Pullback To Continue

• The FBM KLCI (-0.2%) its losses yesterday after erasing all its intraday gains as the recent sharp gains were digested by investors. The lower liners also ended mostly lower as the FBM Small Cap (-0.5%) and FBM Fledgling (- 0.4%) retreated, while the broader market closed mixed with the Technology sector (-2.4%) taking the heaviest beating.

• Market breadth stayed negative as decliners outnumbered advancers on a ratio of 630-to-426 stocks, while 386 stocks flatlined. Traded volumes decline 11.3% to 5.75 bln shares amid the negative market sentiment.

• Hong Leong Bank (-26.0 sen) topped the big board decliners list, followed by Genting Malaysia (-19.0 sen), Hong Leong Financial Group (-18.0 sen), Petronas Dagangan (-10.0 sen) and Telekom (-10.0 sen). Consumer product giants like Dutch Lady (-60.0 sen), Ajinomoto (-34.0 sen) and Fraser & Neave (-30.0 sen) fell, while Ayer Holdings and KESM Industries declined 19.0 sen and 18.0 sen respectively.

• LPI Capital (+56.0 sen) topped the broader market gainers list after reporting a strong set of quarterly earnings, coupled with a 1-for-5 bonus issue proposal, while other notable advancers include Carlsberg (+44.0 sen), Litrak (+29.0 sen), Edaran (+25.5 sen) and Mercury (+18.0 sen). Meanwhile, key winners on the FBM KLCI were Nestle (+20.0 sen), AmBank (+8.0 sen), Genting (+4.0 sen), IHH (+2.0 sen) and Public Bank (+2.0 sen).

• Japanese equities snapped a streak of three days gains as the Nikkei fell 0.3% yesterday after the Japanese Yen appreciated against the U.S. Dollar. However, the Hang Seng Index (+0.2%) registered its twelfth straight session of gains – the longest winning streak since 1991, while the Shanghai Composite (+0.1%) rose for the ninth straight session, anchored by gains in banking and consumer shares. ASEAN stockmarkets, meanwhile, ended mixed.
• Wall Street retreated overnight as the Dow fell 0.1% after trimming most of its intraday losses on concern over the possibility that China would slow U.S. government bond purchases and U.S. President Donald Trump would pull out of the North American Free Trade Agreement (NAFTA). On the broader market, the both S&P 500 and Nasdaq declined 0.1% each.
• European stockmarkets also closed mostly lower as the CAC and DAX fell 0.4% and 0.8% respectively as the former was dragged down by the poor industrial production data that fell 0.5% Y.o.Y in November 2017. The FTSE, however, rose 0.2% to close at a fresh all-time high level at 7,748.51 pts, lifted by the rally in banking stocks.

The Day Ahead

• The Malaysian stock market remains toppish and overbought; therefore we think there should be more consolidation over the near term after its hefty gains over the past few weeks. As it is, the consolidation is starting as the buying strength has diminished, resulting in the follow-through buying interest also tapering following the jump in many stocks prices to a new level.

• Nevertheless, we think the consolidation will remain mild for now as the pullback is merely to adjust from overbought. If the key index is able to build up a stronger base around the supports of 1,800-1,820 levels, it could become a springboard for further upsides in the coming months. For now, the resistances are at around the 1,837-1,840 levels.
• The lower liners and broader market shares could also see profit taking activities continuing over the near term as many stocks are also overbought. The consolidation is seen as healthy to allow the above stocks take a breather after the recent runup.

Company Brief

• AirAsia Bhd is searching for a business partner for its budget airline's unit AirAsia Global Shared Services Sdn Bhd (AGSS), which provide support services including finance and accounting as well as IT, besides sourcing and procurement operations. (The Edge Daily)

• LPI Capital Bhd is planning to undertake a bonus issue on the basis of one bonus share-for-every five existing shares. The group also declared a second interim single tier dividend of 45.0 sen per share, payable on 6th February 2018.

• Meanwhile, its 4Q2017 net profit rose marginally by 2.0% Y.o.Y to RM83.0 mln, from RM81.5 mln a year ago, mainly due to higher contribution from the general insurance segment, while revenue also gained 2.0% Y.o.Y to RM363.5 mln, from RM355.6 mln in the previous corresponding year.

