Weak Sentiments To Prevail

• The FBM KLCI (-1.2%) started off the week on a dour note as the key index erased most of it previous session’s gains amid the fresh weakness in crude oil prices, coupled with the mounting concerns over Malaysia’s national debt. The lower liners – the FBM Small Cap (- 0.7%), FBM Fledgling (-0.6%) and FBM ACE (-1.1%), all fell, while the broader market closed mostly lower.

• Market breadth turned negative as decliners overcame advancers on a ratio of 5-to-3 stocks. Traded volumes inched lower by 0.6% to 2.19 bln shares amid the still negative market sentiment.

• Two-thirds of the key index components fell, dragged down by Petronas Dagangan (-40.0 sen), followed by Hong Leong Financial Group (-28.0 sen), IHH (-27.0 sen), Maybank (-26.0 sen) and Tenaga (- 26.0 sen). Notable decliners on the broader market were Tasek Corporation (- 42.0 sen), Heng Yuan (-30.0 sen) Heineken (-26.0 sen). Allianz (-22.0 sen). Ann Joo slipped 18.0 sen after announcing a weak set of quarterly earnings.

• Far East (+RM1.00) and Aeon Credit (+56.0 sen) topped the broader market gainers list, followed by consumer products stocks like Carlsberg (+36.0 sen), Fraser & Neave (+36.0 sen) and Ajinomoto (+30.0 sen). Key winners on the FBM KLCI were Genting (+18.0 sen) AmBank (+7.0 sen), KLCC (+4.0 sen), KLK (+4.0 sen) and Maxis (+4.0 sen).

• Asia benchmark indices closed in the red yesterday amid uncertainties over the Italian political environment coupled with the fresh weakness in crude oil prices. The Nikkei slipped 0.6% after the Japanese Yen strengthened against the Greenback. The Hang Seng Index closed 1.0% lower on weakness in financial shares, while the Shanghai Composite (- 0.5%) retreated for the third straight session. ASEAN indices, meanwhile, finished mostly lower on Tuesday.
• U.S. stockmarkets extended their losses as the Dow sank 1.6% overnight on concerns over the political impasse in Italy and the continuing weakness in crude oil prices. On the broader market, the S&P 500 fell 1.2% with the financial sector taking the heaviest beating (- 3.4%), while the Nasdaq closed 0.5% lower
• European benchmark indices suffered their worst decline since March 2018 – the FTSE (-1.3%), CAC (-1.3%) and DAX (- 1.5%) all declined on the political instability in Italy that is poised to see another election in July. At the same time, Spain’s Prime Minister, Mariano Rajoy is also struggling to remain in power, sparking concerns over another round of election that dampened market sentiment.

THE DAY AHEAD

• The immediate outlook for Malaysian stocks is looking increasingly frail after Monday’s incessant selldown by foreign funds have pushed the key index to its lowest level for the year. Apart from the above, the renewed political concerns in Europe, coupled with the easing crude oil prices, will leave Malaysian stocks on the downward trend for longer.

• As it is, sentiments on the local stockmarket will continue to be dampened by the revelation of the country’s debts that has been revised to 65% of GDP as well as the increased fears of a ratings downgrade. At the same time, there have been few indications as yet from the new government as to how it will tackle the debt issue. Consequently, market sentiments will continue to be on the guarded side for longer and this could also leave Malaysian stocks to drift lower and could see the FBM KLCI to head towards the 1,750 support level. There is an interim support is at the 1,760 level. The resistances, meanwhile, are at the 1,780 and 1,800 levels.
• There is also little reprieve for the lower liners and broader market shares amid the continuing weak market sentiments. Therefore, the downside risk remains and we see further weakness on the above listed stocks.

COMPANY BRIEF

• Malayan Banking Bhd's (Maybank) 1Q2018 net profit gained 10.0% Y.o.Y to RM1.87 bln, from RM1.7 bln last year, lifted by higher net interest income and Islamic Banking income. Quarterly revenue also increased marginally by 2.1% Y.o.Y to RM11.52 bln, from RM11.28 bln earlier. (The Star Online)

• Pos Malaysia Bhd's 4QFY18 net profit nearly tripled to RM29.0 mln, compared to RM9.9 mln a year ago - contributed mainly by the improved cost management initiatives. Revenue, however, inched higher by 2.8% Y.o.Y to RM653.1 mln vs. RM635.6 mln in 4QFY17.

