Two Speed Market Persisting

• Buying support in the second half of the trading session sent the FBM KLCI (+0.4%) higher on Monday as the key index registered its third straight winning day. The lower liners, however, closed mostly lower as the FBM Fledgling and the FBM ACE slipped 0.2% and 0.4% respectively, while the Mining sector (- 0.9%) was the underperformer despite the broader market closing mostly positive.

• Nevertheless, market breadth turned negative as decliners pipped advancers on a ratio of 411-to-401 stocks. Traded volumes, however, added 4.8% to 1.71 bln shares on rotational play amongst the lower liners.

• Key winners on the local bourse were KLCC (+39.0 sen), Public Bank (+20.0 sen), Genting (+14.0 sen), Hong Leong Bank (+14.0 sen) and AmBank (+12.0 sen). Amongst the biggest gainers on the broader market include Allianz (+34.0 sen), MSM (+32.0 sen), Kossan (+29.0 sen) and PMB Technology (+26.0 sen). Aeon Credit climbed 26.0 sen after delivering a strong set of quarterly results.

• In contrast, Litrak (-25.0 sen), Negri Sembilan Oil Palms (-21.0 sen), Padini (- 13.0 sen) and Air Asia (-12.0 sen) underperformed the broader market. Lotte Chemical Titan sank 52.0 sen after its 1Q2018 earnings disappointed. Meanwhile, Nestle (-40.0 sen), Petronas Gas (-16.0 sen), RHB Bank (-5.0 sen), CIMB (-5.0 sen) and KLK (-4.0 sen) topped the key index decliners list.

• Japanese equities trended higher yesterday as the Nikkei rose 0.2% after recouping all its intraday losses, lifted by strong corporate earnings. Both the Hang Seng Index and Shanghai Composite were closed yesterday for the Labour Day public holiday after both indices climbed 1.7% and 0.2% respectively in the previous session. ASEAN stockmarkets, meanwhile, closed higher a day before the Labour Day break.

• Wall Street ended mixed overnight as the Dow fell 0.3%, dragged down by the weak ISM Manufacturing PMI data that grew 57.3 in April 018 – the slowest expansion since July 2017. On the broader market, the S&P 500 added 0.3%, whilst the Nasdaq jumped 0.9% higher, boosted by gains in technology shares.

• Meanwhile, the FTSE (+0.2%) extended its gains, boosted by a slew of strong corporate earnings, but gains were capped by the weak Markit Manufacturing PMI data at 53.9 in April 2018 – the lowest in 17 months. Both the CAC and DAX were closed in conjunction with the Labour Day public holiday.

The Day Ahead

• The market environment is still mixed with the re-emergence of a two-speed market as the index heavyweights continue to find institutional support, while the lower liners were left to drift amid the prevailing cautiousness ahead of the upcoming General Election next week. We see this trend continuing amid the sustained support on the index-linked stocks where there are few negative developments that is affecting the general market environment.

• The lower liners and broader market shares are likely to continue seeing low following as many retail players are still sidelined by the indifferent broader market environment that is also seeing the traded volumes on the low side of late. With few catalyst, we expect the above listed stocks to continue their drifting trend for longer.
• With more gains on index–linked stocks likely, the key index could head toward its resistances are at 1,875 and 1,880 levels. The supports, meanwhile, are at 1,860 and 1,850 levels.

COMPANY BRIEF

• Lotte Chemical Titan Holding Bhd’s 1Q2018 net profit fell 28.6% Y.o.Y to RM244.2 mln, on the back of a lower profit margin and foreign exchange losses. Revenue for the quarter, however, increased 15.7% Y.o.Y to RM2.21 bln. The group’s plant utilisation rates dropped slightly from an average of 86.0% in 4Q2017 to 83.0% in 1Q2018. (The Star Online)

• Westports Holdings has proposed to acquire 154.2 ha. leasehold land in Pulau Indah from the Selangor State Development Corp (PKNS) for RM116.2 mln. The purchase consideration will be satisfied entirely in cash which will be funded by internally generated funds and bank borrowings.

