More Minute Gains Ahead

• The FBM KLCI (+0.1%) staged a recovery yesterday after hovering in the positive territory throughout the trading session on mild bargain hunting activities in selected index heavyweights. The FBM Small Cap (+0.3%), FBM Fledgling (+0.5%) and FBM ACE (+1.5%) all rebounded from their previous session selloffs, while the broader market ended on a mixed note.

• Market breadth turned positive as advancers edged decliners on a ratio of 475-to-431 stocks. Traded volumes, however, declined 28.4% to 2.23 bln shares as investors remain cautious following the recent market volatility.

• Nestle (+RM3.00) led the key index advancers list, followed by Genting (+10.0 sen), KLCC (+10.0 sen), PPB Group (+8.0 sen) and RHB Bank (+7.0 sen). Amongst the biggest gainers on the broader market were Dutch Lady (+74.0 sen), Petron Malaysia (+42.0 sen), KESM Industries (+34.0 sen), Carlsberg (+28.0 sen) and SAM Engineering & Equipment (+21.0 sen).

• On the flipside, Batu Kawan (-22.0 sen), Hong Leong Industries (-16.0 sen), Scientex (-15.0 sen), BAT (-12.0 sen) and Kawan Food (-12.0 sen) were the biggest decliners on the broader market. Key losers on the big board were Hong Leong Bank (-14.0 sen), YTL (-6.0 sen), Hong Leong Financial Group (-4.0 sen), Petronas Dagangan (-4.0 sen) and MISC (-3.0 sen).

• Asia benchmark indices rebounded, tracking the positive developments on Wall Street as concerns over a potential trade war eased. The Nikkei added 0.5% after Japan’s revised 4Q2017 GDP expanded 1.6% Y.o.Y – beating economists’ forecast of a 0.9% Y.o.Y improvement. The Hang Seng Index (+1.5%) recovered all its previous session losses, while the Shanghai Composite climbed 0.5%. ASEAN stockmarkets, meanwhile, closed mainly in the red.
• U.S. stockmarkets rebounded overnight after recouping all their intraday losses as the Dow added 0.4% after U.S. President Donald Trump signed proclamation on steel and aluminium tariffs that excludes Canada and Mexico, whilst providing rooms on levies for other countries. Similarly, on the broader market, the S&P 500 grew 0.5% while the Nasdaq gained 0.4%.
• Earlier, European benchmark indices – the FTSE (+0.6%), CAC (+1.3%) and DAX (+0.9%) all extended their gains for the fourth consecutive session. Gains were underpinned by European Central Bank’s decision to keep its key interest rates at record lows and signals greater confidence in the Eurozone economy by dropping talk of boosting its mass bondbuying programme.

THE DAY AHEAD

• With the positivity permeating in overseas equity markets, there appears to be room for further near term upsides on Bursa Malaysia as we expect the spillover effect to also provide a booster to the local stockmarket. Nevertheless, we think the near term upsides are likely to remain mild as there is still a dearth of positive leads to entice more market players back to the market. Consequently, we also see the buying interest remaining on the thin side for now.

• The lack of fresh buying is also likely to see the key index making little headway, albeit we think the 1,840 level could be cleared. The 1,850 level will remain a significant hurdle to clear over the near term. Meanwhile, there is support at the 1,820-1,830 levels.
• Similarly, the lack of fresh catalysts will provide a lid on the lower liners and broader market shares’ upsides as the overall market mood is still morbid. Therefore, we see the gains punctuated by quick profit taking actions.

COMPANY BRIEF

• DRB-Hicom Bhd is planning to swap its real estate assets, including land and a golf resort in the Klang Valley for industrial land in Tebrau, Johor and RM288.7 mln cash with its controlling shareholder Tan Sri Syed Mokhtar AlBukhary.

• The group is expected to realise a net gain on disposal of about RM849.4 mln from the asset swap deal. The proposed disposal includes 2,268.4 ac. of land, together with buildings erected on them which are located in Shah Alam, Klang, Puchong, Jalan Tun Razak in Kuala Lumpur, Batu Caves, Johor Baru and Terengganu, collectively valued at RM1.93 bln vs. its total market value of RM1.43 bln. In exchange, DRB-Hicom will obtain 1,243.5 ac. of freehold industrial land in Tebrau, Johor. (The Star Online)

• S P Setia Bhd has inked a sale and purchase agreement (SPA) with Mekar Gemilang Sdn Bhd to acquire the remaining 50.0% equity stake in Setia Federal Hill for RM431.9 mln cash. Setia Federal Hill’s core asset includes two parcels of leasehold land near Bangsar, Kuala Lumpur, totalling about 51.6 ac.

• The purchase consideration is at a 10.9% premium to the unaudited adjusted net asset value of Setia Federal Hill as at 31st December 2017 of RM778.6 mln, after taking into consideration the market value of land of RM2.35 bln, the potential estimated gross development value of up to RM20.19 bln that is based on preliminary management estimates and the prime location of the land.
• The group will fund the acquisition through the cash proceeds from the issuance of Islamic Redeemable Convertible Preference Shares (RCPS-i A) by SP Setia, which was completed on 6th December 2016 and/or bank borrowings.
• Setia Federal Hill is a 50:50 jointventure (JV) company which was established by SP Setia and Mekar Gemilang to undertake a development project on the land. (The Edge Daily)

• Dolphin International Bhd has launched legal action against PT Himalaya Transmeka (PTHT) in the District Court of Indonesia, seeking 14.5 bln rupiah (RM4.1 mln) in claims for additional expenses incurred due to delayed completion of mechanical and electrical work by PTHT.

• This follows PTHT failure to respond to a letter of demand served by PT Dolphin Indonesia on 23th August 2017.

• To recap, both parties had entered into an agreement on 3th January 2013 to award PTHT a mechanical and electrical supply job. However, due to the delay in completion of the work, Dolphin was forced to take over and complete the project on its own. (The Edge Daily)

• KESM Industries Bhd posted a 12.0% Y.o.Y increase in 2QFY18 net profit to RM11.2 mln, from RM10.0 mln a year ago due to strong demand for its services, while revenue grew 10.0% Y.o.Y to RM91.5 mln, from RM83.1 mln in the same quarter last year.

• Cumulative 1HFY18 net profit also rose 13.0% Y.o.Y to RM22.6 mln, from RM20.0 mln, in-tandem with revenue, which grew 12.0% Y.o.Y to RM182.2 mln, from RM163.2 mln in the previous corresponding period. (The Star Online)

• Star Media Group Bhd has dismissed a letter from JAKS Resources Bhd as being a notice of arbitration. The publisher has received a purported notice of arbitration from JAKS’s solicitors on 6th March 2018 to resolve the dispute between the two parties by way of arbitration.

• To recap, the dispute arose over the completion and delivery of Tower A of the Pacific Star project in Petaling Jaya, Selangor. Star said that its solicitors had responded to JAKS’ solicitors disagreeing with JAKS’ contentions as to “disputes or differences which have therefore arisen between Star and JAKS in connection with the SPA”, when at all material times, JAKS had never raised such alleged disputes or differences during the performance of their obligations under the SPA. (The Star Online)

Source: Mplus Research - 9 Mar 2018