Cautious End To The Week

• In-tandem with the weak sentiment on offshore stockmarkets, the FBM KLCI slipped into the red, dragged down by losses in Kuala Lumpur Kepong after the oil palm and rubber planter reported soft 2QFY18 earnings. The lower liners were also splashed in red, with the exception of the FBM Small Cap (+0.1%). Broader market sub-sectors, meanwhile, closed mostly in the negative territory.

• Market breadth turned tepid as losers topped winners on a ratio of 570-to-438 stocks. Traded volumes, however, gained 10.9% to 3.33 bln shares amid quick profit-taking in the lower liners.

• Kuala Lumpur Kepong (-98.0 sen), Public Bank (-16.0 sen), Telekom Malaysia (- 14.0 sen), Maxis (-13.0 sen) and Ambank (-8.0 sen) weighed on the Main Board on Thursday. Broader market decliners, meanwhile, were Hengyuan Refining (- 48.0 sen), George Kent (-43.0 sen), MY E.G. (-36.5 sen), Heineken Malaysia (-36.0 sen) and Malaysia Airport (-31.0 sen).

• Broader market charttoppers were BAT (+RM1.14), Ajinomoto (+RM1.00), Panasonic Manufacturing (+74.0 sen), DKSH Holdings (+36.0 sen) and Hong Leong Industries (+32.0 sen). Meanwhile, companies under the Petronas Group – Petronas Gas (+34.0 sen) and Petronas Chemicals (+6.0 sen) boosted the bluechip gauge, alongside Genting Malaysia (+25.0 sen), Genting (+13.0 sen) and KLCC (+11.0 sen).

• Cautious sentiments sent major offshore stockmarkets lower on Thursday ahead of the second round of trade negotiations between Washington and Beijing. The Hang Seng Index shaved off 0.5%, weighed down by the extended selldown in the Hong Kong Dollar and rising borrowing costs, alongside the Shanghai Composite (-0.5%). The Nikkei, however rose 0.5%, lifted by gains in materialsrelated companies like Mitsui Mining & Smelting Co, while most ASEAN stockmarkets were splashed in red.

• Wall Street slipped into the negative territory on Thursday as wariness is setting in ahead of the U.S. - China talks on trade policies. The Dow fell 0.2% with more than half of its sectors in the red. On the broader market, tech-indices the S&P 500 (-0.1%) and the Nasdaq (-0.2%) retreated following sharp losses in technology players.

• U.K. equities closed mostly higher boosted by strong crude oil prices and continued weakness in Pound. The FTSE (+0.7%) rallied – led by gains in Experian (+5.6%) on expectations strong growth prospects. The DAX (+0.9%) and the CAC (+1.0%) also finished higher, boosted by the rally in energy stocks.

The Day Ahead

• On the whole, market conditions are becoming increasingly indifferent with bouts of quick profit taking nullifying the bargain hunting options, particularly among the lower liners which continues to gyrate. At the same time, whiffs of cautiousness are also blowing into the market as there are still substantive uncertainties over the new government’s policies that are still causing consternation among market players, as displayed by the thinning market breadth.

• Therefore, we think the market has yet to find stability and could continue to see gyrations over the near term. We also think profit taking activities may escalate ahead of the weekend and the key index may end the week on a weaker note. On the downside, there is support at the 1,850 level, followed by the 1,845 level. The resistances remain at 1,860 and 1,870 respectively.

• We think the lower liners and broader market shares will continue to see a mixed trading environment as stocks deemed to be linked to the previous administration will continue to see substantive volatility, while profit taking could accelerate on stocks that have made strong headway over the past week.