• The proposed acquisition is for a terminal expansion as the current preliminary port design for Container Terminal 10 to Container Terminal 19 requires additional land acreage to accommodate new wharf and container yard space to facilitate the effective operations of the new container terminals. (Bernama)

• Ajiya Bhd has entered into a subscription and shareholders agreement (SSA) with YKGI Holdings Bhd’s unit, Asteel Resources Sdn Bhd, for the purpose of forming a joint-venture (JV) company called Asteel Ajiya Sdn Bhd.

• The proposed JV would be involved in the manufacturing and sale of safety glass, supply and installation of Ajiya Green Integrated Building System, as well as trading of metal door frame, window frame, metal ceiling and sunshade products in Sabah and Sarawak. Under the SSA, Ajiya shall hold 40.0% equity in Asteel Ajiya while the remaining 60.0% will be held by Asteel Resources. (Bernama)

• Petronas Gas Bhd (PetGas) is reducing its capital expenditure slightly to RM1.30 bln in 2018, from RM1.40 bln allocated last year. The company, however, will increase its operational expenditure to RM750.0 mln in 2018, from the usual annual allocation of RM450.0 mln-RM500.0 mln in order to revamp and rejuvenate its existing facilities. (Bernama)

• Sasbadi Holdings Bhd has received the renewal of direct sales licence from the Domestic Trade, Co-operatives and Consumerism Minister. The renewal of the licence under the Direct Sales and Anti-Pyramid Scheme Act 1993 is for a period of two years from 26th April 2018. (Bernama)

• Luxchem Corp Bhd’s 1Q2018 net profit dropped 29.2% Y.o.Y to RM9.6 mln on lower revenue contribution. Revenue for the quarter fell 9.8% Y.o.Y to RM196.7 mln. (The Edge Daily)

• Tan Sri Quek Leng Chan has stepped down as Chairman of Guocoland (Malaysia) Bhd effective immediately, amid an internal rationalisation and streamlining exercise. He will be replaced by incumbent Non-Executive Director Choong Yee How as Chairman. (The Edge Daily)

• Malaysia Airports Holdings Bhd (MAHB) is taking legal action against AirAsia X Bhd (AAX), claiming the airline owes it RM34.9 mln in outstanding airport charges. (The Edge Daily)

• Censof Holdings Bhd has bagged a contract worth RM73.4 mln to implement an integrated core and finance system for the Human Resources Development Fund. The fiveyear contract took effect on 25th April 2018. (The Edge Daily)

• MISC Bhd has taken delivery of Seri Cemara, the last of five new liquefied natural gas (LNG) carriers from South Korea's Hyundai Heavy Industries Co Ltd. The vessel will be chartered to Petroliam Nasional Bhd (Petronas) for the next 15 years.

• The 150,200 coal-bed methane LNG carrier is part of MISC’s long term fleet expansion programme to cater to the energy transportation needs of Petronas. The delivery brings the current number of MISC's LNG fleet to 29 vessels. (The Edge Daily)

• Yinson Holdings Bhd has entered into a novation agreement with JX Nippon Oil & Gas Exploration (Malaysia) Ltd and TH Heavy Engineering Bhd (THHE) for the novation of the contract for provision of engineering, procurement, construction, installation and commissioning (EPCIC) and leasing of the Layang floating production, storage and offloading (FPSO) facilities dated Nov 27 2014 between JX Nippon and THHE.

• The charter contract, as amended by Yinson Energy Sdn Bhd (YESB), an associate company and the exclusive agent of Yinson Production AS (YPAS), an indirect wholly-owned subsidiary of Yinson, is a firm charter period of eight years with 10 extension periods of one year each. The estimated aggregate value of the charter contract, assuming all extension options are exercised, is some US$860.0 mln (RM3.37 bln). (The Edge Daily)

• Chin Teck Plantations Bhd's 2QFY18 net profit jumped 180.2% Y.o.Y to RM22.7 mln, mainly lifted by a net fair value gain of RM14.1 mln from the divestment of available-for-sale of investment securities. Revenue for the quarter grew 12.3% Y.o.Y to RM42.2 mln.

• For 1HFY18, cumulative net profit climbed 52.0% Y.o.Y to RM36.3 mln. Revenue for the period improved 5.8% Y.o.Y to RM84.7 mln. (The Edge Daily)  

Source: Mplus Research - 2 May 2018