• The FBM KLCI recovery fizzled out on the back of mild profit-taking on selected heavyweights amid prospects of higher interest rate in the U.S. The lower liners, however, gained traction with the exception of the FBM Ace (-0.4%), as the broader market remained mixed.

• Market breadth was positive as winners outrun losers on a ratio of 487-to-360 stocks. Traded volume surged 39.9% higher to 3.15 bln shares on the back bargain-hunting activities on the lower liners.

• KLCC (-17.0 sen), Petronas Gas (-14.0 sen), Genting Malaysia (-11.0 sen), PPB Group (-6.0 sen) and Digi (-4.0 sen) weighed on the Main Board. Plantations counters like Chin Teck Plantations (-25.0 sen) and Riverview Rubber (-7.0 sen) also declined, followed by Hartalega (-10.0 sen), UMW Holdings (-7.0 sen) and PCCS (-6.0 sen).

• On the other hand, broader market advancers include KESM Industries (+60.0 sen), Petron Malaysia (+36.0 sen), Sam Engineering (+32.0 sen), Tasek (+28.0 sen) and LPI Capital (+26.0 sen). Similarly, BAT (+6.0 sen), Westports (+6.0 sen), RHB Bank (+5.0 sen), Hong Leong Financial Group (+4.0 sen) and Hap Seng (+3.0 sen) outperformed its key-index peers on Thursday.

• Asian equities were broadly higher, ahead of the U.S. payroll data. The Nikkei was flattish as gains in consumer staples offset losses in materials and financialsrelated counters. Meanwhile, Hong Kong and Chinese stockmarkets were closed for festive holidays. ASEAN stockmarkets, however, turned bearish on Thursday’s close.

• U.S. stockmarkets notched another session of record highs, as the S&P 500 (+0.5%) posted its sixth-straight record close, boosted by financials-related stocks on renewed hopes of a tax reform after the White House passed a $4.1 trl budget yesterday. The Dow also gained 0.5% amid the prevailing positive sentiment, while the Nasdaq closed 0.8% higher.

• Key European stockmarkets inched forward, as investors await a string of economic data releases. The FTSE gained 0.5% - led by gains in major miners like Anglo American and Glencore. The CAC (+0.3%) also traded higher at 7,508.0 points, although the DAX (-0.02%) closed a hairline below the negative territory.

The Day Ahead

• It appears that the recovery has stalled with little follow-through impetus yesterday with quick profit taking activities becoming the order of the day. This is also leaving doubts over the strength of the recovery and with the weekend approaching, we think that that there could be more downside bias in the offing as market participants close out their positions and fresh buying becomes more elusive.

• This also means that the 1,755 and 1,750 support levels are back in play with the insipid recovery trend. On the upside, the 1,760 and 1,765 levels are the near term resistances.

• The rotational interest on the lower liners and broader market shares are still continuing despite the weakness on the main market and the trading activities looks to sustain over the near term. However, we think profit taking activities could escalate as retail players look to trim their positions ahead of the weekend as well as to lock-in their gains.

Company Brief

• Sunway Construction Group Bhd (Suncon) has secured a RM2.31 bln contract for a package of the Light Rail Transit line 3 (LRT3) from Bandar Utama to Johan Setia from Prasarana Malaysia Bhd. The package comprises guideway, stations, iconic bridge, park and rides and ancillary buildings construction.

• The project is for a period of 36 months and is expected to be completed by 4Q2020. With the inclusion of the above project, Suncon’s outstanding order book as at to-date amounts to RM6.50 bln. (The Star Online)

• WCT Holdings Bhd has won additional Light Rail Transit 3 (LRT3) works valued at RM640.0 mln on 5th October 2017. The latest award involved building a 2.9km guideway from Merchant Square to Suria Damansara with two stations. The guideway adjoins the guideway being built under an earlier-clinched package (Package GS03) that continues from Suria Damansara to Temasya Glenmarie, stretching 2.8km long.

• Thus the total length under both packages is about 5.7 km with four stations. The works under the latest contract were expected to be completed within 35 months. (The Star Online)

• Meanwhile, Gabungan AQRS Bhd was awarded another LRT3 contract worth about RM1.14 bln to construct guideway, stations, park-and-ride, ancillary buildings and other associated works. The project duration is for 38 months. (The Edge Daily)

• Favelle Favco Bhd intends to buy controlling stakes in four engineering and automation-related companies for over RM87.4 mln. It has inked a Heads of Agreement to acquire a 70.0% stake each in Exact Automation Sdn Bhd, Sedia Teguh Sdn Bhd, Exact Analytical Sdn Bhd and Exact Oil & Gas Sdn Bhd. The final purchase consideration will comprise the indicative RM87.4 mln, and incremental consideration payable over three financial years, up until 2019. (The Edge Daily)

• Yi-Lai Bhd has received a takeover offer from its Executive Director, Aaron Tan Jian Hong and Non-Independent NonExecutive Director, Wendy Kang Hui Lin to acquire the remaining shares in the company.

• The mandatory takeover offer is at 78.5 sen a share and was triggered after Tan and Kang raised their stake in the ceramic and tile manufacturer to 33.0%. The offer will be made not later than the requisite 21 days from 5th October 2017. (The Edge Daily)

• Aeon Credit Service (M) Bhd’s 2QFY18 net profit rose 29.3% Y.o.Y to RM71.4 mln on better topline growth. Revenue for the quarter grew 15.7% Y.o.Y to RM311.3 mln.

• For 1HFY18, cumulative net profit added 24.8% Y.o.Y to RM147.2 mln. Revenue for the quarter improved 15.6% Y.o.Y to RM613.6 mln. The company declared an interim single-tier dividend of 21.1 sen per share. (The Edge Daily)

• Pos Malaysia Bhd's courier arm, PosLaju has been made the exclusive ecommerce logistics partner in the region for online shopping platform PG Mall Sdn Bhd. The partnership will enable PosLaju to serve more than 5,300 PG Mall's active merchants daily, and is likely to contribute about RM0.5 mln to the group's bottom line for 2018. (The Edge Daily)

• Bison Consolidated Bhd has inked two separate agreements with Japanese owned companies, Gourmet Kineya Co Ltd and MRA Bakery Sdn Bhd respectively for the development, supply and sale of ready-to-eat food and baked goods. Bison's food production venture will be undertaken at its food preparation and packaging facility in Rawang, Selangor.

• Under the JV agreements, Bison owns a 51.0% stake each in both JV companies, with total investment cost of RM35.7 mln which will be funded via internally-generated funds and funds from a private placement. (The Edge Daily)

• UMW Holdings Bhd's is disposing a 70.0% stake in its dormant company, UMW Fabritech Sdn Bhd, for a total cash consideration of RM18.0 mln to DKLS Luxuria Sdn Bhd. The disposal is in line with UMW Holding's strategy to exit from its investments in the oil and gas sector.

• UMW Fabritech serves the oil and gas (O&G) industry in the provision of sandblasting, priming, coating, inspection, maintenance, and repair services. (The Edge Daily)  

Source: Mplus Research - 6 Oct 2017