Consolidation To Continue

• Following the slump on Wall Street last Friday, the FBM KLCI (-0.9%) gapped down at the opening bell before recovering some of its intraday losses to close at 1,853.07 pts yesterday. The lower liners – the FBM Small Cap (-1.8%), FBM Fledgling (-1.3%) and FBM ACE (- 2.2%) all ended sharply lower, while the consumer products sector (+0.01%) bucked the negative broader market.

• Market breadth was negative as decliners trounced advancers on a ratio of 966-to- 167 stocks. Traded volumes gained 1.7% to 2.66 bln shares as profit taking and selling activities took precedence.

• More than two-thirds of the key index constituents slipped, dragged down by MISC (-37.0 sen), followed by Petronas Gas (-24.0 sen), Hong Leong Bank (-20.0 sen), RHB Bank (-19.0 sen) and CIMB (- 16.0 sen). Notable decliners on the broader market include Heng Yuan (-58.0 sen), Petron Malaysia (-48.0 sen), LPI Capital (-32.0 sen), Allianz (-28.0 sen) and BAT (-28.0 sen).

• Amid the negative market sentiment, the consumer products sector that is touted as defensive in nature like Fraser & Neave (+62.0 sen), Dutch Lady (+54.0 sen), Heineken (+48.0 sen) and Carlsberg (+18.0 sen) outperformed. Daibochi climbed 6.0 sen after reporting a strong set of quarterly earnings. There were only three advancers on the FBM KLCI – Nestle (+70.0 sen), Petronas Dagangan (+22.0 sen) and Tenaga (+2.0 sen).

• Asia benchmark indices closed mostly lower as the Nikkei sank 2.6%, taking cue from the sharp decline on Wall Street last Friday. The Hang Seng (-1.1%) extended its losses, but the Shanghai Composite (+0.7%) bucked the global mark weakness after recovering all its intraday losses on gains in banking stocks after the Caixin Services PMI rose to the highest level in six years at 54.7 in January 2018. ASEAN stockmarkets, meanwhile, ended mostly lower yesterday.
• U.S. stockmarkets endured its biggest one-day selloff since 2011, wiping their year-to-date gains as the Dow plunged 4.6% to close below the 25,000 psychological level on fear over rising inflation that could trigger a quickerthan-expected rising interest rates. On the broader market, the S&P 500 sank 4.1% with all eleven major sectors remain in the red, while the Nasdaq tumbled 4.0%.
• Earlier, European benchmark indices – the FTSE (-1.5%), CAC (-1.5%) and DAX (- 0.8%) all extended their losses, taking cue from the weakness on Wall Street as investors were also be eyeing on the new round of talks between the U.K. and the European Union regarding Brexit. In the meantime, Spain’s services PMI data rose to 56.9 in January 2018 – the fastest expansion over the past six months.

THE DAY AHEAD

• The toppish global equity market conditions may have reached a turning point with the past two sessions’ steep falls that is likely to permeate further to the Malaysian stockmarket over the near term. As it is, yesterday’s consolidation on Bursa Malaysia is considered mild and we see further consolidation as market players will continue to lock in profits from the uptrend that started in midDecember, before re-entering the market once a new base is found.

• Therefore, we see the key index retracing further below the 1,850 level to around the 1,820-1,830 levels. Depending on the extent of the selling pressure, we think the above levels could provide some measure of support and could allow the key index to build up a new base in due course.
• In the meantime, we also do not see any reprieve in sight for the lower liners and broader market shares as yet, despite the recent steep falls, as global market sentiments have taken a turn for the worse and this is likely to see the selling continuing over the near term.

COMPANY BRIEFS

• Bursa Malaysia Bhd’s 4Q2017 net profit gained 10.2% Y.o.Y to RM55.3 mln, from RM50.2 mln in the previous corresponding year, mainly due to the better performance of the securities market. Meanwhile, revenue also grew 14.1% Y.o.Y to RM141.2 mln vs. RM123.7 mln a year ago. The group has aslo declared a dividend of 18.5 sen in FY17, compared to 17.0 sen in 4Q2016. (The Edge Daily)

• MCT Bhd shareholders was advised to reject the takeover bid launched by Philippines-based property developer Ayala Land Inc's unit Regent Wise Investments Ltd, which has been deemed "not fair and not reasonable" by independent adviser Kenanga Investment Bank Bhd (Kenanga IB).

