• Bargain hunting activities lifted the FBM KLCI 0.1% higher yesterday as the key index halted a streak of four consecutive sessions of decline. Gains were also in tandem with the positive developments across major key regional indices. The lower liners – the FBM Small Cap (+0.1%), FBM Fledgling (+0.1%) and FBM ACE (+0.3%) all advanced, while the broader market ended mostly positive.

• Market breadth was slightly negative as losers were ahead of gainers on a ratio of 453-to-434 stocks. Traded volumes gained 5.0% to 2.75 bln shares on rotational play amongst the lower liners.

• More than half of the key index constituents advanced, led by Petronas Gas (+32.0 sen), followed by BAT (+24.0 sen), PPB Group (+18.0 sen), Hap Seng (+10.0 sen) and Hong Leong Bank (+10.0 sen). Significant advancers on the broader market include Dutch Lady (+RM3.00), Kluang Rubber (+43.0 sen), Petron Malaysia (+38.0 sen) and Nestle (+30.0 sen). Ranhill added 0.5 sen after bagging a project valued at RM19.3 mln to build, operate and transfer a water treatment plant in Thailand.

• In contrast, notable decliners on the broader market were Heineken (-24.0 sen), KESM Industries (-16.0 sen), Lotte Chemical Titan (-16.0 sen), Globetronics (-15.0 sen) and Genting Plantations (- 12.0 sen). Meanwhile, Petronas Dagangan (-20.0 sen), Genting Malaysia (-11.0 sen), KLK (-6.0 sen), Maybank (-5.0 sen) and Genting (-5.0 sen) were the laggards on the big board.

• Asian benchmark indices ended mostly higher as the Nikkei (+1.1%) extended its gains to record its fifteenth straight session of gains after Japanese Prime Minister Shinzo Abe retained his seat in the weekend’s national election. The Shanghai Composite added 0.1% but the Hang Seng Index slipped 0.6%, dragged down by weakness in property stocks. ASEAN stockmarkets, meanwhile, ended mostly higher.

• U.S. stockmarkets gave up all their intraday gains to close lower overnight as the Dow (-0.2%) retreated from its record high level after General Electric (-6.3%) posted its biggest daily slump since August 2011 on weaker-than-expected quarterly earnings. On the broader market, the S&P 500 fell 0.4% as investors digest a flurry of earnings report, while the Nasdaq ended 0.6% lower.

• Earlier, European benchmark indices – the FTSE (+0.02%), CAC (+0.3%) and DAX (+0.1%), all advanced after the Euro currency weakened against the Greenback. Gains, however, were limited as political instability in Spain continues to weigh on market sentiment.

The Day Ahead

• The key index is starting to find some footing after its recent falls with the minute gains yesterday, which although unconvincing, is helping to stop the near term decline and allowing the key index to find support. Hence, we see further near-term upsides as the market continues to stage a recovery, albeit we do not think the gains will be significant amid a still tentative market environment.

• On the upside, we think the key index could attempt to head towards the 1,750 resistance, with the 1,745 level serving as the intermediate resistance. Meanwhile, the 1,740 level remains the near term support for now, while the 1,730 level will serve as the main support. ? We also continue to think the rotational interest on the lower liners and broader market shares will persist over the near term as retail players are likely to continue with their short-term trades.

Company Briefs

• Denko Industrial Corp Bhd is planning to acquire its bigger rival, Integrated Manufacturing Solutions Sdn Bhd (IMS) for RM1.19 bln to be satisfied via an allotment of 1.03 bln new shares in Denko at an issue price of RM1.15 per share.

• The purchase price is 8.9x Denko's market value of RM133.7 mln. The proposed acquisition is in-line with the group’s plastic injection moulding business expansion strategy to grow its revenue and customer base as well as to expand its production capacity.

• Consequently, the group has entered into a Heads of Agreement (HOA) with Denko’s major shareholder and Executive Director-cum-Chairman, Datuk Seri Foo Chee Juan and Datuk Fong Chiu Wan, who is a person connected with Foo, for the proposed acquisition of 6.2 mln shares in IMS.

