Still Looking Dull

• The FBM KLCI (-0.5%) lingered mostly in the red as investors digested the latest corporate earnings updates. All the lower liners retreated – led by the FBM Ace (- 1.8%), which closed lower for the fourth consecutive session. The majority of the broader market members were also in the red at Tuesday’s close.

• Market breadth was negative as the reds overtook the greens on a ratio of 256-to- 624 stocks as investors retreat to the sidelines, in-tandem with the bearish sentiment in the region. Traded volumes, meanwhile, fell by 15.3% to 2.36 bln shares amid the lack of fresh trading catalysts.

• Telekom Malaysia (-50.0 sen) and Petronas Chemicals (-27.0 sen) weighed on the FBM KLCI, following soft 1Q2018 earnings results, while other Main Board decliners include Astro (-5.0 sen), Tenaga Nasional (-32.0 sen) and YTL (-2.0 sen). On the broader market, Hengyuan Refining (-RM1.15) took a beating after reporting a 69.0% Y.o.Y drop in quarterly earnings. Meanwhile, Shangri-La Hotels (- 33.0 sen), Latitude (-25.0 sen), Kossan Rubber (-20.0 sen) and Pecca (-20.0 sen) were also splashed in red.

• On the flipside, broader markets advancers include Panasonic Manufacturing (+RM1.32), Malaysian Pacific Industries (+78.0 sen), BAT (+76.0 sen), Allianz (+72.0 sen) and LPI Capital (+30.0 sen). Significant Main Board gainers were Nestle (+RM1.10), Hong Leong Financial Group (+34.0 sen), Public Bank (+20.0 sen), IHH Healthcare (+16.0 sen) and KLCC (+9.0 sen).

• Major Asian stocks closed unexcitingly, sapped by mild profit-taking activities following the solid gains on Monday. The Nikkei lost 0.2%, as the Dollar strength wanes. On the flip side, however, the Hang Seng Index (+0.6%) rose, while the Shanghai Composite closed with negligible gains. Most ASEAN stockmarkets ended on mixed tone yesterday.

• Renewed concerns over global political uncertainties sent Wall Street southwards following the lack of leads from the U.S.-China trade discussion last weekend. The Dow (-0.7%) erased slightly more than the previous day’s gains, weighed down by Boeing (-2.5%). Meanwhile, the S&P 500 (-0.3%) and the Nasdaq (-0.2%) also weakened, although partially offset by gains in Micron after the chip maker unveiled its US$10.0 bln stock-buyback plan.

• London’s top share index scale fresh records as mining and financials-related counters continue to climb. Gains in Fresnillo (+3.6%) buoyed the FTSE (+0.2%), although the upside was limited by the weakness in Marks & Spencer following plans to slash more than 100 stores in its home market in five years. Meanwhile, stocks in the auto sector rallied after China decided to cut import tariffs on passenger cars to 15% (from 25% previously). The DAX and the CAC closed higher, logging 0.7% and 0.1% gains respectively.

The Day Ahead

• Although foreign selling is dissipating, the weak earnings results of some index heavyweights initiated a fresh selling spree to leave the key index in a state of flux again and resulting in the key index falling below the psychological 1,850 level. With positive leads still hard to come by, coupled with the lingering concerns over the new government’s fiscal direction, we think the market’s weakness will sustain over the near term as market sentiments are still mostly dour.

• With the buying support likely to fade further, the downside bias is still in play. This also means that the 1,840-1,843 support levels could be revisited and it if fails to hold, the next support is at the 1,830 level. The 1,850 level is the immediate resistances, followed by the 1,860 level.

• There is also little reprieve for the lower liners and broader market shares as investor sentiments are remaining cautious and this could leave the stocks in the above sectors to drift further.

COMPANY BRIEF

• AirAsia X Bhd’s 1Q2018 net profit soared 302.9% Y.o.Y to RM41.5 mln, boosted by higher passenger volume and lower operating cost. Revenue for the quarter rose 7.2% Y.o.Y to RM1.26 bln. (The Star Online)

• Telekom Malaysia Bhd’s 1Q2018 net profit fell 31.8% Y.o.Y to RM157.2 mln as TM ONE's contributions were impacted by a decline in voice, data and other telecommunications-related services. Revenue for the quarter slid 3.9% Y.o.Y to RM2.85 bln. (The Star Online)

