Gains To Be Limited By Cautiousness

• Tracking the positive developments on Wall Street overnight, the FBM KLCI (+0.2%) extended its gains last Friday. Despite that, the key index recorded a 0.7% weekly decline. The lower liners ended mostly higher as the FBM Small Cap and FBM ACE added 0.1% and 0.4% respectively, while the construction (- 1.1%) and finance (-0.1%) sectors underperformed their peers.

• Market breadth remained positive as advancers outnumbered decliners on a ratio of 491-to-459 stocks. Traded volumes added 1.0% to 2.25 bln shares on mild bargain hunting activities.
• Nestle (+RM5.00) continues to anchor the FBM KLCI gainers list, followed by Petronas Dagangan (+20.0 sen), Genting (+14.0 sen), Hap Seng (+10.0 sen) and PPB Group (+10.0 sen). Significant advancers on the broader market Petron Malaysia (+95.0 sen), KESM industries (+80.0 sen), Heng Yuan (+35.0 sen), Lotte Chemical Titan (+31.0 sen) and Dutch Lady (+30.0 sen).
• BAT (-76.0 sen) topped broader market decliners list, followed by Chin Teck Plantations (-28.0 sen), Panasonic (-28.0 sen), SAM Engineering & Equipment (- 27.0 sen) and V.S. Industry (-17.0 sen). Selected banking heavyweights like Hong Leong Financial Group (-28.0 sen), Hong Leong Bank (-6.0 sen), RHB Bank (-4.0 sen) and Maybank (-2.0 sen) fell, while Tenaga closed 6.0 sen lower.

• Asia benchmark indices extended their gains last Friday after North Korean leader Kim Jong-un will stop nuclear and missile testing to arrange a meeting with U.S. President Donald Trump. The Nikkei climbed 0.5% to close at a one-week high. The Hang Seng Index (+1.1%) advanced, while the Shanghai Composite climbed 0.5%. ASEAN stockmarkets, meanwhile, closed mainly in the red.
• U.S. stockmarkets extended their gains as the Dow jumped 1.8% higher to close above the 25,000 psychological level last Friday supported by stronger-thanexpected jobs data. On the broader market, the S&P 500 climbed 1.7% with only the telecommunications sector (- 0.01%) underperforming, while the Nasdaq (+1.8%) closed at a fresh record high level at 7560.81 pts.
• European benchmark indices also ended mostly higher as the FTSE and CAC rose 0.3% and 0.4% respectively as concerns over a trade war with the U.S. eased, coupled with higher commodity prices. The DAX, however, fell 0.1% amid the sluggish export and factory output data.

THE DAY AHEAD

• There should be further near term upsides ahead as the positivity among the global equity indices will continue to lend some confidence to the local stockmarket. This will help the market to regain some of its luster that was taken out in the recent market rout as well as seeing market confidence taking a beating.

• While we continue to see a sustained recovery over the near term, the gains may still be modest, given that there is still cautiousness over the market’s direction. At the same time, the remains pockets of foreign selling that are likely to limit the market’s upsides.

• At the same time, the cautiousness is also prevailing among the lower liners and broader market shares amid the still unsettled market outlook as well as the guessing over the timing of the next general election. Therefore, we also see the gains among the lower liners to be curtailed by quick profit taking activities in an environment where there remain few catalysts.
• Under the prevailing environment, we see the FBM KLCI finding substantive resistance at the 1,850 and 1,860 levels, while the 1,840 and 1,830 levels are the supports.

COMPANY BRIEF

• UMW Holdings Bhd is securing a controlling stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua) in an exercise that would involve taking MBM Resources Bhd private. The group is planning to buy a 50.1% equity stake in MBM from Med-Bumikar Mara Sdn Bhd (49.5%) and Central Shore Sdn Bhd (0.6%) for RM501.0 mln cash, followed by a potential mandatory takeover offer for the remaining shares it does not own. Its initial offer for the controlling stake in MBM will close on 28th March, 2018.

• UMW also proposes to acquire another 10.0% shareholding in Perodua from PNB Equity Resources Corp Sdn Bhd, which will lift UWM’s stake in Perodua to 70.6% (from 38.0%). (The Star Online)

• Keck Seng (M) Bhd has earmarked €25.0 mln (RM121.0 mln) to be invested in European hotel operator, AccorInvest Group SA. The group has inked an equity commitment letter on 9th March 2018 to invest in AccorInvest - a unit of French multinational hotel group, Accor SA known for the AccorHotels chain. Keck Seng also said that it is the intention of Accor SA to sell a majority stake in AccorInvest to investors.

• Consequently, Keck Seng will be setting up a special purpose vehicle with other investors for the share acquisition, but did not state the equity percentage it is acquiring. It expects an agreement to be finalised and signed by the respective parties by 2Q2018.
• AccorInvest has a portfolio of 891 hotels in the economy and mid-scale segments, located mostly in Europe. Of the total, 324 are owned and 567 are operated under fixed or variable-rent leases. (The Edge Daily)
• Muhibbah Engineering (M) Bhd was awarded a RM57.6 mln contract from Prasarana Malaysia Bhd via its 49.0%- owned joint-venture (JV) company for engineering work on the Light Rail Transit Line 3 (LRT3).

• The contract will be for the design, supply, delivery, installation, testing and commissioning of noise barrier for package NBE (E) of the LRT3 from Bandar Utama, Petaling Jaya to Johan Setia, Klang. The project will begin immediately and is expected to be completed by 3Q2020. (The Edge Daily)

• Heitech Padu Bhd has secured a contract with Permodalan Nasional Bhd (PNB) to outsource its services for RM27.1 mln. The agreement was signed on 1st March 2018 for the outsourcing of IT services, comprising application services, data centre services, disaster recovery services, desktop management services and helpdesk services.

• The two-year project will commence from 1st January 2018 until 31st December 2019 while any further renewal or extension of the contract will be at the discretion of PNB. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) has slapped Gamuda Bhd's 80.0%-owned subsidiary Gamuda Water Sdn Bhd with four writs of summons together with statements of claim for failing to pay its electricity bills. The four suits include electricity bills worth RM39.5 mln and an annual interest of 5.0% on the claims.

• Gamuda said that the outstanding electricity bills have been fully provided as and when they are incurred. (The Star Online)

• Sasbadi Holdings Bhd has received three textbook publishing and printing contracts for Year 3 of the Chinese primary schools from the Ministry of Education for a total of RM6.5 mln.

• The contracts is for the publishing and printing of Mathematics textbook for RM2.9 mln, Arts Education textbook for RM0.7 mln and Chinese language textbook for RM2.9 mln. The three contracts are for a period of two years from 9th March 2018, to 31st December 2020. (The Star Online)

Source: Mplus Research - 12 Mar 2018