Sideway Trend In The Offing

• The FBM KLCI succumbed to profit-taking in selected telco heavyweights, closing lower despite the positive sentiment in the offshore markets. The lower liners was also painted red, with the FBM Small Cap (-0.8%) taking the brunt. The broader market, meanwhile, was mostly splashed in the red with only three of ten subsectors in the black.

• Market breadth was bearish as losers more than doubled the winners. Traded volumes also lost 24.4% to 2.34 bln shares as investors pull out of the local bourse amid portfolio re-balancing activities.

• Large cap telco companies like Telekom Malaysia (-10.0 sen), Digi (-7.0 sen) and Axiata (-6.0 sen) led the underperformers in the key-index, followed by Hong Leong Financial Group (-6.0 sen) and Petronas Chemicals (-6.0 sen). Other decliners, meanwhile, include KESM Industries (- RM1.30), Petron Malaysia Refining (-34.0 sen), Kossan Rubber Industries (-27.0 sen), BAT (-26.0 sen) and Malaysian Pacific Industries (-24.0 sen).

• On the bright side, charttoppers like Far East Holdings (+50.0 sen), Aeon Credit (+22.0 sen), Heineken Malaysia (+20.0 sen), United Malacca (+20.0 sen) and Shangri-La (+14.0 sen) buoyed the broader market. Main Board winners include Hong Leong Bank (+40.0 sen), Petronas Dagangan (+8.0 sen), Genting (+7.0 sen) and Genting Malaysia (+5.0 sen). Press Metal closed 4.0 sen higher, lifted by rising aluminium prices.

• Key regional benchmark indices closed higher on Wednesday, in-tandem with the bullish close in Wall Street. The Nikkei rose 1.4% to close slightly above the psychological 22,158.0 points. The Shanghai Composite Index (+0.8%) climbed higher after paring earlier losses, alongside the Hang Seng (+0.7%), with eight-of-nine subsectors in the green. The majority of the ASEAN stockmarkets also tracked higher yesterday.

• U.S. equities closed on mixed tone amid rising crude oil prices which were lifted by potential supply disruptions. The Dow slid into the red territory after a choppy session, weighed down by the losses in International Business Machines (IBM) following weaker-than-expected earnings report. The S&P 500 (+0.1%) and Nasdaq (+0.2%), however, ended higher on expectations of solid quarterly earnings.

• Key benchmark European stockmarkets ended favourably, boosted by the rally in commodity prices. The FTSE extended its gains for the second consecutive day on the back of gains in mining giants like Glencore and Anglo American. The DAX took a breather and closed little changed, while the CAC added 0.5% on Wednesday’s close.

The Day Ahead

• As expected, the key index is finding it difficult to pass the 1,880 points amid the lack of following and fresh leads. At the same time, the market is also tethering on the overbought environment, thus leaving little room for the key index to convincingly pass the level.

• While we think that the consolidation is likely to persist for longer, we also think there is little downside pressure as there is no adverse market or economic developments. As it is, market players are playing a waiting game ahead of the upcoming General Elections and this could mean a sideway trend could be in the offing for longer. Hence, we think the FBM KLCI could trend within a tight range between the 1,875 and 1885 levels for now.

• There are also few catalysts among the lower liners and broader market shares which will leave the stocks to continue drifting until the conclusion of the upcoming General Elections. Any gains could be met by quick profit taking actions that will curtail the upsides, in our view.

MACRO BRIEF

• Malaysia's Consumer Price Index for March 2018 rose 1.3% Y.o.Y, but was below the consensus estimate of a 1.6% Y.o.Y increase. The March increases were due to food & non-alcoholic beverages (+2.8% Y.o.Y) and furnishings, household equipment and routine household maintenance (+2.1% Y.o.Y). (The Star Online)

COMPANY BRIEF

• T7 Global Bhd has secured three contracts for the provision of services worth a total of RM63.0 mln. The first contract is from Murphy Sarawak oil for the provision of maintenance services, spare parts and consummables for Murphy Sarawak Oil Co Ltd for a tenure of three years until 14th January 2021, with an option to extend for one year.

