Bouyed By Easing Trade Impasse

• The FBM KLCI (+0.9%) pared losses in the morning session, closing higher for the day on the back of gains in selected banking heavyweights. The lower liners – the FBM Small Cap (+1.5%), the FBM Fledgling (+0.5%) and the FBM Ace (+2.0%) also recovered, alongside the majority of the broader market shares.

• Market breadth was positive with 598 winners vs. 294 losers, while traded volumes also jumped 29.2% to 2.69 bln shares, in-tandem with the buyinginterest in the lower liners.

• Banking giants like Maybank (+36.0 sen), CIMB (+25.0 sen), Hong Leong Financial Group (+20.0 sen) and Public Bank (+20.0 sen) dominated the key-index charttoppers. Glove-maker Hartalega also finished higher after adding 33.0 sen on Thursday. Broader market advancers, meanwhile, were Malaysian Pacific Industries (+54.0 sen), Allianz Bank (+40.0 sen), George Kent (+30.0 sen), Kossan Rubber Industries (+30.0 sen) and Gamuda (+23.0 sen).

• On the other hand, broader market laggards consists of BAT (-RM1.00), BLD Plantation (-67.0 sen), Pintaras Jaya (- 14.0 sen), Harrisons (-10.0 sen) and Heineken Malaysia (-8.0 sen). Gentinglinked companies like Genting (-8.0 sen) and Genting Malaysia (-3.0 sen) weighed on the blue-chip gauge, alongside Sime Darby Plantation (-9.0 sen), Press Metal (- 4.0 sen) and Maxis (-3.0 sen).

• Key regional indices closed higher on Thursday after China said it was willing to negotiate with U.S. on trade matters. The Nikkei added 1.2%, lifted by solid gains in the telecommunication services sector, while the Shanghai Composite and the Hang Seng index rebounded, rising by 2.2% and 0.6% respectively. Most ASEAN bourses also rallied at Thursday’s close, boosted by the recovery in commodities.

• Major U.S. benchmark bourses rebounded from the sharp sell-down on Wednesday – led by the strong rally in giant tech companies on expectations of upbeat corporate earnings growth. The Dow posted 0.9% gains, lifted by Cisco Systems and Intel. On the broader market, the Nasdaq (+1.4%) logged its biggest one-day gain since early June, after Facebook and Amazon hit their alltime highs. The S&P 500 also rallied, closing 0.9% higher earlier.

• U.K. equities rose as investors digested the latest corporate news and Prime Minister Theresa May’s Brexit proposals. The FTSE (+0.8%) closed in the green, helped by British broadcaster Sky (+3.4%) after Comcast increased its takeover bid for the former, upping its ante against 21st Century Fox in their latest bidding war. The DAX also expanded 0.6% on gains in healthcare stocks, while the CAC ended 1.0% higher.

The Day Ahead

• China’s reported willingness to negotiate with the U.S. on the trade issues provided a fresh leg for the global equities to spring higher yesterday, included those on Bursa Malaysia. The gains look to sustain into the end of the trading week as there is now some measure of calmness over tariff issue, albeit it is still too early to assess the direction of the potential negotiations, which may be protracted if both sides stand their ground.

• Nevertheless, we view the above gesture positively as it could end the impasse that has threatened the global stockmarkets over the past six months and the latest developments could also provide a mild relief rally over the near term. With the 1,700 points taken out, we see the FBM KLCI headed to the next hurdles around the 1,710-1,720 levels. On the downside, the supports are pegged at 1,700 and 1,690 respectively.

• We also see the near term positivity giving an impetus for the lower liners and broader market shares to head higher over the near term. More importantly, the general market undertone is improving and this will allow many of the FBM Small Cap stocks to make a decent recovery after a difficult six-month period that has seen many stocks veering into the oversold region.

COMPANY BRIEF

• WCT Holdings Bhd has received a letter of intent (LOI) from Lendlease Projects (M) Sdn Bhd (LLPM) for the RM555.0 mln contract on the development of a mixed commercial property project at Tun Razak Exchange (TRX). The development will comprise four levels of shopping complex, three levels of car park, one level of open landscape with retail space and an information centre on a plot identified as on lot PT157, Seksyen 67, Jalan Tun Razak / Jalan Davis, Kuala Lumpur.

