Searching For A Bottom

• The FBM KLCI (-0.3%) continued its downward trajectory despite the recovery in the offshore markets, weighed down by selling pressure in selected heavyweights and the Ringgit’s weakness. On the flip side, the lower liners finished on an upbeat tone, together with majority of the broader market. The only three declining sectors were the Finance, Properties and Plantations sectors.

• Market breadth turned positive as advancers overtook decliners on a ratio of 439-to-356 stocks. Traded volumes, however, fell by 19.8% to 2.21 bln ahead of the Organisation of Petroleum Exporting Countries (OPEC) meeting this Friday.

• Nestle (-80.0 sen), Kuala Lumpur Kepong (-76.0 sen), Public Bank (-58.0 sen), Hong Leong Bank (-20.0 sen) and RHB Bank (- 11.0 sen) were among the key-index decliners yesterday, while broader market laggards were Dutch Lady (-30.0 sen), Vitrox (-29.0 sen), KESM Industries (-22.0 sen), MSM Malaysia (-20.0 sen) and C.I. Holdings (-14.0 sen).

• Broader market chart-toppers, meanwhile, include BAT (+78.0 sen), Fraser & Neave (+46.0 sen), Hong Leong Industries (+28.0 sen), Apex Healthcare (+18.0 sen) and United Plantations (+18.0 sen). Main Board winners were Petronas Dagangan (+20.0 sen), Malaysia Airports (+19.0 sen), MISC (+19.0 sen), Tenaga Nasional (+10.0 sen) and Genting (+9.0 sen).

• Key regional indices reversed earlier losses to finish higher on Wednesday, lifted by bargain-hunting activities although most Asian stockmarkets were still in the red for the week. The Hang Seng snapped four-straight sessions’ of losses, closing 0.8% higher, while the Shanghai Composite index (+0.3%) ended with meagre gains – helped by the strength in the services and consumer goods sector. The Nikkei (+1.2%) also rallied, together with most of the ASEAN stockmarkets.

• Social media giant Facebook drove the U.S. equities higher, on the back of a positive growth outlook amid easing concerns on the Facebook’s privacy scandals. The S&P 500 (+0.2%) ended a three-day losing streak, while the Nasdaq (+0.7%) logged a record high at 7,781.5 points. The Dow, however, slipped into the red after a volatile intraday session.

• Major European stockmarkets finished on an upwards bias amid stronger crude oil prices, ahead of the OPEC meeting. The FTSE rose 0.3%, despite coming off intraday high. The DAX (+0.1%) also closed with meager gains, but the CAC slipped into the red in the later session, finishing 0.3% lower as investors digested fresh corporate news.

The Day Ahead

• While there were attempts to shore up the market yesterday, it only encouraged further selling into strength, particularly from foreign funds as market players capitalised on the early day market strength to offload some of their shareholding.

• Although the FBM KLCI is already oversold, a rebound remains elusive as there are still bouts of selling that makes it difficult for the key index to establish a decent recovery phase. As it is, there are few signs that foreign selling is abating and this could pressure the key index further. Hence, we see the market weakness persisting with the 1,700 points level remaining under threat until the selling pressure eases. The immediate resistance is at the 1,720 level, followed by the 1,730 level.

• The broader market fared better yesterday amid some mild bargain hunting activities, but we think some quick profit taking activities will emerge and this could bring back the mixed trading environment.

Company Update

• Kimlun Corporation Bhd bagged a RM53.5 mln contract from Nusajaya Rise Sdn Bhd to undertake earthworks, road and drainage and other ancillary site works for the Gerbang Nusajaya development in Tanjung Kupang and Pulai, Johor. The construction work is expected to be completed by end of April 2019. (The Edge Daily)

Comments

• The above contract brings Kimlun’s YTD construction orderbook replenishment to RM197.6 mln, representing 65.9% of our orderbook replenishment target of RM300.0 mln for 2018. With the contracts falling within our orderbook assumption in the construction segment, we leave our earnings forecast unchanged.

• We maintain our BUY recommendation on Kimlun with an unchanged target price of RM1.85. Our target price is derived from ascribing an unchanged target PER of 9.0x to its 2018 fully diluted construction earnings and PER of 6.0x (unchanged) to its fully diluted manufacturing earnings, while its property development segment’s valuation remains unchanged at 0.6x its BV due to its relatively small-scale development projects.

