More Upsides Ahead

• The FBM KLCI extended its winning streak for the eighth-straight session, largely due to gains in telco giants like Axiata and Telekom Malaysia as well as renewed buying-interest in emerging stockmarkets. All the lower liners ended in the positive territory, alongside majority of the local subsectors.

• Market breadth was positive as winners beat losers on a ratio of 594-to-295 stocks, while traded volumes gained 12.5% to 2.63 bln shares, on the back of bargain-hunting activities in selected stocks following the selldown in the local bourse recently.

• Telco and banking giants like Telekom Malaysia (+22.0 sen), Axiata (+17.0 sen), CIMB Bank (+18.0 sen) and Public Bank (+10.0 sen) rallied on Wednesday’s close, alongside Tenaga Nasional (+10.0 sen), which posted gains for the second consecutive day. Revenue Group gained 25.5 sen following its debut on the ACE market today, while other broader market advancers include BAT (+50.0 sen), KESM Industries (+40.0 sen), Top Glove (+30.0 sen) and UWM Holdings (+30.0 sen).

• On the losing team, decliners were Heineken Malaysia (-16.0 sen), Fraser & Neave (-14.0 sen), Hong Leong Industries (-14.0 sen), PMB Technology (-12.0 sen) and Enra Group (-9.0 sen). Only three blue-chip stocks slipped into the bearish territory, namely Hong Leong Financial Group (-22.0 sen), Petronas Dagangan (- 4.0 sen) and Hong Leong Bank (-2.0 sen).

• Key benchmark regional indices finished mostly lower, as investors digested potentially higher interest rates and stronger US Dollars. The Nikkei (+0.4%) was unfazed, closing higher as Yen continues to be southbound. On the other hand, the Shanghai Composite (-0.4%) and the Hang Seng index (-0.2%) erased earlier gains and slipped into the red, while the ASEAN equities closed mixed.

• Major U.S. equities closed with meagre gains, on the back of the strength in transportation and banking-related companies. The Dow extended its winning streak, boosted by gains in healthcare stocks. On the broader market, the S&P 500 rose 0.2%, while the Nasdaq flatlined.

• Earlier, U.K. stockmarkets rallied as corporate results remained in the forefront. The FTSE (+0.7%) finished in the green – due to the weaker Pound following lower-than-expected inflation data, although capped by losses in Smiths Group on softer earnings outlook expectations. The DAX and the CAC, meanwhile, rose 0.8% and 0.5% respectively, hitting new highs since 18th June.

The Day Ahead

• Index heavyweights continue to provide ample support for the key index to head higher and to extend its recovery, taking cue from the positivity in most global indices. While we think the process is already overdone and the recent buying have left the market overbought, we think the near term upsides will persist for longer.

• As it is, local institutions are providing the selective buying support on the index heavyweights, taking advantage of the dwindling foreign selling and few negative developments on the ongoing trade issues between the U.S. and China. Therefore, the calmer market environment, coupled with the gains on global equities, will continue to provide the catalyst for the FBM KLCI to head higher after it broke though the 1,750 level. Further ahead, the resistances are at 1,761 and 1,775 points respectively. The supports are at 1,750 and 1,737 points respectively.

• In tandem with the positivity among the heavyweights, the lower liners and broader market shares are also garnering increased following, albeit the level of participation is still relatively indifferent for now. However, the continuing gains in major markets will help to draw-in more retail participation and provide some impetus for a firmer recovery among the broader market FBM Small Cap listed stocks.

MACRO BRIEF

• Malaysia's June 2018 inflation rate only rose 0.8% Y.o.Y – the first time in 40 months that saw growth coming in below 1.0%, following the abolishment of the Goods and Services Tax (GST), discounted prices by retailers and price control due to the festivities. This was sharply lower compared with the consensus estimate of a 1.3% Y.o.Y increase.

• The CPI fell 1.2% M.o.M due to the decrease in all main groups. For the period from January 2018 to June 2018, the CPI rose 1.6% Y.o.Y from the previous corresponding period. (The Star Online)

COMPANY BRIEF

• Maxis Bhd’s 2Q2018 net profit fell 16.4% Y.o.Y to RM478.0 mln, mainly dragged down by higher depreciation expenses. Revenue for the quarter declined 3.8% Y.o.Y to RM2.25 bln.

