Profit Taking Delayed, More Upsides In Store

• Tracking the positive developments across global stockmarkets, the FBM KLCI (+0.8%) marched higher for the third consecutive session last Friday. The key index consequently recorded its sixth straight weekly winning streak, rising 1.2% W.o.W. The lower liners also rose as the FBM Small Cap and FBM Fledgling added 1.2% and 0.6% respectively. Meanwhile, the REITS (-0.2%) sector was the sole decliner on the broader market.

• Market breadth remained positive as advancers outnumbered decliners on a ratio of 696-to-405 stocks, while 344 stocks flatlined. Traded volumes rose 15.6% to 5.84 bln shares as buying support remain unabated.

• Two-third of the key index components advanced, led by Nestle (+RM1.20), followed by Petronas Gas (+26.0 sen) Axiata (+23.0 sen), Hong Leong Bank (+20.0 sen) and Press Metal (+20.0 sen). Notable gainers on the broader market include Fraser & Neave (+RM1.02), KESM Industries (+64.0 sen), LPI Capital (+38.0 sen), Malaysian Pacific Industries (+34.0 sen) and UMW Holdings (+25.0 sen).

• On the flipside, Panasonic Malaysia (- 22.0 sen), United Plantations (-18.0 sen), Dutch Lady (-16.0 sen), Westports (-16.0 sen) and Hartalega (-14.0 sen) were amongst the broader market’s biggest decliners. Key losers on the FBM KLCI were IHH (-8.0 sen), KLCC (-7.0 sen), Petronas Chemicals (-4.0 sen), Hong Leong Financial Group (-4.0 sen) and RHB Bank (-2.0 sen).

• Asian equities extended their gains last Friday as the Nikkei (+0.9%) extended its gains to close at its highest level since January 1992. The Hang Seng Index (+0.3%) advanced after recouping all its intraday losses, while the Shanghai Composite added 0.2%. ASEAN stockmarkets, meanwhile, ended mostly positive.
• U.S. stockmarkets advanced to yet another record high level after the unemployment rate stood unchanged at 4.1% in December 2017. The Dow (+0.8%) advanced for the fourth straight session, while the S&P 500 climbed 0.7% higher, anchored by gains in the technology sector (+1.2%).
• European stockmarkets recorded their biggest weekly gain in eight months, powered by the strong Eurozone’s Retail PMI and Producer Price Index data. The FTSE (+0.4%), CAC (+1.1%) and DAX (+1.2%) all rose, underpinned by gains in automakers like Volkswagen AG (+2.6%), Fiat Chrysler Automobiles NV (+6.4%) and Renault (+2.3%).

The Day Ahead

• Despite lingering in the overbought territory and a consolidation is due, the key index continues to ascend, underpinned by the positive market undertone in global equity markets. We think this positive run could continue and the consolidation spell could be delayed as the market’s underlying tone is still broadly positive.

• This means the key index is likely to continue its near term ascend with the 1,820-1,825 levels the next targets, while the 1,800 points level is the major support for now.

• Similarly, we see rotational interest on the lower liners and broader market shares persisting as retail players take advantage of the positive market undertone to undertake trading activities. As it is, market breadth has picked up substantially over the past week amid the return of the speculative interest.

Company Brief

• MCT Bhd has received an unconditional takeover offer at 88.0 sen per share from Philippine-listed Ayala Land Inc, after the latter increased its equity stake in MCT to 50.2%.

• Ayala is bound to extend the takeover offer following the conditional share purchase agreement (SPA) inked between Ayala and MCT’s Non-Executive Director Tan Sri Goh Ming Choon for the acquisition of 17.2% equity stake in MCT for RM202.5 mln, effectively raising Ayala’s stake to 50.2%, as well as the receipt of waiver from Bursa Malaysia.

• The agreement was conditional upon a waiver being obtained from Bursa to allow for 51.0% of the cash consideration to be settled in tranches to Goh.

• Scomi Group Bhd's three-way-turned-two merger will now proceed with its engineering unit after shareholders of Scomi Engineering Bhd agreed to the proposal during a court convened meeting (CCM) 5th January 2018.

• Those who voted for the proposed merger represent 93.5% of the total value of votes held by non-interested Scomi Engineering shareholders, against 6.5% that was against the notion.

• To recap, Scomi Group proposed to consolidate its businesses by merging with its engineering and energy units, Scomi Engineering and Scomi Energy Services Bhd respectively, via a members' scheme of arrangement involving a share swap and an issuance of warrants on 21th August, 2017.

• The proposed merger, which was aimed at reducing cost and strengthen its balance sheet, would have resulted in the privatisation of the two units after all shareholders in the respective units swap their shares for Scomi Group shares.
• Consequently, Scomi Engineering is expected to be delisted from Bursa Malaysia by end-February and to be wholly owned by Scomi Group. Scomi Energy, on the other hand, will remain a listed entity following the rejection of non-interested shareholders to the proposed merger at a similar CCM.
• MGB Bhd is buying a property development firm, Multi Court Developers Sdn Bhd for RM2.8 mln. Multi Court owns a 9.4 ha. land in Batu Pahat Johor, on which a Perumahan Penjawat Awam 1Malaysia (PPA1M) project will be developed with an estimated gross development value of RM93.5 mln.

• Multi Court will receive a facilitation fund of RM14.6 mln from PPA1M for the project. The project is slated to commence from 2Q2018 and completed in 2020.

• The Ministry of Home Affairs has extended My EG Services Bhd's (MyEG) contract to undertake the voluntary repatriation of illegal foreign workers to 30th June 2018, from 31st December last year.

• AMMB Holdings Bhd is aborting its joint-venture (JV) with Singapore-based ARA Asset Management (Malaysia) Ltd and will be signing a new agreement with Amcorp Properties Bhd to manage its real estate investment trust — AmFIRST REIT.

• AMMB has terminated the agreement as ARA Asset plans to sell its entire 30.0% shareholding in Am ARA REIT Holdings Sdn Bhd. To recap, AMMB and ARA Asset set up a 70:30 JV company Am ARA REIT Holdings in 2006 to manage AmFirst REIT.

• Education solutions provider Eduspec Holdings Bhd is collaborating with PKUHKUST Shenzhen-Hong Kong Institution (PKU) to promote Science, Technology, Engineering, and Mathematics (STEM) education in schools in China.

Source: Mplus Research - 8 Jan 2018