• The FBM KLCI (-0.3%) ended lower after enduring a choppy session on last Friday. Still, the key index chalked up a 0.1% W.o.W gain. The lower liners, however, ended mostly higher with the FBM Small Cap and FBM Fledgling adding 0.02% and 0.2% respectively, while the broader market closed mostly in the red with the Construction sector (-0.4%) taking the heaviest beating.

• Market breadth turned negative as decliners overcame advancers on a ratio of 479-to-371 stocks. Traded volumes, however, rose 0.5% to 3.11 bln shares on rotational play amongst the lower liners.

• Half of the key index constituents fell, dragged down by MISC (-15.0 sen), Genting Malaysia (-10.0 sen), Axiata (- 10.0 sen), KLK (-8.0 sen) and Westports (- 7.0 sen). Notable decliners on the broader market were Kim Loong (-24.0 sen), Genetec (-13.0 sen), DKLS Industries (-11.0 sen) and Apex Healthcare (-10.0 sen). MSC, meanwhile, slipped 11.0 sen after reporting a weak set of quarterly earnings.

• In contrast, KESM Industries (+56.0 sen), Hartalega (+40.0 sen), Vitrox (+39.0 sen), Hong Leong Industries (+28.0 sen) and Nestle (+28.0 sen) topped the broader market advancers list. Key winners on the local bourse were Petronas-related companies like Petronas Dagangan (+16.0 sen), Petronas Gas (+10.0 sen) and Petronas Chemicals (+4.0 sen), while Hong Leong Financial Group and Hong Leong Bank added 4.0 sen each.

• The Nikkei (-0.8%) extended its losses, dragged down by weakness in technology shares like Toshiba Corporation (-5.1%). The Hang Seng slipped 0.1% after trading in a lackluster manner, but the Shanghai Composite added 0.1% after the government is said to be considering an expansion of its corporate tax cuts. ASEAN bourses, meanwhile, closed mostly higher.

• U.S. stockmarkets extended their losses last Friday as the Dow fell 0.1% on concerns over the timing of its tax cut implementation. On the broader market, while the S&P 500 slipped 0.1%, dragged down by the weakness in energy sector (- 0.8%), but the Nasdaq added 0.01% after being lifted into the positive in the final trading hour.

• European benchmark indices – the FTSE (-0.7%), CAC (-0.5%) and DAX (-0.4%), all continue to lose ground last Friday to record their worst performance since August 2017. The weakness stemmed from the slowdown in earnings growth, coupled with the weakness in commodity prices.

The Day Ahead

• There continues to be few impetus for most key index stocks to climb higher with the lack of a definative direction; hence, we see the key index remaining on a muted trend for longer.

• As it is, there is little broad-based interest to lift the market with only rotational and situational plays keeping market breadth on a high mark. The ongoing results reporting season has done little to shoreup the market’s interest and the general market outlook is staying dour as a result.

• Under the prevailing market condition, we think the market could continue to trend within the 1,740 and 1,750 levels for longer with the downside bias still looms large that could bring the key index back to the 1,740 support. The lower liners and broader market shares will also see the bouts of rotational and speculative plays sustaining over the near term as retail players adopt hit and run tactics in view of the lack of sustainable catalysts.

Company Brief

• Westports Holdings Bhd’s 3Q2017 net profit inched lower to RM150.8 mln, from RM151.0 mln in the previous corresponding period – due to lower container throughput and higher fuel cost. Quarterly revenue, however, was 3.8% Y.o.Y higher at RM492.3 mln, from RM474.4 mln a year ago.

• For cumulative 9M20117, net profit fell 8.6% Y.o.Y to RM440.5 mln, from RM482.0 mln, despite a slightly stronger revenue, which grew 3.6% Y.o.Y to RM1.51 bln, from RM1.46 bln in 9M2016. The weaker earnings were mainly due to the aforementioned reasons. (The Edge Daily)

• BHS Industries Bhd (BHS) is partnering Bau Palm Oil Mill Sdn Bhd, a company managed by Sarawak Land Consolidation & Rehabilation Authority (SALCRA), to jointly construct a biogas plant and integrated wastewater treatment plant at SALCRA's palm oil mills. The project aims to revolutionise the pulp and paper industry by providing a new source of eco-friendly and sustainable paper and pulp. (The Edge Daily)