• On the other hand, LPI’s full year net profit declined 28.0% Y.o.Y to RM313.8 mln, from RM437.2 mln, despite a 7.0% Y.o.Y increase in revenue to RM1.47 bln, from RM1.38 bln — driven by a one-off RM150.4 mln gain from sale of equities recorded in 2016. (The Star Online)

• AYER Holdings Bhd, which has undergone a rebranding exercise from TAHPS Group Bhd, is in the midst of restructuring its master plan for Bukit Puchong.
• The group is planning to launch landed and non-landed properties this year, while also working on adding recreational, education and healthcare components to enhance the value of their township. (The Edge Daily)
• Penang-based property developer Ewein Bhd has confirmed that its Group Managing Director (MD) Datuk Ewe Swee Kheng has been remanded by the Malaysian AntiCorruption Commission (MACC) to facilitate and assist in the graft probe in relation to the undersea tunnel project in Penang.

• The group does not expect the event to have any operational, management or financial impact on the company, as its Deputy MD, Chuah Poh Lim will continue to run Ewein Group’s business as usual. (The Star Online)

• Meanwhile, apparel retailer Vertice Bhd also said that the MACC investigation on the Penang undersea tunnel project will not impact its progress and that its 13.2%-owned associate company, Consortium Zenith Construction Sdn will continue as the main contractor for the project.

• Consequently, the financial performance of the group is not expected to be negatively impacted by the recently reported events. (The Star Online)

• Goldis Bhd expects to complete its takeover of IGB Corp Bhd in early March, with the latter's shares to be delisted from the Main Market of Bursa Malaysia within the same month.

• The High Court has granted an order sanctioning the proposed takeover exercise, which will see Goldis taking over the listing status of IGB Corp, but renamed to Ipoh Goldis Bersatu Bhd. (The Star Online)

• Tan Chong Motor Holdings Bhd has obtained the rights to be the exclusive distributor, assembler and after-sales service provider of King Long products in Vietnam.

• The group has inked an exclusive distributorship agreement with Xiamen King Long United Automotive Industry Co Ltd – a Chinese company that specialises in the design, production and sale of various buses and coaches. The partnership is expected to facilitate Tan Chong’s penetration into the different bus and coach segments. (The Star Online)

• Accsoft Technology Bhd is proposing to undertake a share split involving the subdivision of every 10 existing shares in the company into 25 shares, which will result in Accsoft’s shares being more affordable in order to appeal to a wider group of public shareholders and investors as well as improve the trading liquidity of the shares. (The Edge Daily)

• Tiger Synergy Bhd has proposed a fourinto-one (4-into-1) share consolidation, and an issuance of Redeemable Convertible Notes to raise up to RM150.0 mln to fund its current property development projects.

• The proposed share consolidation will involve the consolidation of every four existing Tiger Synergy shares into one consolidated share.

• The group has also signed a conditional subscription agreement with Advance Opportunities Fund 1 (AOF1) and Advance Capital Partners Asset Management Private Ltd (the discretionary investment manager of AOF1) for the proposed notes, to be issued in three tranches to AOF1.
• The Redeemable Convertible Notes, at an interest rate of 1.0% per annum, will be due in 2023. The first tranche's principal amount will be RM25.0 mln, the second RM50.0 mln and the final will be RM75.0 mln.
• About RM125.3 mln of the gross proceeds will be used to fund its ongoing property development projects, with the remainder left for working capital. (The Edge Daily)

• My E.G. Services Bhd (MyEG) has been granted approval by Bank Negara Malaysia to issue electronic money via its iPayEasy e-wallet.

• The group has received a letter of approval from the central bank allowing it to issue electronic money via its designated payment instrument, with a maximum wallet limit of RM1,500 per customer. (The Edge Daily)

• The number of passengers passing through the 39 airports managed by Malaysia Airports Holdings Bhd (MAHB) in the country rose by 1.2% Y.o.Y in December 2017. About 9.0 mln people travelled through the airports in Malaysia in December 2017, up from 8.9 mln a year ago. Meanwhile, international traffic rose 10% Y.o.Y to 4.8 mln passengers, although domestic traffic fell 7.5% Y.o.Y to 4.2 mln passengers. (The Edge Daily)

Source: Mplus Research - 11 Jan 2018