Making Mild Gains

• The FBM KLCI was flattish after declining from its intraday high. On a weekly basis, the Main Board was 0.4% W.o.W higher at 1,854.5 points, supported by local institutional funds’ buying. The lower liners – the FBM Small Cap (-0.9%), the FBM Fledgling (-0.2%) and the FBM Ace (- 0.1%), however, retreated amid a mostly negative broader market.

• Market breadth was negative as losers topped winners on a ratio of 607-to-379 stocks. Traded volumes, meanwhile, fell by 12.4% to 2.92 bln shares amid the extended selling interest by foreign funds.

• Top gainers on the FBM KLCI include Nestle (+RM3.00), Kuala Lumpur Kepong (+18.0 sen), PPB Group (+18.0 sen), Maxis (+11.0 sen) and Telekom Malaysia (+10.0 sen). Consumer products-related stocks like Dutch Lady (+66.0 sen), Carlsberg (+58.0 sen), Heineken Malaysia (+58.0 sen) and Ajinomoto (+42.0 sen) closed higher on Friday. Meanwhile, Allianz Malaysia (+50.0 sen) also extended its gains for the third-straight day.

• On the downside, Cahya Mata Sarawak (- RM1.05), United Plantations (-40.0 sen), BAT (-34.0 sen) and Kluang Rubber (-29.0 sen) weighed on the broader market. Toll concessionaires like Litrak (-RM1.38) also weakened following news of a potential revamp on toll charges. On the Main Board, Press Metal (-23.0 sen), Genting (-15.0 sen), Petronas Dagangan (-8.0 sen) and Astro (-7.0 sen) were the main losers. KLCC also fell 13.0 sen on its potential exclusion from the FBM KLCI in the upcoming FTSE Bursa Malaysia KLCI review in June.

• Japanese stockmarkets shrugged off the lower-than-expected consumer data, amid the continuous weakness in the Yen. The Nikkei (+0.4%) sustained its upward momentum, closing higher for the second consecutive day. Meanwhile, the Hang Seng Index and the Shanghai Composite also rallied, finishing up by 0.3% and 1.2% respectively. ASEAN equities finished mostly positive on Friday’s close.

• U.S. equities ended mostly in the negative territory as the earnings season gets underway. The Dow flatlined after a volatile intraday session amid rising bond yields and the Greenback, while the S&P 500 shed 0.3%. Both indices logged its third weekly decline. The Nasdaq, meanwhile, also slipped 0.4% on Friday.

• Key benchmark European stockmarkets were splashed in red as the FTSE (-0.1%) ended on a tepid tone due to minor profittaking, despite posting its eight consecutive week of gains, boosted by the strength in commodity counters. Similarly, the DAX (-0.3%) and the CAC (- 0.1%) pulled back as investors booked profit amid the prevailing uncertainties surrounding Italian politics and heightened trade disputes.

The Day Ahead

• As expected, the generally cautious market environment took a bite on the market’s performance at the end of previous week on the back of profit taking and the sustained selldown by foreign funds. Notwithstanding the still broadly indifferent market environment, we think sentiments could perk up slightly on the abating concerns over a trade war between the U.S. and China that is likely to keep global trade patterns intact for now.

• The positivity is expected to extend to Malaysian stocks with local institutions continuing to provide ample near term support for the key index and to keep it afloat and to nullify some of the effects of the continuing selloff by foreign funds.

• Among the stocks that could be in focus include consumer and auto stocks as they are deemed the beneficiaries of the zero rating of the GST rate. Construction and toll concessionaires, however, could continue to be pressured by uncertainties over the status of the upcoming mega projects as well as the likely cut in toll rates. On the upside, the 1,860 and 1,870 levels are the resistances, while the supports remain at 1,850 and 1,843 levels.

• The lower liners and broader market shares are still enduring a mixed trading pattern with little follow through buying interest after the post-election surge. Interest on the lower liners and broader market shares have also thinned as a result and with few available catalysts, their performance is expected to remain mixed as market players await for more corporate results to be announced.

COMPANY BRIEF

• Petronas Dagangan Bhd’s 1Q2018 net profit dipped 13.7% Y.o.Y to RM218.5 mln, due to decline in operating profit for its retail segment. Revenue for the quarter, however, rose 4.3% Y.o.Y to RM7.07 bln. An interim dividend of 13.0 sen per share, payable on 14 June 2018 was declared. (The Star Online)

• Kerjaya Prospek Group Bhd’s Executive Chairman, Datuk Tee Eng Ho has launched a takeover of property company GSB Group Bhd at 13.0 sen per share. Tee, through Javawana Sdn Bhd on 18th June 2018, acquired 24.1% or 127.0 mln GSB shares for RM16.5mil, raising the stake to 40.7%. ? Following the acquisition, Javawana is obliged to extend a conditional mandatory takeover offer to acquire the remaining 313.1 mln GSB shares for 13.0 sen each. Javawana plans to maintain the listing status of GSB. (The Star Online)

• Minho (M) Bhd, which provides kilndrying services, has proposed to acquire a 5.0 ac. industrial land in Kapar, Klang for RM19.6 mln as it seeks to expand its timber storage facilities. Its unit, Victory Enterprise Sdn Bhd had signed a sales and purchase agreement with Preferred Plot Sdn Bhd to buy the land, which is adjacent to its existing factory. (The Edge Daily)

• Tan Chong Motor Holdings Bhd’s 1Q2018 net profit stood at RM4.3 mln vs. a net loss of RM35.3 mln in the corresponding quarter. Revenue for the quarter improved 3.5% Y.o.Y to RM1.03 bln. (The Edge Daily)

• IOI Properties Bhd’s 3QFY18 net profit jumped 37.6% Y.o.Y to RM166.7 mln, thanks to lower operating expenses, a significant contribution from its jointventure firms and lower taxes. Revenue for the quarter, however, slumped 39.6% Y.o.Y to RM541.2 mln.

• For 9MFY18, cumulative net profit dropped 11.2% Y.o.Y to RM518.6 mln. Revenue for the quarter declined 29.1% Y.o.Y to RM2.12 bln. (The Edge Daily)

• Kumpulan Perangsang Selangor Bhd’s 51.0%- owned unit, Aqua-Flo Sdn Bhd has received a letter of extension to supply chemicals to water treatment plants operating under the Air Selangor Group for a further period of five and a half months. The contract, which was for duration of two years until 15th May 2018, will now expire on 31st October 2018 instead and the estimated value for the project during the extended period will amount to RM25.1 mln. (The Edge Daily)

• Ho Hup Construction Bhd will unveil property projects worth RM1.70 bln in 2018 after holding off new launches in the past few years. The group currently has a tender book of RM2.00 bln and an order book of RM400.0 mln comprising all government-related jobs over three years duration. (The Edge Daily)

• UMW Holdings Bhd has changed the prices of its Toyota and Lexus vehicles following the zero-rating of all goods and services under the Goods and Services Tax effective 1st June 2018. This follows after the newly elected Federal government announcing that all goods and services would be zero-rated under the GST. (The Edge Daily)  

Source: Mplus Research - 21 May 2018