May Find Local Support

• Selling pressure in banking heavyweights sent the FBM KLCI (-0.5%) lower for the third straight session as the key index closed at its lowest level in four weeks at 1,841.83 pts last Friday. Consequently, the key index extended its weekly losses, falling 1.2% W.o.W. The lower liners also finished mostly lower as the FBM Fledgling and FBM ACE slipped 0.3% and 1.3% respectively, while the broader market closed mostly lower.

• Market breadth stayed negative as decliners overpowered advancers on a ratio of 525-to-325 stocks. Traded volumes thinned by 3.9% to 1.61 bln shares amid the negative market sentiment.

• Banking giants like CIMB (-23.0 sen), Hong Leong Financial Group (-18.0 sen) and Public Bank (-14.0 sen) topped the big board decliners list, while Nestle and KLCC shed 10.0 sen and 9.0 sen respectively. Consumer products stocks like Fraser & Neave (-70.0 sen), BAT (- 58.0 sen), Carlsberg (-44.0 sen) and Apex Healthcare (-13.0 sen) retreated, while Shangri-La fell 18.0 sen.

• On the flipside, notable advancers were United Plantation (+38.0 sen), Top Glove (+30.0 sen), Negri Sembilan Oil Palms (+21.0 sen), Pentamaster (+19.0 sen) and Hartalega (+15.0 sen). Meanwhile, Tenaga (+8.0 sen), MISC (+7.0 sen), Sime Darby (+7.0 sen), KLK (+4.0 sen) and IHH (+1.0 sen) were the key index biggest winners.

• Asia benchmark indices closed lower last Friday as the Hang Seng Index (-1.3%) sank below the 30,000 psychological level on weakness in the financial sector (-1.8%), while the Shanghai Composite slipped 0.3% as investors monitor on the developments between the U.S.-China trade talks. Japanese stockmarkets were closed for the Greenery Day public holiday. ASEAN stockmarkets, meanwhile, was splashed in the red last Friday.

• U.S. stockmarkets recorded their biggest daily gain in three weeks last Friday as the Dow rose 1.4% to recapture the 24,000 psychological level after the unemployment rate hit an 18-year low, coupled with surging crude oil prices at a three-year high. On the broader market, both the S&P 500 jumped 1.3%, while the Nasdaq finished 1.7% higher.

• Earlier, European benchmark indices rebounded as the FTSE (+0.7%) rose after the British Pound fell against the U.S. Dollar, while mining shares advanced, The depreciation of Euro Currency also sent CAC and DAX to close 0.3% and 1.0% higher respectively despite Eurozone’s retail sales data for March only grew 0.8% Y.o.Y – falling short of economists’ estimate of a 1.9% Y.o.Y advance.

The Day Ahead

• The selling was again more pronouncedthat-anticipated as foreign funds continue to sell Malaysian stocks last Friday and ahead of the General Election in two days’ time. After three days of weakness, however, we think there could be some mild support from local institutions as the key index attempts to find support around the 1,840 level.

• Part of the gains will be from the positivity in global stockmarkets that continues to cheer stronger economic and corporate earnings growth prospects for the year.

• Still, we think the upsides will be limited given that broad-based buying remains elusive as wariness over the election outcome will continue to weigh on sentiments. Therefore, the upsides may find resistances at 1,847 and 1,850 levels. Below the 1,840 support, the next support is at the 1,830 level.

• The reduced market interest is most pronounced among the lower liners and broader market shares and this trend will continue over the near term ahead of the General Election on Wednesday. Nevertheless, the small-cap stocks have seemingly found a base after their recent rout and are likely to continue building up a base at the prevailing levels for now.

COMPANY BRIEF

• Genting Bhd’s 95.0%-owned indirect subsidiary, Genting Oil & Gas Ltd (GOGL) has received the green light from Indonesia's Ministry of Energy and Mineral Resources for a first phase plan for the development of the Asap, Merah and Kido structures (POD 1) in West Papua, Indonesia.

