Still Waiting For A Breakthrough

• The lingering concerns over trade tariffs between U.S. and China continue to beset the FBM KLCI as the key index extended its losses, closing 0.3% lower yesterday. The lower liners, however, closed mostly higher as the FBM Fledgling and FBM ACE rose 0.6% and 1.3% respectively on bargain hunting activities, while the broader market also closed mostly negative.

• Market breadth stayed negative as advancers outnumbered decliners on a ratio of 447-to-351 stocks. Traded volumes, however, rose 25.5% to 2.13 bln shares on rotational play amongst the lower liners.

• Half of the key index constituents retreated, dragged down by Nestle (-30.0 sen), followed by Tenaga (-16.0 sen), Digi (-11.0 sen), Hartalega (-10.0 sen) and KLK (-10.0 sen). Amongst the biggest on the broader market were BAT (-38.0 sen), United Plantations (-36.0 sen), MPI (-34.0 sen), Dutch Lady (-28.0 sen) and Allianz (- 18.0 sen).

• On the flipside, significant gainers on the broader market include Lebtech (+24.0 sen), Heineken (+20.0 sen), Bursa (+19.0 sen), Aeon Credit (+16.0 sen) and Serba Dinamik (+15.0 sen). Meanwhile, Petronas Gas (+22.0 sen), Telekom (+20.0 sen), Hong Leong Bank (+8.0 sen), Hong Leong Financial Group (+6.0 sen) and Petronas Chemicals (+5.0 sen) topped the big board’s winners list.

• Asian benchmark indices closed mostly lower despite trimming most of their intraday losses as the Nikkei fell 0.1%, while the Hang Seng Index finished 1.4% lower. The Shanghai Composite (+0.4%) managed to claw its way into the positive territory after the People Bank of China aims to keep its currency at a “stable and reasonable” level. ASEAN stockmarkets, meanwhile, ended mixed yesterday.

• U.S. stockmarkets staged a pullback after reversing all their intraday gains with the Dow falling 0.5% as investors anticipate that there would be no conciliatory deal ahead of the first round of tariffs to be taken effect on 6th July 2018. On the broader market, the S&P 500 (-0.5%) erased all its previous session gains on weakness in technology shares, while the Nasdaq finished 0.9% lower.

• Earlier, European benchmark indices – the FTSE (+0.6%), CAC (+0.8%) and DAX (+0.9%), all rebounded after German Chancellor Angela Merkel steered her coalition government to reach agreement on migration, coupled with weaker Euro Currency against the Greenback. In the meantime, the European Union has threatened US$300.0 bln worth of fresh tariffs against U.S. products.

The Day Ahead

• The cautious global stockmarket undertone is still widespread to block recovery prospects on Malaysian stocks. As it is, concerns are still abound over the heighten possibility of a trade war between the U.S and the rest of world with tariffs to be implemented on China made goods from this Friday onward that could place a big dent on global trade in due course.

• Therefore, we see Malaysian stocks staying on the wayside over the near term amid the weak market sentiments and uncertain stockmarket direction. This is likely to keep the FBM KLCI and the broader market indices in check for longer as the lack of positive leads will keep fresh buying and trading opportunities at a minimum. There are also few fresh leads from domestic sources to stir investor interest.
• Under the prevailing weak market environment, we think the downside bias still will remain and the 1,680 support level may not hold, leaving the key index to potentially find support at the 1,673 and 1,665 levels. The resistances, meanwhile, is at 1,683 points and 1,691 points.

COMPANY BRIEF

• Pasdec Holdings Bhd has received a conditional mandatory takeover offer from substantial shareholder and Executive Director, Datuk Seri Tew Kim Thin to acquire 57.7% of the group's shares as well as 31.3% of its warrants, through his private investment vehicle Jasa Imani Sdn Bhd.

• Datuk Seri Tew has proposed to pay RM121.4 (or 52.5 sen per share) for the remaining 231.2 shares he does not own in the company,as well as RM357,900 (or one sen) per warrant for the remaining 35.8 warrants in Pasdec.

• Datuk Seri Tew is deemed the ultimate offeror for the offer as he is the founder and major shareholder of Jasa Imani, in which he holds a 58.2% equity stake. His son Tew Liang Tze owns another 37.4% of Jasa Imani shares. He also intends to maintain Pasdec's listing status after completing the shares acquisition. (The Edge Daily)

• Damansara Realty Bhd (DBhd) has appointed its Group Chief Executive Officer (CEO), Brian Iskandar Zulkarim as Executive Director and Group Managing Director with immediate effect. He has been the CEO of the group since 1st September 2016. (The Edge Daily)

• Telekom Malaysia Bhd (TM) has revised its 2018 key performance indicators (KPIs) lower due to the evolving market dynamics and a challenging operational environment.