• For 1H2018, cumulative net profit decreased 6.8% Y.o.Y to RM1.00 bln. Revenue for the period slipped 4.8% Y.o.Y to RM4.48 bln. An interim dividend of five sen per share was declared. (The Star Online)

• Boustead Plantations Bhd is buying 5,531.3 ha. of plantation land in Sandakan, inclusive of a 60-tonne per hour palm oil mill from Sit Seng & Sons Realty Sdn Bhd for an indicative purchase consideration of RM397.0 mln. The indicative market value of the plantation assets inclusive of the 60-tonne palm oil mill is about RM433.0 mln, based on a statement issued by Boustead Plantation on 8th May 2018. (The Star Online)

• Seacera Group Bhd has proposed to place out new shares to yet-to-beidentified investors, to raise up to RM25.4 mln to fund its working capital in order to finance the group's tile operations as well as property development/construction divisions. The current placement will involve up to 10.0% of the total number of the company's issued shares or up to 54.1 mln shares at an issue price to be determined later. (The Edge Daily)

• Institutional investors such as the Employees Provident Fund (EPF) have voiced their unhappiness with the remuneration received by loss-making Sapura Energy Bhd's President and Group Chief Executive Officer, Tan Sri Shahril Shamsuddin which totalled RM71.9 mln for the financial year ended 31st January 2018, according to the Minority Shareholder Watchdog Group (MSWG). The amount is equivalent to 1.2% of the group's FY18 revenue of RM5.89 bln. 

• Shahril, who also owns a 17.4% stake in Sapura Energy, was paid a salary and related emoluments of RM7.24 mln and he was also awarded with a RM55.0 mln bonus, which was based on prior year's group performance and achievements, along with RM9.3 mln in defined contribution plan and RM348,000 in various benefits-in-kind. (The Edge Daily)

• MNRB Holdings Bhd has proposed to undertake a rights issue to raise gross proceeds of about RM400.0 mln, which the issue price and entitlement basis would be finalised later. The proceeds of the rights issue will be injected into its takaful subsidiaries — Takaful Ikhlas Bhd and Malaysian Reinsurance Bhd, of RM300.0 mln and RM100.0 mln respectively to enhance the capital position for both companies and to grow its takaful and reinsurance business. MNRB intends to procure an irrevocable written undertaking from Permodalan Nasional Bhd to subscribe in full for its entitlement. (The Edge Daily)

• TMC Life Sciences Bhd is looking to double its revenue by 2020, driven by expansion of its rebranded Thomson Hospital Kota Damansara (THKD), which was formerly known as the Tropicana Medical Centre. With the current THKD building built on one third of a six-ac. land, the new expansion will occupy another one-third of the land, then, leaving another two ac. for future development. The expansion project is expected to be completed by 2020, having a full capacity of 600 beds, 10 state-of-the-art operating theatres, 10 centres of excellence and an advanced imaging centre, as well as more than 100 specialist clinics. (The Edge Daily)

• Perunding Ranhill Worley Sdn Bhd (PRW), an associate of Ranhill Holdings Bhd and WorleyParsons Ltd of Australia, has won a contract from Kebabangan Petroleum Operating Co Sdn Bhd (KPOC) to provide engineering support and design services to the KPOC-Kebabangan northern hub platform in Sabah. The value of the contract, however, was not disclosed. The contract spans three years, with an option to extend by one year and encompasses the provision of engineering and design services. These include special engineering studies, conceptual engineering, basic engineering and detailed engineering support. (The Edge Daily)

• Hua Yang Bhd’s 1QFY19 net profit declined 45.5% Y.o.Y to RM1.0 mln, dragged down by higher finance costs and higher tax expenses. Revenue for the quarter, however, rose 41.4% Y.o.Y to RM66.5 mln. (The Edge Daily)

• Ikhmas Jaya Group Bhd has bagged a subcontract worth RM78.0 mln for the construction of a marine bridge under the Seri Tanjung Pinang development in Penang, from Kerjaya Prospek (M) Sdn Bhd. The project is expected to be completed on 10th April 2020. (The Edge Daily)

• Menang Corp (M) Bhd has proposed to dispose of its 51.0% stakes in two units — Rumpun Positif Sdn Bhd and Protokol Elegan Sdn Bhd for a total of RM43.5 mln. Of the total proceeds, RM20.0 mln will be utilised for repayment of bank borrowings, RM17.8 mln for working capital requirements, RM5.0 mln set aside for future development and the balance to pay off expenses of the proposals. The proposals will enhance the group’s earnings with a net gain on disposal of RM7.7 mln, (The Edge Daily)

• Tek Seng Holdings Bhd’s 50.7%-owned subsidiary, TS Solartech Sdn Bhd has decided to temporarily stop its photovoltaic (PV) production activities in Penang in 3Q2018. The temporary halt of TS Solartech's operations will affect 118 workers, who will be made redundant. The temporary stop is due to intense competition in the solar industry, coupled by the eroded prices of the solar cells due to excess inventory in the supply chain that resulted in a challenging operating environment for TS Solartech. (The Edge Daily)  

Source: Mplus Research - 19 Jul 2018