• These structures are within the concession area for the Kasuri Block, which was awarded to GOGL's unit Genting Oil Kasuri Pte Ltd (GOKPL) following a production-sharing contract (PSC) signed in May 2008 between GOKPL and BP MIGAS — the Indonesian oil and gas regulator. The concession period for GOKPL for the Kasuri PSC ends in 2038. (The Star Online)

• Dagang NeXchange Bhd's (DNeX) 51.0%- owned subsidiary, DNeX RFID Sdn Bhd was awarded a sub-contract by TCSens Sdn Bhd to provide a touch-and-go electronic wallet service for local and foreign vehicles entering the country.

• Although the sub-contract value was undisclosed, DNeX expects the project to generate an annual revenue ranging from RM19.0 mln to RM21.0 mln, with an estimated project margin of 35.0% in the first three years. (The Star Online)

• Ralco Corp Bhd has proposed to raise up to RM3.3 mln via a private placement to independent investor(s) to be identified later. The proceeds are expected to fund the purchase of new equipment and machineries.

• Accordingly, the proposed private placement will involve the issuance of up to 6.3 mln new shares, representing not more than 10.0% of its issued shares. (The Edge Daily)

• Malaysia Marine And Heavy Engineering Holdings Bhd‘s (MHB) 1Q2018 net loss widens to RM25.3 mln, from RM16.6 mln a year earlier, mainly due to lower revenue contribution from its heavy engineering and ship repair businesses. Revenue for the quarter was also lower at RM188.3 mln (-20.1% Y.o.Y) in 1QFY18 from RM235.8 mln a year ago. (The Star Online)

• AirAsia X Bhd (AAX) has inked a maintenance, repair and overhaul (MRO) agreement with Safran Landing Systems Singapore for 24 Airbus A330 aircraft. The agreement includes the complete overhaul and repair services for 24 landing gears of Airbus A330 aircraft. The duration of the contract will be from 2018 till 2025, while the first scheduled services will be provided by Safran Landing Systems MRO, located in Singapore.

• Safran's total contracted aircraft with AirAsia Group is 56, including the recently signed MRO agreement. (The Edge Daily)

• Fraser & Neave Holdings Bhd (F&N) has earmarked more than RM25.0 mln capex over the next 18 months to fully debottleneck operations at its dairy plant in Pulau Indah. The whole process will be carried out in phases as the group awaits for approval from its Board for some of its plans. Meanwhile, any further expansion is likely to utilise the additional land at its Pulau Indah plant. (The Edge Daily)

• Notion VTec Bhd has received RM30.0 mln from its insurers as part settlement of a RM50.0 mln claim for the fire incident at its main manufacturing plant in Klang, Selangor on 20th October last year. The remaining balance of RM20.0 mln will be paid at a subsequent date. (The Edge Daily)

• Axiata Group Bhd's 63.0%-owned unit, edotco Group Sdn Bhd is taking up an 80.0% stake in Tanjung Digital Sdn Bhd (TDSB), which owns the right to build telecommunication infrastructure in Kedah, for RM140.0 mln.

• The internally-funded acquisition will include RM25.0 mln for the sale shares, and RM115.0 mln for the redemption of funding facility in Tanjung Digital Sdn Bhd (TDSB).

• The acquisition will allow edotco to expand its presence in Kedah with a sizeable portfolio of about 225 towers. (The Edge Daily)

• Alam Maritim Resources Bhd’s auditors Messrs Ernst & Young have highlighted a material uncertainty in respect of the group's 2017 financial statements, which may jeopardise the group's ability to continue as a going concern.

• The material uncertainty arises from, among others, a net loss of RM145.4 mln last year as well as the impairment of the group's vessels and equipment as well as the impairment of investment in associates and joint-ventures (JV) as a result of subdued conditions in the oil and gas (O&G) industry. (The Edge Daily)  

Source: Mplus Research - 7 May 2018