Mild Pullback Seen

• Tracking the encouraging performance on Wall Street overnight, coupled with the higher crude oil prices, the FBM KLCI (+0.5%) recorded its fifth straight winning streak yesterday after lingering in the positive territory for the entire trading session. The lower liners – the FBM Small Cap (+1.5%), FBM Fledgling (+0.4%) and FBM ACE (+0.8%) also extended their gains, while the broader market closed mostly on a positive note.

• Market breadth stayed positive as advancers outstripped decliners on a ratio of 736-to-322 stocks. Traded volumes climbed 24.6% to 4.65 bln shares amid rotational plays among the lower liners.

• Topping the FBM KLCI gainers list was Astro (+26.0 sen) as it recovered from its all-time low level, followed by CIMB (+16.0 sen), Maybank (+12.0 sen), Press Metal (+11.0 sen) and Genting (+10.0 sen). Significant gainers on the broader market include Carlsberg (+76.0 sen), Ajinomoto (+48.0 sen), Cahya Mata Sarawak (+46.0 sen) and KESM Industries (+44.0 sen). Sasbadi gained 3.0 sen after bagging two textbook publishing and printing contracts.

• On the flipside, Transocean (-27.0 sen), UMW Holdings (-26.0 sen), APM Automotive (-17.0 sen), Ibraco (-11.0 sen) and Unisem (-11.0 sen) topped the broader market decliners list. Big board losers include Sime Darby Plantations (- 17.0 sen), Petronas Gas (-10.0 sen), KLK (-10.0 sen), PPB Group (-10.0 sen) and Hong Leong Financial Group (-6.0 sen).

• Asian benchmark indices closed mixed overnight as the Nikkei (-0.5%) fell on weakness in retail and consumer shares. The Hang Seng Index (+0.6%), however, recorded its fourth consecutive winning day, boosted by gains in energy shares, while the Shanghai Composite rose 0.6%. ASEAN stockmarkets, meanwhile, closed mostly higher yesterday.

• Wall Street retreated as the Dow fell 0.9% overnight after U.S. Federal Reserve officials hinted on a more hawkish tone towards interest rate direction coupled with escalating geopolitical tension in the Middle East. On the broader market, the S&P 500 slipped 0.6% with nine of the eleven major sectors in the red, while the Nasdaq finished 0.4% lower.

• Earlier, key European stockmarkets – the FTSE (-0.1%), CAC (-0.6%) and DAX (- 0.8%) also trended lower as market sentiment was dented by the potential U.S. military action against Syria. Meanwhile, European Central Bank’s President Mario Draghi has cautioned that the threat of tariffs could impact negatively on investors’ confidence.

The Day Ahead

• After a streak of gains, we expect Malaysian stocks could take a breather from the recent upside as we think the overnight weakness on many global indices will prompt profit taking activities on stocks that have posted strong gains over the past few sessions.

• As it is, the flaring up of tensions in the Middle East and the higher U.S interest rate issues are taking off some shine on global market sentiments and this could provide the excuse for investors to take some profit on their recent gains. Nevertheless, the broad market outlook has not turned overly negative as yet and as a consequence, the pullback is likely to be mild for now.

• On the key index, the pullback may result in the key index dipping back to near the 1,860 support, before the 1,850 support comes into play. The resistances, meanwhile, are at 1,870 and 1,880 respectively.

• Similarly, we think there could be increased profit taking action among the lower liners after their recent recovery, but we also think the pullback will be modest amid a still firm market undertone that should provide ample support.

COMPANY BRIEF

• Fitters Diversified Bhd‘s subsidiary, Molecor (SEA) Sdn Bhd has been appointed the strategic supplier of specialised pipes for Felda Water Sdn Bhd’s RM57.9 mln project involving Orang Asli villages in Pahang.

• To this end, Molecor and Felda Water signed a Memorandum of Understanding (MoU) to explore and co-operate in the application and use of HYPRO PVC-O pipes in water and wastewater projects in Malaysia and the region.

• Felda Water was awarded a contract by the Energy, Green Technology and Water Ministry to install and commission approximately 80.0 km of main and distribution pipelines to supply treated water to 14 Orang Asli villages throughout five districts in Pahang. (The Star Online)

• Datasonic Group Bhd is proposing an issuance of up to 675.0 free warrants on the basis of one warrant-for-every two shares held, at an entitlement date to be announced later. The exercised price of RM1.01 represents a premium of 16.1% to the five-day volume weighted average market price of Datasonic shares of 10.0 sen, as at 2th April, 2018.
• Datasonic's issued share capital on 2th April, 2018 stood at RM135.0 mln comprising 1.35 bln shares.