• Further, Denko has also proposed a private placement of up to 10.0% of the existing total number of issued shares to independent third party investors to be identified later. The issue price of the placement shares will also be determined at a later date. (The Star Online)

• British American Tobacco (Malaysia) Bhd (BAT Malaysia) registered a 32.7% Y.o.Y drop in its 3Q2017 net profit to RM143.2 mln, from RM212.6 mln last year, dragged down by weaker sales volume, restructuring expenses and higher operating expenses. Revenue for the quarter, meanwhile, also shed 18.8% Y.o.Y to RM757.3 mln vs. RM932.2 mln in 3Q2016 as the group remains concerned with persistently high incidence of illegal cigarette trade. Despite the weaker performance, the group has declared a third interim dividend of 43.0 sen per share, payable on 23th November 2017. (The Star Online)

• I-Bhd's 3Q2017 net profit declined 12.7% Y.o.Y to RM19.6 mln, from RM22.4 mln in the same quarter last year, on the back of higher maintenance costs for its investment properties in the quarter under review, while revenue was down by 7.3% Y.o.Y to RM105.3 mln, from RM113.6 mln a year ago.

• Cumulative 9M2017 net profit, however, rose 10.2% Y.o.Y to RM57.8 mln, from RM52.5 mln a year earlier, boosted by a 19.7% Y.o.Y growth in revenue to RM336.0 mln, from RM280.7 mln in 9M2016. (The Star Online)

• TAS Offshore Bhd returned to the black after posting a 1QFY18 net profit of RM2.2 mln, from a net loss of RM1.1 mln in 1QFY17, while its revenue jumped fivefold to RM10.4 mln compared to RM2.3 mln in the previous year – led by the sale of two units of tugboats. (The Edge Daily)

• Titijaya Land Bhd will be receiving compensation of up to RM65.3 mln over the temporary occupation and usage of its 65,216 sq. m. piece of land in Shah Alam for the upcoming third Light Rail Transit (LRT3) project. (The Edge Daily)

• KKB Engineering Bhd has received purchase orders totalling RM23.9 mln for the supply and delivery of mild steel casing and concrete-lined mild steel pipes, from CMS Infra Trading Sdn Bhd (CMSIT) and Kimlun Sdn Bhd. The supply and delivery of the concretelined mild steel pipes is expected to be completed within 1Q2018. (The Edge Daily)

• HeiTech Padu Bhd has secured a RM19.2 mln contract to undertake mechanical and electrical works for renewable energy substations in Perak, from Gading Kencana Development Sdn Bhd.

• The contract works, which include the design, supply, installation and completion of mechanical and electrical works for a 132kV switching substation, and a 33/132kV step-up substation in Bidor, is slated to be completed by 28th May 2018. (The Edge Daily)

• Berjaya Land Bhd (BLand) has disposed of 10.0 mln shares (or 0.9% equity stake) in 7-Eleven Malaysia Holdings Bhd for RM14.9 mln via a direct business transaction on 20th October 2017. The sale is expected to reap a gain of about RM1.5 mln. Consequently, the group now holds about 6.5 mln 7- Eleven shares (or a 0.59% equity stake). (The Edge Daily)

• Axis Real Estate Investment Trust (REIT) has posted a marginal increase of 0.3% Y.o.Y in its 3Q2017 net property income (NPI) to RM35.9 mln, from RM35.8 mln a year ago due to rental proceeds from newly acquired Scomi Facility @ Rawang and Kerry Warehouse. Quarterly revenue, however, flatlined at RM42.0 mln and the REIT declared a third interim distribution of two sen distribution per unit (DPU) to unitholders, payable on 13th December, 2017. (The Edge Daily)

• T7 Global Bhd has inked a Memorandum of Understanding (MoU) with three private companies to form a strategic partnership for the construction of the East Coast Rail Line project. The three companies are Eastern Pacific Industrial Corp Bhd, CMC Engineering Sdn Bhd and China State Construction Engineering (M) Sdn Bhd. (The Edge Daily)  

Source: Mplus Research - 24 Oct 2017