• Petronas Gas Bhd (PetGas) posted a marginal 1.2% Y.o.Y drop in its 3Q2017 net profit to RM417.4 mln, from RM422.7 mln last year as a result of lower gross profit due to higher depreciation. The rising costs was expected as it was inline with the completion of capital projects and higher utilities cost of sales arising from upward fuel gas price revisions. Revenue for the quarter, meanwhile, added less than 1.0% Y.o.Y to RM1.16 bln, from RM1.16 bln a year ago. The group has also declared a third interim dividend of 16.0 sen per share, payable on 8th December 2017, bringing PetGas’s year-to-date payout to 50.0 sen vs 45.0 sen in the same period last year.

• Cumulative 9M2017 net profit, meanwhile, gained 2.5% Y.o.Y to RM1.31 bln, from RM1.27 bln a year earlier, in-tandem with revenue growth, which rose 2.9% Y.o.Y to RM3.51 bln, from RM3.41 bln in 9M2016. (The Star Online)

• Petronas Dagangan Bhd's (PetDag) 3Q2017 net profit more than tripled to RM761.7 mln, from RM248.8 mln, on higher sales volume, better margins and a disposal gain of RM424.6 mln. Revenue for the quarter also jumped 22.1% Y.o.Y to RM6.69 bln, from RM5.48 bln in the previous corresponding quarter. PetDag has also declared an interim dividend of 20.0 sen per share, payable on 8th December 20187. (The Star Online)

• Destini Bhd is collaborating with Singapore's Federal International (2000) Ltd to collectively bid for oil and gas projects in the South Asia and South East Asia region. A 50:50 jointventure (JV) company will be set up in Singapore in order to bid for contracts related to floating production systems in greenfield development, transportation and installation services, well abandonment and field decommissioning services, as well as downhole and well workover services. (The Star Online)

• XOX Bhd has inked a collaboration agreement with Indonesia's PT Inovasi Telematika Nusantara and Pengurus Besar Nahdlatul Ulama (PBNU), for the development of a mobile application using its Voopee solution. To recap, both parties had signed a Memorandum of Understanding (MoU) on 28th July 2017 to collaborate on the development of a mobile application known as Nahdlatul Ulama (NU) which will offer SIM-less mobile services and a platform to engage various other services like government, banking, education and e-wallet for PBNU users. (The Edge Daily)

• Samchem Holdings Bhd’s 3Q2017 net profit almost doubled to RM6.3 mln, from RM3.3 mln a year earlier, on the back of a 41.6% Y.o.Y spike in revenue to RM242.6 mln, from RM171.3 mln last year.

• Meanwhile, year-to-date net profit rose 28.0% Y.o.Y to RM14.7 mln, from RM11.5 mln in the same period last year. Cumulative revenue also grew about 40.0% Y.o.Y to RM676.2 mln, from RM483.7 mln last year. (The Edge Daily)

• Mudajaya Group Bhd is aborting the RM810.0 mln contract that was awarded in December 2016 by Consortium Zenith Construction Sdn Bhd for construction work in Penang over "uncertainties" of the project. The contract includes the construction of major roads under Package 2 (the Ayer Itam to Lebuhraya Tun Dr Lim Chong Eu by-pass) and the Third Link Project in Penang. (The Star Online)

• Dialog Group Bhd has signed a lease agreement and a sale and facilities agreement with Johor Corp (JCorp) to lease two plots of land in Johor from Johor Corp (JCorp) for 30 years and buy a tank terminal facility from the Johor state investment corporation, to expand its tank terminal storage capacity and operations at Tanjung Langsat, for RM153.0 mln.

• The 30-year deal for the plots, measuring a combined 35 ac., is for a total lease rental of RM62.0 mln, while the price of the tank terminal facility, which is located on one of the plots, is RM91.0 mln. (The Star Online)

• KNM Group Bhd is proposing a private placement of up to 10.0% of its issued shares to independent investors to raise up to RM53.3 mln, which will be used to pare bank borrowings.

• The cash call involves the issuance of up to 213.3 mln placement shares at an issue price to be fixed later. About RM40.0 mln of the cash proceeds will be used to repay bank loans, while the remaining RM13.3 mln will be used to finance working capital. (The Edge Daily)  

Source: Mplus Research - 13 Nov 2017