• Should the warrants be fully exercised, the gross proceeds will amount to RM681.8 mln which will be used to fund future working capital requirements which may include business development activities, project expenditures and other operating expenditures. (The Edge Daily)

• Benalec Holdings Bhd has proposed to raise up to RM31.4 mln via a private placement to third party investors to finance ongoing and future land reclamation projects. The proposed exercise entails the issuance of up to 112.2 mln new shares — representing up to 10.0% of its enlarged issued shares of 1.23 bln shares — at an issue price to be determined later.

• Proceeds will mainly be used for expenses such as raw material costs, payments to sand concessionaires for the rights to dredge sand ex-seabed, payments to suppliers, hire of land equipment and labour costs amongst others. Additionally, RM10.0 mln will be apportioned for working capital. The proposed exercise is slated to be completed by the 2Q2018. (The Star Online)

• Sapura Energy Bhd, Petronas Carigali Sdn Bhd and Sarawak Shell Bhd have taken the final investment decision (FID) to develop Sarawak's Gorek, Larak and Bakong gas fields under phase one of the SK408 production sharing contract.

• The FID follows Petronas' approval for the field development plan and the signing of the key terms to the gas sales agreement for phase one of the SK408 gas field development. Subsequently, Sapura will be the development and production operator of the Larak and Bakong fields, while Sarawak Shell is the development and production operator of the Gorek field. (The Star Online)

• Cypark Resources Bhd has signed a two-year MoU (including an option for extension) with German-based 21st Century Clean Energy GmbH & Co KG to collaborate and cooperate in energy storage projects and to jointly expand their business opportunities in the area of renewable energy in Malaysia. 21st Century is the authorised German battery storage system developer and Tesvolt agent for Malaysia.

• The MoU entails cooperation in developing business and marketing strategies to potential customers for battery energy storage projects in Malaysia, to jointly explore relevant business opportunities for vertical and horizontal market expansion and collaborating in feasibility studies to set up renewable energy facilities and the development of battery energy storage projects. (The Edge Daily)

• Pharmaniaga Bhd expects a doubledigit growth of between 17.0% and 18.0% this year from its Indonesian segment, lifted by its halal products. The group has also earmarked a capital expenditure of RM75.0 mln for FY18 to be used for upgrading machinery and warehousing for its plants, including a halal vaccine plant which should be ready between 2020 and 2022. Pharmaniaga plans to continue reducing its dependency on the concession business, which contributes 49.0% to total business currently. (The Star Online)

• Encorp Bhd has filed a lawsuit against its contractor, Bumimetro Construction Sdn Bhd to claim for liquidated damages of RM24.6 mln as the latter failed to complete the project within the stipulated timeframe given. The group is also seeking a Quality Assessment System in Construction penalty of RM3.0 mln for failure to score a minimum of 85.0% and an interest at the rate of 5.0% per year on the sum of RM27.6 mln until the date of full settlement.

• To recap, Bumimetro was appointed by Encorp as the main contractor for main building works construction for a proposed mixed development project in Kota Damansara. The single block development comprises a three-storey retail component, 34 floors of serviced apartment, five floors of carpark, a facility floor and a basement level. (The Edge Daily)

• Public Bank Bhd is establishing an Additional Tier 1 Capital Securities (AT1CS) programme up to RM10.0 bln in nominal value. The banking group has lodged the programme with the Securities Commission Malaysia and it also obtained approval from Bank Negara Malaysia (BNM) on 7th March 2018 for the establishment of the AT1CS programme.

• The AT1CS to be issued from time to time under the AT1CS programme will qualify as Additional Tier 1 capital for the computation of the regulatory capital of PBB and PBB group in accordance with the Capital Adequacy Framework (Capital Components) issued by BNM. The programme to be issued will also have a perpetual tenure. (The Edge Daily)

• Harn Len Corp Bhd was publicly reprimanded by Bursa Malaysia Securities Bhd after failing to account for adjustments in the group’s 4Q2016 financial report. The group had lodged an unaudited net loss of RM2.3 mln in its 4Q2016 report vs. an audited net loss of RM8.3 mln in the audited statements announced on 28th April 2017. (The Edge Daily)  

Source: Mplus Research - 12 Apr 2018