Uptrend Intact

• The FBM KLCI logged 0.5% gains to close above the 1,858.0 psychological level, lifted by extended buying-support by institutional funds in selected heavyweights. The lower liners – the FBM Small Cap (+0.7%), the FBM Fledgling (+0.4%) and the FBM Ace (+0.4%) also rallied amid a mostly positive broader market.

• Market breadth was slightly positive as gainers outrun decliners on a ratio of 492-to-486 stocks. Meanwhile, traded volumes fell further by 30.3% to 3.0 bln shares as investors digested fresh corporate earnings releases as well as global political developments.

• Key-index outperformers include Nestle (+RM1.80), Public Bank (+50.0 sen), Maxis (+17.0 sen), Hong Leong Financial Group (+14.0 sen) and IHH Healthcare (+11.0 sen). Meanwhile, consumerproducts counters like BAT (+RM3.06), Dutch Lady (+RM2.30), Panasonic Manufacturing (+RM1.26) and Heineken Malaysia (+RM1.00) were the big movers in the broader market. Aeon Credit also closed 90.0 sen higher at Wednesday’s closing bell.

• On the opposite side of the trade, HSS Engineering (-23.5 sen), Malaysian Pacific Industries (-23.0 sen), DKSH Holdings (-18.0 sen), Westports (-13.0 sen) and Hengyuan Refining (-12.0 sen) retreated. Genting-linked companies like Genting (-7.0 sen) and Genting Malaysia (-6.0 sen) weighed on the Main Board, followed by Kuala Lumpur Kepong (-10.0 sen), MISC (-8.0 sen) and PPB Group (-8.0 sen).

• Major regional equities continued to be southbound, following renewed political uncertainties after Pyongyang’s unexpectedly called off discussions with Seoul, casting doubt on the highly anticipated meeting between the U.S. and North Korea in June. The Nikkei shed 0.4% - led by losses in telecom and utilities-related counters. Despite recovering from sharp losses in the earlier session, the Hang Seng Index (- 0.1%) closed a shade below the breakeven level, alongside the Shanghai Composite (-0.7%). ASEAN equities, meanwhile, were also splashed in red.

• Key U.S. indices closed in the black, helped by gains in retailers and solid economic data. The Dow (+0.3%) closed at 24,768.9 points, boosted by Nike‘s (+2.7%) and Walmart’s (+1.9%) advance, although selling-pressure in Home Depot weighed on the blue-chip gauge after the giant home-improvement retailer’s sales missed analysts’ forecasts. Meanwhile, the S&P 500 (+0.4%) and the Nasdaq (+0.6%) also logged gains at Wednesday’s closing bell.

• European equities closed mostly higher on the back of the weakness in Euro. The CAC and the DAX closed up by 0.3% and 0.2% respectively, while the FTSE notched-up 0.2%, driven by gains in Paddy Power (+6.3%) following a potential M&A of its U.S. business with FanDuel Inc.

The Day Ahead

• Despite the continuing selldown by foreign funds, local institutions again provided the support to send the key index higher yesterday amid the new government’s move to effectively remove the Goods and Services Tax (GST) beginning next month.

• We think the market will continue to be buoyed by the move to abolish the GST and we see consumer stocks remain among the leading gainers for the day as consumer spending is poised for a stronger growth ahead.

• Much of the gains, however, will emanate from local institutional buying as we think foreign funds will continue to trim their positions amid the cautiousness over new government’s economic policies. Therefore, we think the upsides will be measures with the immediate resistance of 1,860 in play, followed by the 1,870 level. The main support is still at the psychological 1,850 level, followed by the 1,840 level.

• The lower liners and broader market shares could still continue to see a mixed trend as retail players could continue to switch to laggards and locking-in profits on winning stocks.

COMPANY BRIEF

• Star Media Group Bhd’s 1Q2018 net profit rose 70.3% Y.o.Y to RM11.3 mln on better cost management and lower depreciation expenses. Revenue for the quarter, however, declined 8.1% Y.o.Y to RM109.0 mln. (The Star Online)

• Hap Seng Consolidated Bhd (Hap Seng) plans to dispose of its 100.0% interest in HSC Sydney Holding Ltd and a 20.0% stake in Hap Seng Credit Sdn Bhd, for RM771.2 mln and RM906.0 mln respectively to Lei Shing Hong Capital Ltd. The disposal of HSC Sydney would enable the company to pare down borrowings and channel part of the proceeds towards working capital requirements.

• Meanwhile, the proposed sale in Hap Seng Credit provides an opportunity to bring in a strategic business partner with diversified business operations to enhance the expansion of Hap Seng Credit's credit financing business. (Bernama)
• IOI Corp Bhd's 3QFY18 net profit surged 6.7x Y.o.Y to RM2.07 bln, mainly due to a forex gain of RM201.9 mln, higher contribution from the resource-based manufacturing segment and a profit from the discontinued operations of RM1.72 bln. The improved earnings resulted in its earnings per share rising to 32.9 sen from 4.9 sen. Revenue for the quarter, however, fell marginally by 1.1% Y.o.Y to RM2.31 bln.

• For 9MFY18, cumulative net profit soared 7.1x Y.o.Y to RM3.02 bln. Revenue for the quarter, however, fell 3.6% Y.o.Y to RM6.92 bln. (The Edge Daily)

• Pharmaniaga Bhd's 1Q2018 net profit fell 7.1% Y.o.Y to RM17.6 mln, dragged down by lower profit from the manufacturing division and losses from the group’s Indonesia division. Revenue for the quarter declined marginally by 0.1% Y.o.Y to RM617.9 mln. A first interim dividend of 5.0 sen, payable on 20th June 2018, was declared. (The Edge Daily)

• Meda Inc Bhd’s wholly-owned subsidiary, Maju Puncakbumi Sdn Bhd has launched legal action against Perbadanan PR1MA Malaysia, claiming RM108.8 mln in damages. This follows the termination of a plan by PR1MA to buy a 4.3-ac. piece of land in Tanjung Kling, Melaka, from Maju Puncakbumi for RM6.8 mln in December 2017. (The Edge Daily)

• Wah Seong Corp Bhd's 1Q2018 net profit surged 208.9% Y.o.Y to RM29.3 mln on improved earnings from its oil and gas (O&G) business. Revenue for the quarter jumped 150.3% Y.o.Y to RM792.8 mln. (The Edge Daily)

• Dialog Group Bhd’s 3QFY18 net profit rose 25.9% Y.o.Y to RM118.8 mln as both its Malaysian and international operations reported better earnings. Revenue for the quarter declined 5.1% Y.o.Y to RM867.4 mln.

• For 9MFY18, cumulative net profit added 48.1% Y.o.Y to RM395.5 mln. Revenue for the period increased 3.3% Y.o.Y to RM2.50 bln. (The Edge Daily)

• APM Automotive Holdings Bhd's 1Q2018 net profit climbed 53.6% Y.o.Y to RM16.2, mainly contributed by the better utilisation of fixed overheads which led to an improved gross profit margin for the group. Revenue for the quarter grew 8.9% Y.o.Y to RM320.3 mln. (The Edge Daily)

• MMC Corp Bhd's indirect subsidiary, Kontena Nasional Bhd is suing its former chief executive officer Hood Osman for RM66.6 mln in damages. The claim is premised primarily on the breach of Hood's employment contract with Kontena Nasional, fraud and various breaches of duty of care under common law and the Companies Act 2016. (The Edge Daily)  

Source: Mplus Research - 17 May 2018