Profit Taking Expected

• Tracking the strength in the regional indices, the FBM KLCI gained 0.8% on Thursday – led by gains in selected banking heavyweights. The majority of the lower liners also climbed higher in the eleventh hour, with the exception of the FBM Ace (-0.4%). Meanwhile, seven-often sub-sectors closed mostly higher at Thursday’s close.

• Market breadth turned positive as gainers overtook losers on a ratio of 505-to-374 stocks. Traded volumes also rose 7.7% to 2.52 bln shares, lifted by buying-interest in O&G and steel-related stocks.

• Key Main Board advancers were Petronas Dagangan (+84.0 sen), PPB Group (+48.0 sen) and Nestle (+30.0 sen). Hong Leongaffiliated companies like Hong Leong Financial Group (+40.0 sen) and Hong Leong Bank (+34.0 sen) also gained on Thursday. Broader market outperformers meanwhile include BAT (+RM1.98), Fraser & Neave (+RM1.22), Allianz (+RM1.06) and Heineken Malaysia (+58.0 sen). PMB Technology rose 46.0 sen, boosted by sharp rally in aluminium prices.

• On the flip side, consumer productsrelated counters like Dutch Lady (-34.0 sen) and Ajinomoto (-30.0 sen) finished lower, followed by Chin Teck Plantations (-40.0 sen), Air Asia (-11.0 sen) and Syarikat Takaful Malaysia (-11.0 sen). Only two-of-thirty stocks closed lower on the key index, which were Genting Malaysia (-3.0 sen) and Genting (-2.0 sen).

• Chinese stockmarkets gained traction, boosted by the strength in crude oil prices and positive effect spilled from Wall Street on Wednesday. The Hang Seng jumped 1.4% - led by gains in the energy (+4.1%) and consumer staples (+3.5%) sectors. The Shanghai Composite Index also rallied 0.8% to 3,117.4 points, while the Nikkei ended up with minute gains, albeit slightly weighed down by consumer staples (-0.7%) stocks. ASEAN stockmarkets also finished mostly positive on Thursday.

• Wall Street, however, bucked the positive sentiments on global stockmarkets, closing in the red on renewed worries of escalating interest rates amid ongoing political uncertainties in Washington. The Dow (-0.3%) continued its downward momentum, pressured by losses in tech giants such as Apple and Intel. Meanwhile, tech-heavy indices like the S&P 500 (-0.6%) and Nasdaq (-0.8%) also took a beating yesterday.

• U.K. equities advanced for the thirdstraight day on the back of gains in the mining sector. The FTSE (+0.2%) logged in gains, driven by the continued strength in oil and metal stocks as well as gains in Shire (+5.9%) after the pharma giant rejected a takeover attempt from its Japanese peer Takeda Pharmaceutical. France’s CAC was also up by 0.2% but the DAX (-0.2%) declined, weighed down by the selling-pressure in Infineon Technologies (-2.8%).

The Day Ahead

• Although the FBM KLCI notched up significant gains to reach a new milestone yesterday, we are unconvinced of its longevity as valuations are already stretched. At the same time, the recent uptrends were not broad-based and was selective on the index heavyweights that mostly jumped on a last minute push by institutions. Therefore, we think the stay at the new all-time high could be short lived for now as we think there will be profit taking ahead of the weekend and after the key index jumped over 4.0% over the past two weeks.

• While we think the key index is poised for a pullback, we believe it could be mild for now as there is little selling pressure despite the toppish market conditions. Hence, we see the FBM KLCI retreating back to the 1,885 level and if it gives way, the next support is at the 1,880 level. There are no visible resistances left as the key index is now at a new all-time high, but the psychological resistance is at the 1,900 points level.

• The lower liners and broader market shares also experience a purple patch yesterday in tandem with the gains on the big board, but we think there could be quick profit taking activities as retail players could opt to cash in on some of their gains ahead of the weekend.