• To recap, Regent Wise acquired 17.2% equity stake (or 230.1 mln shares) in MCT from Tan Sri Goh Ming Choon for RM202.5 mln (or 88.0 sen per share) on the 2nd February, 2018.

• The offer price of 88.0 sen is lower than and represents a discount of 36.2% over the estimated fair value per MCT share of RM1.38 and is deemed not fair. (The Edge Daily)

• Vivocom International Holdings Bhd was awarded a RM27.6 mln contract from China Construction Third Engineering Group (M) Sdn Bhd for aluminum and glazing works in Melaka. The project will be completed by September 2019. (The Edge Daily)
• Serba Dinamik Holdings Bhd is buying a 40.0% equity stake in Maju Renewable Energy Sdn Bhd, Maju RE (Talang) Sdn Bhd and Maju RE (Temenggor) Sdn Bhd from Maju Holdings Sdn Bhd, which is owned by businessman Tan Sri Abu Sahid Mohamed — for a combined RM24.9 mln.
• The group entered into a Memorandum of Agreement (MoA) with Maju, which currently owns 70.0% of the shares in each of the target companies. Meanwhile, the remaining 30.0% in the three target companies will be held by Perak Hydro Renewable Energy Corp Sdn Bhd.

• The proposed acquisition will be funded in cash through proceeds from its initial public offering. (The Star Online)

• DBE Gurney Resources Bhd is proposing to diversify into property development and construction (from the operation of poultry breeding farms) via a joint-development with Misi Jutari Sdn Bhd (MJSB) for a mixed development project in Perak.

• The project, developed on a 3.7 ha. land in Bota Kanan in Perak Tengah district, encompasses 95 units of semidetached and terrace houses and 19 units of shop houses. (The Star Online)

• Daibochi Plastic and Packaging Industry Bhd‘s 4Q2017 net profit jumped 33.7% Y.o.Y to RM7.9 mln, from RM5.9 mln last year, in-tandem with a 16.9% Y.o.Y growth in revenue to RM105.7 mln, from RM90.4 mln in the same quarter last year. Following the stellar performance, the group also declared a dividend of 1.3 sen a share, payable on 21st March 2018. (The Star Online)

• Kuantan Flour Mills Bhd's external auditors, McMillan Woods Thomas has issued a qualified opinion on the company's FY17 audited financial statements amid uncertainty over its proposed regularisation plan dated 29th September 2017, which has yet to be approved by Bursa.
• The auditors also noted that the group incurred net loss of RM12.3 mln in FY17, with net liabilities of RM29.0 mln and negative shareholders' funds of RM23.1 mln. (The Edge Daily)
• Sapura Energy Bhd has secured several contracts with a combined value of about RM905.0 mln, including three provisions of Engineering, Procurement, Construction and Commissioning (EPCC) contracts.

• Two of the aforementioned contracts were secured from Petronas Carigali Sdn Bhd, while the third is from Hess Exploration And Production Malaysia BV.

• Sapura also secured two other projects which involved: i) the transportation and installation works for the Bokor Central Processing Platform project for Malaysia Marine and Heavy Engineering Sdn Bhd, and ii) the provisioning of offshore/onshore pipelines and terminal works for the Fifth Oil Berth project at Mumbai Port Trust. (The Star Online)

• Anzo Holdings Bhd, who anticipates a potential RM1.21 bln contract to build the Paragon@KLNorthgate shopping centre in Selayang with a partner, does not see the project take off anytime soon.

• The group said that the developer, KL Northgate Sdn Bhd is currently reviewing the whole development concept and development components of the project, in view of the current real estate glut and the imbalance in the supply-demand conditions, which could take up to nine months.

• As the progress of the project, including the decision to revise the whole development concept and development components, solely depends on the direction from KL Northgate, Anzo will only be able to submit the tender documents upon KL Northgate finalising the contract document and pricing for the project, estimated by October 2018. (The Edge Daily)

Source: Mplus Research - 6 Feb 2018