COMPANY BRIEF

• Ahmad Zaki Resources Bhd (AZRB) has secured a RM198.0 mln contract from PNB Merdeka Ventures Sdn Bhd to build tunnels, flyover and road works. The work scope includes the construction of Jalan Hang Jebat, Jalan Stadium (Victoria Institutions) and Chinwoo tunnels, elevated U-Turn and flyover, galloway pedestrian bridge, upgrading of surface road. The contract works will start on 21st May 2018 and to be completed within 883 days from commencement date. (The Star Online)

• Sime Darby Property Bhd is teaming up with Japan's Mitsui & Co., Ltd. and Mitsubishi Estate Co., Ltd to build industrial facilities on a 39-ac. site at the Bandar Bukit Raja integrated township in Klang. The JV project would have a gross development value (GDV) of about RM530.0 mln. (The Star Online)

• Carlsberg Brewery Malaysia Bhd's 1Q2018 net profit added 19.9% Y.o.Y to RM80.8 mln, underpinned by improved profit contributions from its domestic operations and associate company. Revenue for the quarter gained 5.5% Y.o.Y to RM548.5 mln. (The Star Online)

• Shangri-La Hotels (Malaysia) Bhd’s 1Q2018 net profit climbed 32.3% Y.o.Y to RM25.5mln, driven by higher average room rates and occupancies at its hotels. Revenue for the quarter rose 16.1% Y.o.Y to RM151.0 mln. (The Star Online)

• Petronas Gas Bhd's 1Q2018 net profit rose 4.3% Y.o.Y to RM483.2 mln on higher revenue from all business segments. Revenue grew 15.4% Y.o.Y to RM1.35 bln. (The Edge Daily)

• OCR Group Bhd is planning a mixed development on a 47.9 ac. of land in Tebrau, Johor, with an estimated gross development value of RM700.0 mln. Its unit, Junjung Simfoni Sdn Bhd has signed a joint-venture agreement (JVA) to partner with Casa Bangsar Sdn Bhd whose largest shareholder is the NonExecutive Chairman of Damansara Realty Bhd, Datuk Ahmad Zahri Jamil. The development will encompass two phases to be built over the next five years. Under the JV, the profit entitlement will be shared with 70% going to OCR, which the remainder is for Casa Bangsar. (The Edge Daily)

• Sunway Construction Group Bhd's (SunCon) 1Q2018 net profit grew 6.1% Y.o.Y to RM35.9 mln on higher group revenue that offset the decline in its precast segment, which was hit by higher steel bar prices. Revenue for the quarter rose 26.1% Y.o.Y to RM529.2 mln. (The Edge Daily)

• IHH Healthcare Bhd has extended the validity of its most recent offer to acquire a stake in India's leading hospital chain, Fortis Healthcare Ltd by two weeks, despite reports that Fortis’s board had accepted the joint offer from Hero Enterprise Investment Office and Burman Family Office. IHH has issued an extension letter to the board of directors of Fortis, extending the acceptance period of the enhanced revised proposal until 11.59pm on 29th May 2018. (The Edge Daily)

• Cypark Resources Bhd has proposed to raise up to RM64.4 mln via a new share placement to third party investors to meet the working capital for its engineering, procurement, construction and commissioning (EPCC) undertaking of a 30-MW solar photovoltaic plant at Empangan Kelinchi, Negeri Sembilan. The proposed private placement involves the issuance of up to 28.7 mln new shares, representing up to 10.0% of the issued shares of Cypark, at an issue price to be determined and announced later. (The Edge Daily)

• Tomei Consolidated Bhd’s 1Q2018 net profit sank 42.1% Y.o.Y to RM2.5 mln as the jeweller was hit by lower sales in both its manufacturing and wholesale segment. Revenue for the quarter fell 9.5% Y.o.Y to RM150.0 mln. (The Edge Daily)

• Samchem Holdings Bhd's 1Q2018 net profit added 62.0% Y.o.Y to RM8.1 mln, lifted by increase in foreign exchange gain and higher sales. Revenue for the quarter climbed 20.8% Y.o.Y to RM262.8 mln. (The Edge Daily)  

Source: Mplus Research - 18 May 2018