COMPANY BRIEF

• Maxis Bhd's 1Q2018 net profit rose 4.2% Y.o.Y to RM523.0 mln, driven by continuous cost optimisation initiatives. Revenue for the quarter, however, fell 5.8% Y.o.Y to RM2.24 bln. An interim dividend of five sen a share, payable on 28th June 2018, was declared. (The Star Online)

• IHH Healthcare Bhd has issued a nonbinding letter to Fortis Healthcare Ltd on 18th April 2018 to express IHH's readiness to invest up to INR4,000 crores into Fortis via a preferential share allotment at a price not exceeding INR160 (about RM9.44) a share. The infusion is intended to fund the buyout of assets from RHT Health Trust as well as to provide immediate liquidity for working capital and infrastructure upgrades. (The Edge Daily)

• Hektar Real Estate Investment Trust (Hektar REIT) aims to double its portfolio asset value to RM2.40 bln by 2026, by acquiring at least four assets over the eight-year period. As at 31st December 2017, the REIT's asset value stood at RM1.20 bln following last year's acquisition of Segamat Central, bringing its total net lettable area (NLA) to 2.0 mln sq.ft. (The Edge Daily)

• The fall in the share price of British American Tobacco (Malaysia) Bhd (BAT) matches the decline in the size of the legal tobacco market in Malaysia, according to Group Chief Financial Officer Ricardo Guardo. BAT’s share price and the size of the legal market, has fell to 41.7% in 2017. Conversely, the size of the illegal market had grown to 58.3% in 2017, from 52.5% in 2016. (The Edge Daily)

• MK Land Holdings Bhd’s wholly-owned subsidiary Saujana Triangle Sdn Bhd is being sued by the Inland Revenue Board (IRB) over RM27.0 mln in additional tax claims for the years of assessment 2011 and 2013. (The Edge Daily)

• Handal Resources Bhd is supplying two pedestral cranes to Sapura Fabrication Sdn Bhd for RM7.3 mln. The award is for the fabrication, supply and delivery of the two pedestral cranes by December 2018. (The Edge Daily)

• Bina Darulaman Bhd (BDB) is confident of overcoming the current challenging business environment by capitalising on undeveloped landbanks, worth RM344.4 mln to sustain future developments. The primary focus now is to strategise for long-term growth and sustainability. The property division will be focusing on clearing its inventory of available units and introducing new and innovative products that match the market’s requirements. About 75.0% of BDB’s new launches would be affordable housing priced at RM400,000 and below. (The Edge Daily)

• Destini Bhd has bagged a RM138.0 mln contract from the Defence Ministry to provide maintenance, repair and overhaul (MRO) services and the supply of safety and survival equipment to the Royal Malaysian Air Force (RMAF).

• Under the contract, Destini Prima is required to participate in the Skim Latihan 1Malaysia and provide employment to at least 57 people without cost to the government. (The Edge Daily)

• Ikhmas Jaya Group Bhd has secured an RM101.9 mln contract, boosting its outstanding orderbook to RM900.0 mln, for a flood mitigation project in Sungai Pendang, Kedah from the Department of Irrigation and Drainage. The project consists of demolition and site clearance, piling works, upgrading of bridges, upstream and improvement works. It is expected to take 36 months to complete beginning from the date of site possession. (The Edge Daily)

• Vizione Holdings Bhd's 3QFY18 net profit surged 53.0x to RM8.1 mln, mainly due to contribution from the construction works undertaken by its newly-acquired unit Wira Syukur (M) Sdn Bhd. Revenue for the quarter jumped 9.2x Y.o.Y to RM133.9 mln.

• For 9MFY18, cumulative net profit soared more than 36.5x Y.o.Y to RM15.1 mln. Revenue for the period increased 9.2x Y.o.Y to RM302.5 mln. (The Edge Daily)

• PUC Bhd will be investing up to RM90.0 mln in Celcom Planet Sdn Bhd (CPSB) and as a result, take over management control of 11Street Malaysia. (The Edge Daily)  

Source: Mplus Research - 20 Apr 2018