• Axiata Group Bhd’s 1Q2018 net loss stood at RM147.4 mln vs. a net profit of RM239.0 mln recorded in the previous corresponding quarter, due to higher share of business losses from its Indian associate Idea Cellular Ltd of RM124.3 mln. The Indian telecommunications unit continues to struggle with an intense price war and a hypercompetitive market. Revenue for the quarter fell 2.3% Y.o.Y to RM5.75 bln. (The Edge Daily)

• UMW Holdings Bhd’s 1Q2018 net profit surged 267.5% Y.o.Y to RM74.1 mln, following the group's exit from its oil and gas businesses. Revenue for the quarter, however, fell 10.4% Y.o.Y to RM2.42 bln. A single-tier dividend of 5.0 sen per share, payable on 21st June 2018, was declared. (The Edge Daily)

• Inari Amertron Bhd’s 3QFY18 net profit grew 7.8% Y.o.Y to RM55.2 mln, mainly attributable to the increase in demand for its products, despite having to incur higher depreciation cost, increase in taxation as well as less favourable foreign exchange rates. Revenue for the quarter rose 18.9% Y.o.Y to RM325.8 mln.

• For 9MFY18, cumulative net profit added 18.5% Y.o.Y to RM192.2 mln. Revenue for the quarter improved 29.4% Y.o.Y to RM1.07 bln. A third single tier interim dividend of 1.6 sen per share, payable on 6th July 2018 was declared. (The Edge Daily)

• Serba Dinamik Holdings Bhd’s 1Q2018 net profit grew 18.2% Y.o.Y to RM92.7 mln due to stronger contribution from its operations and maintenance segment, which amounts to about 86.8% of the group's quarterly revenue. Revenue for the quarter gained 19.3% Y.o.Y to RM730.8 mln. A first interim dividend of 1.9 sen per share was declared. (The Edge Daily)

• Destini Bhd has clinched a two-year oil and gas contract to provide tubular running services in Pakistan, worth US$8.0 mln or RM31.8 mln. The contract was awarded by Lyallpur Oil Tool Pvt Ltd (LOT) and spans from 1st July 2018 to 30th June 2020. The contractcomes with a one-year extension option. Destini will provide specialised oilfield equipment and experienced expatriate personnel for LOT to execute tubular running services. (The Edge Daily)

• Tropicana Corp Bhd's 1Q2018 net profit increased 71.5% Y.o.Y to RM46.4 mln, due to cost savings and advanced progress billing of ongoing projects. Revenue for the quarter climbed 21.2% Y.o.Y to RM453.0 mln. (The Edge Daily)

• Hua Yang Bhd’s 4QFY18 net profit shrank 68.2% Y.o.Y to RM3.1 mln on lower margins from its property development segment. Revenue for the quarter, however, grew 7.5% Y.o.Y to RM86.7 mln.

• For FY18, cumulative net profit plunged 92.8% Y.o.Y to RM4.4 mln. Revenue for the year dipped 40.1% Y.o.Y to RM230.7 mln. (The Edge Daily)

• Utusan Melayu (Malaysia) Bhd’s 1Q2018 net loss narrowed to RM5.9 mln, from RM22.8 mln in the previous corresponding quarter, supported by cost reduction from distribution of its elearning product Tutor guru and its epaper, coupled with higher revenue. Revenue for the quarter grew 33.7% Y.o.Y to RM55.5 mln. (The Edge Daily)

• Lafarge Malaysia Bhd’s 1Q2018 net loss widened to RM68.7 mln, from RM48.9 in the previous corresponding quarter on lower sales contribution from the cement segment because of soft market demand, increased industry capacity and continued pricing pressures. Revenue for the quarter slipped 2.7% Y.o.Y to RM546.8 mln. (The Edge Daily)

• Taliworks Corp Bhd’s 1Q2018 net profit rose 10.5% Y.o.Y to RM7.6 mln due to higher bulk sales rate (BSR) and lower provision for discounting of trade receivables. Revenue for the quarter added 14.5% Y.o.Y to RM81.7 mln. A single-tier dividend of 2.0 sen per share, payable on 13th July 2018, was declared. (The Edge Daily) ? Metrod Holdings Bhd’s 1Q2018 net profit increased 12.1% Y.o.Y to RM5.7 mln, lifted by a fair value gain on foreign exchange derivatives. Revenue for the quarter rose 20.8% Y.o.Y to RM671.6 mln. (The Edge Daily)  

Source: Mplus Research - 23 May 2018