• For the full FY18, net profit increased by 14.2% Y.o.Y to RM93.3 mln from RM81.9 mln last year, in-tandem with revenue growth (+18.7% Y.o.Y) of RM2.47 bln, from RM2.08 bln. (The Star Online)

• MMC Corp Bhd‘s net profit in 1Q2018 sank by 26.3% Y.o.Y to RM41.3 mln, from RM56.1 mln in the previous corresponding quarter, following weaker contribution from Johor Port Bhd and Northport (M) Bhd, coupled with a smaller share of profit from Malakoff Corp Bhd albeit the earnings were slightly offset by higher contribution from the MRT2 (Sungai Buloh-SerdangPutrajaya Line) project and Port of Tanjung Pelepas (PTP). Quarterly revenue rose 38.3% Y.o.Y to RM1.28 bln, from RM925.2 mln previously. (The Edge Daily)
• Kerjaya Prospek Group Bhd, which recently clinched a contract worth RM357.3 mln, aims to secure more construction jobs to meet its internal replenishment order book target of RM1.0 bln in 2018.
• Currently, Kerjaya Prospek’s construction division has 24 ongoing projects with an outstanding order book of about RM3.05 bln as at 31st March 2018 which will provide earnings visibility for at least three years. (The Edge Daily)

• Felda Global Ventures Holdings Bhd's (FGV) 1Q2018 net profit dropped 22.0% Y.o.Y to RM1.3 mln vs. RM1.7 mln in the same quarter last year. Revenue also fell 16.5% Y.o.Y to RM3.6 bln from RM4.32 bln previously. (The Star Online)

• Malaysia Building Society Bhd’s (MBSB) net profit more than tripled to RM316.8 mln, from RM101.3 mln, boosted by allowance write back for impaired loans worth RM154.4 mln. Revenue for the quarter, meanwhile, only rose marginally by 0.5% Y.o.Y to RM815.0 mln, compared to RM811.2 mln. (The Star Online)

• CCM Duopharma Biotech Bhd’s 1Q2018 net profit soared by 25.1% Y.o.Y to RM10.8 mln, from RM8.6 mln last year, mainly due to higher demand for its pharmaceutical products, while revenue grew 10.1% Y.o.Y to RM133.3 mln, from RM121.0 mln in the previous corresponding period. (The Edge Daily)

• Harrisons Holdings (Malaysia) Bhd is planning to venture into the retail business in Singapore via the acquisition of the Famous Amos cookies business for S$5.7 mln (RM16.9 mln). This comes after its recent acquisition of Watts Harrisons Sdn Bhd, which retails and wholesales the uniform price products under the Komonoya brand in Malaysia, Singapore and Brunei.

• Moving forward, the group plans to expand to other regional territories with this established brand (Famous Amos) together with the Komonoya brand. (The Edge Daily)

• Allianz Malaysia Bhd's 1Q2018 net profit jumped 29.9% Y.o.Y to RM87.2 mln, from RM67.2 mln a year ago, on improved performance from both its general insurance and life insurance segments. Quarterly revenue gained 5.2% Y.o.Y to RM1.27 bln, from RM1.21 bln last year. (The Edge Daily)

• Supermax Corp Bhd reported a 69.0% Y.o.Y jump in its 3QFY18 net profit to RM33.4 mln, from RM19.8 mln a year ago, mainly due to higher turnover, increased production capacity and improved operational efficiency.

• Revenue, meanwhile, rose 6.1% Y.o.Y to RM327.1 mln, compared to RM308.2 mln last year, lifted by the strong demand for gloves and higher output, albeit slightly offset by the weaker US dollar. The group also declared an interim dividend of 3.0 sen, payable on 28th June 2018. (The Star Online)

• Lay Hong Bhd's 4QFY18 net profit nearly doubled to RM11.0 mln, from RM5.7 mln in the same quarter last year on higher revenue contribution, which was 28.8% Y.o.Y higher at RM224.6 mln, from RM174.4 mln in 4QFY17. (The Edge Daily)
• Tiong Nam Logistics Holdings Bhd’s 4QFY18 net profit plummeted by 81.7% Y.o.Y to RM6.9 mln, from RM37.6 mln in the previous corresponding quarter on a fair value loss on quoted investment, coupled with a loss on disposal of quoted shares, higher depreciation and amortization as well as finance cost. On the contrary, 4QFY18’s core net profit only dropped 4.1% Y.o.Y to RM13.3 mln, if the quoted investment losses were excluded. Quarterly revenue was up by 5.6% Y.o.Y to RM170.8 mln, from RM161.7 mln earlier. (The Edge Daily)
• Hap Seng Plantations Holdings Bhd’s 1Q2018 net profit narrowed by 35.6% Y.o.Y to RM15.5 mln, from RM24.1 mln a year ago, dragged down by a lower revenue contribution of RM121.2 mln (- 15.9% Y.o.Y) vs RM144.1 mln last year. (The Edge Daily)

• Muda Holdings Bhd’s posted a 13.5% Y.o.Y fall in 1Q2018 net profit to RM15.7 mln, from RM18.2 mln in the same quarter last year, mainly due to higher finance costs and lower insurance compensation of RM3.1 mln, compared to RM12.7 mln received a year ago. Should the insurance compensation be excluded, adjusted pre-tax profit is expected to be about 2.4 times higher in 1Q2018 at RM19.4 mln, from 1Q2017’s RM8.2 mln. Quarterly revenue, however, climbed 17.3% Y.o.Y to RM371.6 mln compared with RM316.7 mln last year. (The Edge Daily)

Source: Mplus Research - 30 May 2018