• The group’s revenue growth was envisaged to a range of -1.0% to flat growth (from 3.5%-4.0% previously), while earnings before interest and tax (EBIT) is expected to be about RM1.0 bln (from RM1.1 bln previously). Its customer satisfaction measure was also revised downwards to 72.0 from 74.0.

• Further, the group also announced the implementation of its performance improvement programme 2018, a continuation of its transformation journey, which is at its 4th wave. (The Star Online)

• Green Packet Bhd has inked a jointventure (JV) agreement with Hong Kong-based Funsea Entertainment Co Ltd to undertake the business related to offering digital contents such as games, movies and music to telecommunications operators or master content providers in Asean.

• Green Packet will take up a 40% stake in the JV company, while Funsea will own the remaining stake. The RM3.0 mln project cost for the business in Malaysia will be funded via shareholders' advance, proportionately. Green Packet will fund its investment sum of RM1.2 mln via internal funds. (The Star Online)

• Velesto Energy Bhd (VEB), formerly known as UMW Oil and Gas Corp Bhd, has secured a US$31.0 (RM126.0 mln) offshore drilling services contract from ROC Oil (Sarawak) Sdn Bhd.

• VEB will provide one jack-up drilling rig and associated services for ROC's D35 Phase 2 "infill drilling" programme. (The Star Online)
• IHH Healthcare Bhd has submitted a new binding offer to the Board of Directors (BoD) of Fortis Healthcare Ltd to acquire the struggling Indian hospital chain and its affiliates, although no details were provided on the size of its offer this time.

• To recap, Fortis had initiated a fresh bidding process and invited selected bidders, including IHH, to submit fresh proposals on 29th May 2018. Subsequently, the latest proposal will supersede and replace the earlier proposal submitted by IHH. (The Edge Daily)

• Versatile Creative Bhd has suspended its Managing director and Chief Financial Officer (CFO) pending investigations by the forensic auditors after discovering financial irregularities arising from unauthorised payments to third parties between August 2017 and June 2018.

• Crowe Malaysia has been appointed by the board to carry out the forensic audit after Versatile Chairman Datuk Lee Kwee Hiang lodged a police report. Datuk Lee has also been appointed as the acting Managing Director. (The Edge Daily)

• Sunway Bhd has established a new venture capital (VC) fund, Sun SEA Capital LP, with a proposed investment of US$50.0 mln which will allow the group to accelerate its digital transformation through investments into synergistic digital start-ups, and conduct external fundraising to grow the start-ups. The group has inked an initial exempted limited partner agreement to set up the new VC fund on 3th July 2018.

• Moving forward, Sun SEA Capital will seek to provide scalable start-ups in Malaysia, Thailand, Singapore, Indonesia, the Philippines, Vietnam and Hong Kong specialising in online-to-offline convergence, enterprise solutions, logistics, digital media/entertainment, financial technology and digital health sectors access to Series A investments worth US$1.0 mln-US$3.0 mln per ticket size. (The New Straits Times)

• Zelan Bhd has appointed Kamaruddin Abd Karim as the Chief Operating Officer of the group. The latter has more than 30 years of experience in construction management and has held various positions within Zelan Group including head of planning and monitoring, head of business development and general manager of special projects since joining in 2009. (The Edge Daily)

• Lion Industries Corp Bhd is planning to acquire the flat steel assets including a manufacturing plant in Banting, Selangor from Megasteel Sdn Bhd for RM537.7 mln, in-line with its plans to expand into the flat steel business. The proposed acquisitions will widen its steel product base from the manufacturing of long produts.

• The proposals are also part of a debt settlement scheme to be undertaken by Megasteel, with the lenders and creditors. Meanwhile, both companies also share a common substantial shareholder, Tan Sri William Cheng. (The Star Online)

• TH Heavy Engineering Bhd‘s NonIndependent and Non-Executive Chairman, Datuk Seri Johan Abdullah, who holds about 30.1% equity stake in the company, has relinquished his position following his departure from Tabung Haji, where he was a nominee director of Tabung Haji. At the same time, TH Heavy has re-designated CEO cum CFO, Suhaimi Badrul Jamil as the company's CEO, effective 3rd July 2018. (The Edge Daily)  

Source: Mplus Research - 4 Jul 2018