COMPANY BRIEF

• Malaysian Resources Corporation Bhd has announced that its Executive Director, Mohd Imran Tan Sri Mohamad Salim will be re-designated as Group Managing Director with effect from 2nd July 2018. Meanwhile, Tan Sri Azlan Zainol will be re-designated as the Chairman of the construction-property group.

• The changes were to comply with Practice 4.1 of the Malaysian Code Of Corporate Governance (MCCG) where at least half of the board of directors of a listed company should comprise of independent directors. Presently, five out of the company’s eight directors are non-independent directors, and only three are independent directors. (The Star Online)

• Scientex Bhd's 3QFY18 net profit fell 8.1% Y.o.Y to RM62.5 mln due to lower contribution from the property division as its recently launched projects were still in the early stages of construction. Revenue for the quarter slipped 5.6% Y.o.Y to RM600.2 mln.

• For 9MFY18, cumulative net profit added 9.5% Y.o.Y to RM201.5 mln. Revenue for the period grew 7.8% Y.o.Y to RM1.89 bln. (The Star Online)

• Gabungan AQRS Bhd has bagged a RM60.2 mln contract to build a substructure, toll plaza and motorcycle lane along part of the Sungai Besi-Ulu Kelang Expressway (SUKE). Work is set to start on 25th June 2018 and expected to be completed by 24th February 2020. (The Star Online)

• MyEG Services Bhd's associate company has inked a preliminary agreement seeking to be a payment processor and payment gateway business enterprise for offshore transactions in the Philippines' Cagayan Special Economic Zone and Freeport. The associate, I-Pay MyEG Philippines Inc signed the Memorandum of Understanding (MoU) with the Cagayan Economic Zone Authority on Monday. (The Edge Daily)

• Felda Investment Corp Sdn Bhd (FIC), a unit of the government-owned Federal Land Development Authority (Felda), has ceased to be a substantial shareholder in Barakah Offshore Petroleum Bhd. FIC had, on 18th June 2018, disposed of 4.5 mln shares on the open market. (The Edge Daily)

• Dagang NeXchange Bhd’s (DNeX) associate, Ping Petroleum Ltd (Ping) has been awarded two licences that allow for development and production activities to be carried out on three potential greenfield oil and gas blocks in the UK Central North Sea.

• The approval was given by UK’s Oil and Gas Authority to Ping’s wholly-owned unit Ping Petroleum UK Ltd (Ping UK), which partnered with two established U.K. oil and gas companies, namely Summit Petroleum Ltd and Azinor Catalyst Ltd on these licences. (The Edge Daily)

• GHL Systems Bhd, via its wholly-owned unit GHL (Thailand) Co Ltd, has secured a contract to supply Krung Thai Bank PCL (KTB) with up to 38,000 electronic data capture (EDC) terminals. The value of the contract, however, was undisclosed.

• These EDC terminals are expected to be deployed throughout KTB's vast network of merchants to enable the acceptance of electronic payments in the form of credit and debit cards (including Thai QR Payment) as well as government related payment services. (The Edge Daily)
• Tan Chong Motor Holdings Bhd has been appointed the sole and exclusive distributor, assembler and after-sales service provider of King Long coaches and buses in Malaysia. TC Trucks Sales is expected to start sales of King Long products in 4Q2018. The initial term of the agreement will be for five years and may be extended subject to the parties' mutual written agreement. (The Edge Daily)

• myNEWS Holdings Bhd’s 2QFY18 net profit rose 10.1% Y.o.Y to RM6.8 mln, on increase in stores, better products mix and higher other operational income. Revenue for the quarter grew 18.8% Y.o.Y to RM94.2 mln.

• For 1HFY18, cumulative net profit improved 4.8% Y.o.Y to RM13.2 mln. Revenue for the period expanded 18.5% Y.o.Y to RM184.3 mln. (The Edge Daily)

• Hap Seng Condolidated Bhd has entered into a sale and purchase agreement with Goldcoin Ventures Sdn Bhd for the disposal of two parcels of lands measuring 59.2 ac. in Tawau, Sabah for a combined RM90.1 mln.

• The proposed disposals will enable HSPD to realise an attractive capital gain and the proceeds will be used to reduce bank borrowings and/or to contribute to the working capital of the group. (The Edge Daily)  

Source: Mplus Research - 21 Jun 2018