Outlook Still Look Meek

• Tracking the weakness on Wall Street overnight, the FBM KLCI (-0.4%) erased all its previous session’s gains after lingering in the negative territory for the entire trading session. The lower liners also closed mostly lower as the FBM Small Cap and FBM ACE declined 0.5% and 1.5% respectively, while the finance sector (+0.1%) outperformed the negative broader market.

• Market breadth stayed negative as decliners outnumbered advancers on a ratio of 635-to-332 stocks. Traded volumes, however, added 1.3% to 2.32 bln shares as rotational plays remain on the forefront.

• Nestle sank RM16.40, wiping out its previous three sessions of gains, while other big board losers were KLK (-22.0 sen), Maxis (-14.0 sen), AmBank (-11.0 sen) and Hap Seng (-10.0 sen). Notable losers on the broader market were Dutch Lady (-RM1.14), Heng Yuan (-51.0 sen), Ajinomoto (-40.0 sen), Petron Malaysia (- 33.0 sen) and Panasonic (-32.0 sen). UMW sank 59.0 sen after announcing a cash-call exercise to acquire MBM Resources (-1.0 sen).

• On the flipside, BAT (+52.0 sen), Hartalega (+44.0 sen), Grand Hoover (+28.0 sen) and MPI (+23.0 sen) were amongst the biggest advancers on the broader market. IJM added 1.0 sen after bagging a Light Rail Transit Line 3 project. Meanwhile, Hong Leong Bank (+28.0 sen), Genting (+13.0 sen), Hong Leong Financial Group (+10.0 sen), PPB Group (+10.0 sen) and MISC (+4.0 sen) topped the key index winners list.

• Asia benchmark indices ended lower yesterday as the Nikkei fell 0.9%, snapping a four-day winning streak. The Hang Seng Index (-0.5%) also retreated after recouping most of its intraday losses on concerns over a potential trade-war. Despite reporting a solid industrial production data that grew 7.2% in January and February 2018, the Shanghai Composite finished 0.6% lower. ASEAN stockmarkets, meanwhile, closed mostly lower.
• U.S. stockmarkets trended lower for the third straight session yesterday as the Dow (-1.0%) sank below the 25,000 psychological level amid an unexpected sluggish retail sales data that contracted 0.1% M.o.M in February 2018. On the broader market, the S&P 500 fell 0.6%, dragged down by the weakness in teh basic materials sector (-1.3%), while the Nasdaq closed 0.2% lower after enduring a choppy trading session.
• Earlier, European benchmark indices closed mostly lower as both the FTSE and CAC fell 0.1% and 0.2% respectively, pressured by the eleventh hour selling pressure after European Central Bank President Mario Draghi announced that bond-buying program could prolong should the underlying inflation in the region remains subdued. The DAX, however, managed to add 0.1%, lifted by Adidas AG (+9.8%) on optimism over earnings outlook as it initiated a share buy-back program.

THE DAY AHEAD

• The persistently dour market conditions finally caught up the index heavyweights yesterday after the key index that saw support earlier gave way to profit taking activities, hastened by the weak global equity market environment. With global indices staying on the weak side, we see further downside pressure on Bursa Malaysia stocks over the near term with the bargain hunting activities likely to be delayed.

• The continuing weakness could also see the key index revisiting the 1,850 support level and if it gives way, the next support is at 1,840 level. On the upside, the immediate resistances are at 1,860 and 1,870 respectively.

• Meanwhile, the dour trend on the lower liners and broader market shares are also likely to persist amid the insipid market conditions and lack of fresh leads. As a consequence, we also expect market breadth to remain on the modest side.

COMPANY UPDATE

• V.S. Industry Bhd has withdrawn its previous application in relation to the listing of and quotation of bonus shares to be issued under a proposed one-forfour bonus issue that was submitted to Bursa Securities for approval on 27th February 2018. A new application for the listing and quotation for the bonus shares has been submitted to Bursa on 14th March 2018, although no reasons were given for the withdrawal of its previous submission. The proposed exercise is expected to be completed in 2Q2018. (The Edge Daily) Comments

• We were informed that the previous submission was withdrawn due to minor calculation errors, which required the group to re-submit the application for the listing and quotation of the bonus issue.