• The actual award, however, is subject to the terms of a preliminary works agreement (PWA) executed between Lendlease and WCT on 12th July 2018 and the execution of a trade contract prior to 10th October 2018. WCT will proceed with certain preliminary works, which include procurement of performance bond and all relevant insurance,as well as site mobilisation activities. WCT is also entitled to be paid up to a maximum of RM27.8 mln for carrying the preliminary works under the PWA. (The Star Online)

• Nova MSC Bhd is disposing a 51.0% stake in loss-making wholly-owned subsidiary, PrimusTech Pte Ltd, to JAG Ltd of Japan for RM8.9 mln. The price took into account PrimusTech group's unaudited net assets – 51.0% of which amounted to RM4.4 mln for the financial year ended 31st March 2018 (FY18) as well as the group's lossmaking position.

• PrimusTech, which provides integrated control and automation systems and information technology solutions for buildings and facilities, posted an unaudited loss after taxation of RM1.8 mln for FY18. (The Star Online)

• Lafarge Malaysia Bhd's RM270.0 mln cement supply contract for the proposed East Coast Rail Link (ECRL) project has been suspended by China Communications Construction (ECRL) Sdn Bhd, following the suspension of the project pending a government review. This follows the instruction received by China Communications from Malaysia Rail Link Sdn Bhd on 3rd July 2018 on the ECRL project suspension. (The Edge Daily)

• The High Court has ordered two issuing financial institutions to release a RM50.0 mln bank guarantee called on by Star Media Group Bhd in February 2018, in relation to an agreement for the purchase of a piece of land in Section 13, Petaling Jaya for RM135.0 mln. This means JAKS Resources Bhd will have to pay the RM50.0 mln sum to the two issuers. The High Court has dismissed the legal suit filed by JAKS to restrain the financial institutions from releasing the bank guarantee to Star Media, with costs.

• Separately, JAKS’s 51.0%-owned unit JAKS Island Circle Sdn Bhd (JIC) has instructed its solicitors to file a notice of appeal to the Court of Appeal. JIC has further instructed for applications for a stay of execution of the Court order, as well as an Erinford injunction on the issuing financial institutions and Star Media pending the hearings of the appeal. An Erinford Injunction is filed pending an appeal or an application of leave to appeal. (The Edge Daily)

• Gabungan AQRS Bhd's 2Q2018 net profit jumped 164.2% Y.o.Y to RM19.1 mln, thanks to higher revenue from both its construction and property development segments. Revenue for the quarter rose 134.5% Y.o.Y to RM187.2 mln.

• For 1H2018, cumulative net profit rose 52.2% Y.o.Y to RM35.6 mln. Revenue for the period climbed 31.8% Y.o.Y to RM314.7 mln. (The Edge Daily)

• Atlan Holdings Bhd’s 1QFY19 net profit slipped 35.4% Y.o.Y to RM7.4 mln, dragged down by supply shortage of certain duty free products in the global market, whilst the property and hospitality segment also recorded lower revenues as a result of reduced occupancy rates. Revenue for the quarter fell 21.5% Y.o.Y to RM170.5 mln. (The Edge Daily)

• Kumpulan Jetson Bhd has bagged a contract worth RM88.0 mln to build four blocks of serviced apartments at Jalan Yap Kwan Seng, Kuala Lumpur. The contract entails the construction of the main building and external works for four blocks of serviced apartments totalling 140 units. The project's tenure is 32 months, with the commencement date to be confirmed by the architect. (The Edge Daily)

• SKH Consortium Bhd is proposing to acquire a 70.0% stake in property development firm Rimbun Gabungan Sdn Bhd for RM12.0 mln in cash, from a company in which Bina Puri Holdings Bhd's founder Dr Tony Tan Cheng Kiat is a Director. SKH said it inked a share sale agreement with Bijak Fajar Sdn Bhd and Newston Development Sdn Bhd for the proposed acquisition.

• Under the agreement, SKH will buy 49.0% from Bijak Fajar, and 21.0% from Newston — giving it control of 70% in Rimbun Gabungan. Rimbun Gabungan is set to receive the rights to develop a piece of government leasehold land in Setapak that has been alienated for affordable housing from its sister company, Rimbun Purnama Sdn Bhd, which was awarded the land last 220year. The two companies have common shareholders and directors.

• Based on an independent valuation in April 2018, the market value of the land was set at RM24.5 mln. The proposed affordable housing project on the plot, comprising two blocks of residential apartments, will have an estimated gross development value of RM252.0 mln. (The EdgeDaily)  

Source: Mplus Research - 13 Jul 2018