (The Star Online)

• PPB Group Bhd has decided to sell its entire equity interest in Tefel Packaging Industries Co Ltd in Myanmar for US$2.4 mln (RM10.1 mln), in a bid to divest its unprofitable non-core activities.

• The former’s 79.9%-owned indirect subsidiary, Tego Sdn Bhd has signed an agreement to transfer its entire 100.0% stake in Tefel Packaging Industries Co Ltd, a polypropylene bags manufacturer to Messrs Natthi Cholsaipant and Tanapat Cholsaipant.

• Tego is owned by FFM Bhd, which is 80.0%-owned by PBB and 20.0% by Wilmar International Ltd via PGEO Group Sdn Bhd. (Bernama)

• Practice Note 17 (PN17) company, YFG Bhd has been granted an extension until 18th March 2018 from the Court on the restraining order it obtained against its creditors last year to facilitate the regularisation of its financial condition. The restraining order, which was secured in January last year was originally slated to expire on 20th September 2017. (The Edge Daily)

• Lotte Chemical Titan Holdings Bhd has announced that a fire broke out at its plant in Pasir Gudang, Johor yesterday. However, the extent of the damage from the incident cannot be confirmed at this juncture. (The Edge Daily)

• AHB Holdings Bhd plans to raise between RM5.0 mln and RM7.3 mln via a private placement for working capital and capital expenditure purposes. The proposed cash call includes issuing up to 23.2 mln shares (or 10.0% of its share capital) to selected investors at a discount of not more than 10.0% of the five-day weighted average price calculated up to the price-fixing date. (The Edge Daily)

• Berjaya Sports Toto Bhd’s (BToto) 1QFY18 net profit jumped 26.5% Y.o.Y to RM74.3 mln, from RM58.7 mln last year, lifted by improved results of luxury car dealer, H.R. Owen Plc (HR Owen), BToto’s 86.8%-owned subsidiary, as well as foreign exchange gains recognized by a foreign subsidiary company in the financial quarter under review.

• Revenue also grew marginally by 2.5% Y.o.Y to RM1.47 bln, from RM1.44 bln in the same quarter last year. Subsequently, the group has declared a first interim dividend of four sen per share, payable on 24th October 2017. (The Star Online)

• Datasonic Group Bhd is expanding its smart card business to Indonesia, marking its maiden overseas venture. Th group has set up a subsidiary in Indonesia called PT Datasonic Teknologi Indonesia to facilitate the expansion.

• Moving forward, Datasonic intends to expand its international presence, especially in the personalised smart card industry - valued by Ireland-based Research and Markets at US$6.7 bln in 2016. (The Edge Daily)

• Hai-O Enterprise Bhd’s 1QFY18 net profit surged 83.4% Y.o.Y to RM17.9 mln, from RM9.7 mln, on the back of higher sales of its products and additional sales from newly recruited members, while revenue gained 58.3% Y.o.Y to RM124.5 mln, from RM78.7 mln in the corresponding quarter in the preceding year.

• Overall, net margin grew by 2.1% as a result of higher sales of its premium products and improvement in operational efficiency. (Bernama)  

Source: Mplus Research - 21 Sept 2017