• As there were no change from the earlier proposal, we maintain our BUY recommendation on VSI with an unchanged target price of RM3.60 (exbonus: RM2.74) by ascribing an unchanged target PER of 18.0x to its unchanged FY19 EPS of 20.1 sen (exbonus: 15.2 sen). The ascribed target PER is at a small premium to its closest competitor, SKP Resources which we believe is justified in view of the group’s leading position in Malaysia’s EMS industry.
• We also maintain our view that the proposed bonus issue as a positive way to reward VSI’s shareholders. We continue to like VSI for its strong growth outlook, which will be driven by higher sales orders from a key client, as well as from its gradual capacity expansion.

COMPANY BRIEF

• Glomac Bhd posted a 19.8% Y.o.Y fall in its 3QFY18 net profit to RM4.3 mln, from RM5.4 mln a year ago. Revenue for the quarter however, rose 20.0% Y.o.Y to RM105.1 mln, from RM87.5 mln in the last corresponding year.

• For 9MFY18, net profit plunged 92.8% Y.o.Y to RM7.8 mln, from RM109.2 mln last year, while revenue narrowed 26.1% Y.o.Y to RM312.6 mln, from RM422.9 mln in 9MFY17. (The Star Online)

• MK Land Holdings Bhd said that its unit, Saujana Triangle Sdn Bhd (STSB) owes about RM80.8 mln in income tax and penalties as claimed by the Inland Revenue Department (IRB) after the Court of Appeal upheld the High Court's decision.

• The above follows the High Court’s decision to disallowe STSB's application for leave and stay to commence judicial review which was made in respect of the IRB's notices of assessment. (The Star Online)

• JAKS Resources Bhd is planning a private placement to raise a minimum of RM68.9 mln to fund the group's ongoing projects. The proposed exercise would involve an issuance of up to 50.7 new shares to third party investors at an issue price to be determined later.

• About RM45.0 mln of the total proceeds will be used to finance the group's ongoing projects and RM20.0 mln for the working capital of its 51.0%-owned Evolve Concept Mall in Petaling Jaya.

• Meanwhile, the remaining funds would be utilised for working capital and estimated expenses relating to the proposed placement which is slated to be completed by 3Q2018. (The Edge Daily)

• T7 Global Bhd has inked a fresh Memorandum of Understanding (MoU) with Terengganu state-linked corporation, Eastern Pacific Industrial Corp Bhd (Epic) and CMC Engineering Sdn Bhd, a wholly-owned bumiputera company, to form a consortium to undertake the construction of the RM60.0 bln East Coast Rail Line (ECRL) project's Terengganu section.

• However, China State Construction Engineering (M) Sdn Bhd (CSCEM) - a subsidiary of China State Construction Engineering Corp Ltd, is excluded from the new MoU.

• To recap, in the previous MOU signed on 20th October 2017, CSCEM's was the technology partner in the strategic partnership to ensure the smooth implementation of the ECRL project. (The Edge Daily)

• YFG Bhd’s shares will be delisted from the Main Market of Bursa Malaysia on 26th March 2018 after the regulator rejected the group’s application for more time to submit its regularisation plan.

• The group had withdrawn the proposed regularisation plan submitted to Bursa Securities and its application for a further extension of time of up to 31st August 2018. Subsequently, the securities will be delisted on 26th March, unless an appeal against the delisting is submitted to Bursa by 21st March 2018. (The Star Online)

• Malaysia Airports Holdings Bhd (MAHB) has clarified that there are no plans yet to develop a third terminal at the Kuala Lumpur International Airport (KLIA). This comes after several newspapers reported that the group is planning to build a third terminal. (The Edge Daily)

• Denko Industrial Corp Bhd has signed a sale and purchase agreement (SPA) with Blessplus Sdn Bhd to acquire a piece of land measuring 62,127 sq. ft. in Johor for RM4.3 mln. The proposed plot, which will house its new warehouse, is located closer to ATA Industrial’s main manufacturing base and upon completion of the warehouse, Denko would shift from some of its existing rented warehouses. The proposed acquisition is also expected to be completed within six months from the date of the SPA. (The Edge Daily)

Source: Mplus Research - 15 Mar 2018