More Upsides Ahead

• The FBM KLCI recouped its earlier losses after a volatile start, supported by local funds inflows into selected heavyweights. The FBM Ace (+6.0%) also rallied alongside the FBM Small Cap (+2.1%) and the FBM Fledgling (+2.6%) amid bargainhunting activities in some politicallylinked counters. The broader market, meanwhile, finished mostly higher on Monday, the first trading day after the shock election win of Pakatan Harapan.

• Market breadth was positive as winners overpowered the losers on a ratio of 930- to-405 stocks. Traded volumes jumped 180.1% to 6.58 bln shares, spurred by a surge in portfolio reshuffling following the unexpected election victory by the opposition-led coalition last week.

• Significant gainers include Nestle (+RM5.70), Public Bank (+92.0 sen), PPB Group (+82.0 sen), Genting (+36.0 sen) and Petronas Chemicals (+28.0 sen). Other broader market constituents which rallied on Monday were BAT (+RM5.68), Heineken Malaysia (+RM2.32), Petron Malaysia (+RM1.64), KESM Industries (+RM1.54) and Hengyuan Refining (+RM1.46).

• Construction-related counters like George Kent (-RM1.18), Gamuda (-89.0 sen) and CMSB (-50.0 sen) declined, in-tandem with the broad weakness in the construction sector alongside MYEG (- 77.0 sen) and Litrak (-55.0 sen). Meanwhile, banking stocks like CIMB (- 35.0 sen) and Ambank (-27.0 sen) were amongst the worst hit on the Main Board, followed by Petronas Gas (-22.0 sen), YTL (-17.0 sen) and Genting Malaysia (-13.0 sen).

• On the regional front, major Asian stockmarkets extended their winning streak, driven by renewed optimism on U.S.-China’s trade negotiations after Washington banned American supplies to Chinese telecom giant, ZTE Corp, as well as strong crude oil prices. The Nikkei closed 0.5%, buoyed by gains in the consumer staples (+2.8%) sector. The Hang Seng Index (+1.4%) also finished positively, driven by the strength in telecoms and smartphone component suppliers like Sunny Optical Technology, while the Shanghai Composite added 0.3% at 3,174.0 points. The majority of ASEAN stockmarkets ended in the green on Monday.

• Wall Street extended its rally to eight consecutive sessions – its longest winning streak since September last year on easing geopolitical trade tensions. The Dow gained 0.3%, closing slightly below the 24,900.0 psychological level. Meanwhile, tech-indices like the S&P 500 and the Nasdaq also rose 0.1% each, partly due to gains in energy stocks.

• Earlier, European equities slid into the red following a turbulent session as investors digested fresh developments in Italy’s political landscape. The DAX lost 0.2%, while the CAC flatlined after two antiestablishment parties in Italy reportedly agreed to jointly-form a governing coalition – ending more than two months of political impasse in the country. The FTSE (-0.2%), meanwhile, snapped its three-day winning streak as investors booked profits amid a strengthening Pound.

The Day Ahead

• It was certainly a volatile session yesterday amid the push-and-pull factors that saw market players reacting to the unprecedented change in government. Whilst the mood was generally buoyant on the back of promise of fresh economic policies, stocks that were deemed losers of the outcome of the election took a beating as expected. With the dust settling on the election outcome, we think there could be more near term upsides as market players continue to adjust to the new policies on offer. We also think that the steep selloff of many construction and politically linked stocks are overdone and some spots of bargain hunting may emerge.

• We also think that the lower liners and broader market shares are poised for further near term upsides as the underlying market environment is still positive and this will continue to encourage bargain hunting activities as value has emerged following their steep price falls over the past two months.

• Although quick profit taking activities sapped most of the intraday gains yesterday, we view the uptrend as still intact and we see the key index building up a base around the 1,850-1,860 levels for now as market players await for the formation of the new cabinet. The key resistance and supports for now are at 1,875 and 1,820 respectively.

COMPANY BRIEF

• MISC Bhd's 1Q2018 net profit sank 54.1% Y.o.Y to RM310.6 mln due to weaker petroleum tanker market while its heavy engineering segment was impacted from the lack of new contracts. Revenue for the quarter slipped 32.3% Y.o.Y to RM2.02 bln. An interim dividend of 7.0 sen a share was declared. (The Star Online)

• Felda Global Ventures Holdings Bhd's (FGV) 72.0%-owned unit, Felda Palm Industries Sdn Bhd (FPI) is planning to sell its 30.0% stake in Taiko Clay Chemical Sdn Bhd (TCC) for RM145.0 mln which will net FGV a disposal gain of RM16.1 mln. TCC is principally involved in manufacturing and sale of activated bleaching earth and related products, production of sulphuric acid, oleum and battery acid as well as the general trading and manufacturing of aluminium sulphate.

• The group expects the disposal to be completed by 2H2018 and proceeds from the proposed disposal will be used for general working capital. (The Edge Daily)

• S P Setia Bhd’s 1Q2018 net profit slipped 45.2% Y.o.Y to RM61.5 mln due to marginal recognition from the Parque Melbourne project. Revenue for the quarter decreased 36.4% Y.o.Y to RM655.5 mln. (The Edge Daily)

• GD Express Carrier Bhd's 3QFY18 net profit dropped 67.3% Y.o.Y to RM2.6 mln, mainly due to higher operating expenses incurred during the quarter. Revenue for the quarter, however, grew 19.4% Y.o.Y to RM73.4 mln.

• For 9MFY18, cumulative net profit fell 32.4% Y.o.Y to RM17.1 mln. Revenue for the period, however, added 17.8% Y.o.Y to RM218.6 mln. (The Edge Daily)

• Daibochi Plastic and Packaging Industry Bhd’s 1Q2018 net profit rose 12.3% Y.o.Y to RM6.5 mln, lifted by the new consumer packaging plant in Yangon, Myanmar that commenced operation in July 2017. Revenue for the quarter climbed 11.3% Y.o.Y to RM104.7 mln. A first interim single tier dividend of 1.0 sen per share, payable on 28th June 2018, was declared. (The Edge Daily)

• Sunway Construction Group Bhd (SunCon) has bagged an RM180.0 mln contract from Alliance Parade Sdn Bhd to undertake Phase 1 of the Sunway Medical Centre project. With this project, SunCon’s outstanding orderbook amounts to RM6.30 bln. The job constitutes a related-party transaction as Alliance Parade is an indirect wholly-owned subsidiary of Sunway Bhd, which is a major shareholder of SunCon. The project will commence on 15th May 2018 with completion by 15th December 2020. (The Edge Daily)

• Damansara Realty Bhd is disposing its 70.0% stake in Healthcare Technical Services Sdn Bhd (HTS) to Johor Corporation (JCORP) for RM11.0 mln. The sales consideration will be satisfied entirely by way of set-off against the intercompany loan owing by Damansara Realty to JCorp. The proposed sale in HTS is expected to be completed in 3Q2018. (The Edge Daily)

• Malaysian Bulk Carriers Bhd’s 1Q2018 net loss was trimmed to RM14.3 mln vs. RM33.2 mln recorded in the previous corresponding quarter on improved charter rates from the dry bulk segment and reduced losses from its associate, PACC Offshore Services Holdings Ltd (POSH). Revenue for the quarter, however, fell 16.5% Y.o.Y to RM54.3 mln. (The Edge Daily)  

Source: Mplus Research - 15 May 2018