• The second contract involves the upgrading of a combat management system for a Royal Malaysian Navy vessel for Marine Crest Technology Sdn Bhd, expected to be completed in August 2019. Lastly, a contract from CP Energy & Services Sdn Bhd is for the supply of equipment and upgrading works, which expires on 16th October 2018. (The Star Online)

• Aeon Co (M) Bhd is looking to strengthen and expand its presence in Sabah and Sarawak with its first mall in Kuching, Sarawak. Aeon Mall Kuching Central will be open to the public on 20th April 2018 and with the launch of the mall, the group will have a total of 27 Aeon malls and 35 Aeon stores nationwide. The new mall has over 1.6 mln sq.ft. of gross built-up area housing more than 130 retail lots spread across three floors. In addition, the mall also comes with 1,800 car park bays spread over five floors. (The Edge Daily)

• Zhulian Corp Bhd's 1QFY18 net profit fell 38.1% Y.o.Y to RM9.0 mln due to smaller foreign exchange gains. Revenue for the quarter declined 10.4% Y.o.Y to RM43.3 mln. A first interim dividend of two sen per share, payable on 8th June 2018, was declared. (The Edge Daily)

• PLB Engineering Bhd has proposed a private placement of up to 10.0% of its share capital that would raise up to RM18.2 mln for working capital purposes. The placement will involve up to 11.2 mln new shares at an indicative price of RM1.62 per placement share. The placement shares will be placed out to third party investors to be identified and the actual issue price will be determined and announced later. (The Edge Daily)

• Keck Seng (Malaysia) Bhd is close to acquiring a stake in Luxembourg-based AccorInvest Group SA, which boasts a portfolio of 891 hotels in the economy and midscale segments — the majority of which are located in Europe. The investment in AccorInvest is expected to provide an opportunity for the group to gain exposure to a diversified portfolio of hotels with resilient income stream and opportunities for value creation.

• To this end, Keck Seng’s wholly-owned subsidiary, Brosna Ltd has entered into a subscription agreement with A2I Holdings S.À.R.L to subscribe for shares and Tracking Preferred Equity Certificates (TPECs) issued by A2I for €25.0 mln (RM120.0 mln). The transaction is expected to be completed in 2Q2018. (The Edge Daily)

• Chemical Co of Malaysia Bhd (CCM) has secured a US$25.0 mln (RM100.0 mln) credit facility from Sumitomo Mitsui Banking Corp Malaysia Bhd (SMBC) to pare down its existing borrowings. The company has an outstanding term loan with SMBC of RM150.6 mln, which is maturing on 30th April 2018. The repayment of the existing bank facility and drawdown from this facility will see the gearing ratio of CCM Group reduced to 0.2x for 2018. (The Edge Daily)

• Malayan Banking Bhd (Maybank) is preparing to spin off and list its Etiqa insurance arm on the local stock exchange. Etiqa is estimated to be worth at least US$1.00 bln – a bigger market value than insurance peer Syarikat Takaful Malaysia Bhd, which is valued at about US$700.0 mln. As part of the transaction, Maybank's investors are expected to receive shares in the insurance company in proportion to their existing holding in the bank and no new money is expected to be raised in the listing. (The Edge Daily)

• The Perodua Labour Union has objected to the proposed acquisition of MBM Resources Bhd by UMW Holdings Bhd, as it fears the move would negatively affect the rights and interests of its members. The union expressed concerns that the takeover will be detrimental to the rights and interests of union members, which have been safeguarded by the existing Perodua management for the past 25 years.

• Moreover, it is also worried that Perodua's Japanese partner, Daihatsu Motor Corp may review its involvement as a technological partner of Perodua and discontinues the partnership. (The Edge Daily)  

Source: Mplus Research - 19 Apr 2018