Looking Toppish

• The local index logged its ninth-day of gains after lingering in the positive territory for the entire intra-day session – led by gains in banks. The FBM Small Cap (+1.6%) and the FBM Fledgling (+0.5%) followed suit, with the exception of the FBM ACE (-0.4%). Meanwhile, most of the broader market constituents closed higher at Thursday’s closing bell.

• Market breadth was bullish as advancers topped decliners on a ratio of 640-to-323 stocks, while traded volumes jumped 32.7% to 3.49 bln shares – partly due to the slowing foreign outflows.

• Banking blue-chips like Maybank (+21.0 sen) and Public Bank (+20.0 sen) continues to lead the Main Board gainers, followed by Malaysia Airports (+19.0 sen), Press Metal (+16.0 sen) and Genting (+7.0 sen). Broader market winners, meanwhile, include previously beatendown construction stocks like Iskandar Waterfront City (+17.5 sen) and Gamuda (+17.0 sen), alongside KESM Industries (+58.0 sen), Malaysian Pacific Industries (+50.0 sen) and Tasek (+18.0 sen).

• On the flipside, MNRB (-31.0 sen), Top Glove (-30.0 sen), UMW Holdings (-20.0 sen), Carlsberg (-16.0 sen) and Fraser & Neave (-14.0 sen) declined. Key-index decliners include Hong Leong Bank (-38.0 sen), Nestle (-30.0 sen), KLCC (-11.0 sen), Hartalega (-7.0 sen) and Sime Darby Plantation (-6.0 sen).

• Key regional large-caps bourses were splashed in red amid potentially higher U.S. interest rates and lingering concerns of the U.S.-China trade conflicts which weighed on sentiments. The Nikkei (- 0.1%) snapped a four-session winning streak, weighed down by worries of increased protectionism policies from Washington after Japan posted a trade surplus with U.S. despite existing tariffs. The Shanghai Composite and the Hang Seng index also followed suit, narrowing by 0.5% and 0.4% respectively, while ASEAN equities were broadly lower on Thursday.

• Wall Street finished mostly lower – due to the weakness in financials-related equities, in-tandem with the sharp fall in Treasury yields and the U.S. Dollar after President Donald Trump criticised the Federal Reserves’ monetary policies. The Dow fell by 0.5%, mainly due to a profittaking after rallying for five-straight sessions. Meanwhile, both the S&P 500 and the Nasdaq also declined by 0.4% respectively, weighed down by lacklustre corporate earnings on Thursday.

• European equities were mostly in the red, as the earnings season gets underway. The FTSE (-0.1%) opposed the general downtrend to eke-out gains after lowerthan-expected retail data hit the Pound and lifted blue-chips exporters. The DAX and the CAC, however, weakened by 0.6% each as investors booked profits following the recent strong gains.

The Day Ahead

• The key index continues to take flight amid the more positive market undertone, but this is also leaving the market at the toppish range and the key index is showing signs of overbought as a result. Therefore, we see further near term upsides becoming more difficult to come buy amid the increasingly toppish market environment.

• At the same time, global markets are also retreating from their recent gains, thus also providing an option for market players to lock-in some of their recent gains, which is welcomed for the market to take a breather. While we think the market is poised for a pullback, the general market undertone is still indifferent, in our view, as there is still few signs of a retreat in the trade spat between the U.S. and China.

• We see the above issue still to dictate the market’s overall direction for the time being and unless the issue eases, we think it could still weigh on the market’s movement over the foreseeable future. In the meantime, the FBM KLCI’s resistances are pegged at 1,774 and 1,780 respectively. The supports are at 1,750 and 1,730 respectively.

• The lower liners and broader market shares, however, are still on the mend after their steep falls over the past sixmonths. However, their recovery has been more modest and we see this trend continuing as there is still some measure of tentativeness among retail players.

COMPANY BRIEF

• Serba Dinamik Holdings Bhd has won a RM268.5 mln contract for engineering, procurement, construction and commissioning (EPCC) work in Laos. The EPCC contract was awarded by Nam Taep 1, 2, 3 Hydropower Company Ltd.

• Separately, Serba Dinamik is buying a 15.0% stake in Green & Smart Holdings Plc (GSH) for RM17.0 mln through a share subscription exercise. GSH, listed in London on the AIM market, is involved in research and development, engineering consultancy and process design services in the area of industrial biotechnology, pollution control and renewable energy, as well as EPCC of various waste water treatment plants/ systems and development. Its core business is power generation from biogas captured through the treatment of palm oil mill effluent. (The Star Online)

• British American Tobacco (Malaysia) Bhd’s 2Q2018 net profit slipped 21.1% Y.o.Y to RM113.7 mln, dragged down by market contraction and absence of sales of certain raw materials. Revenue for the quarter declined 9.2% Y.o.Y to RM679.2 mln.

• For 1H2018, cumulative net profit fell 18.8% Y.o.Y to RM209.6 mln. Revenue for the period decreased 12.0% Y.o.Y to RM1.32 bln. A second interim dividend of 35.0 sen per share was declared. (The Star Online)

• AirAsia Group Bhd has transferred 30 aircraft with gross proceeds totalling US$355.0 mln (approximately RM1.44 bln) as part of its divestment plan for its aircraft-leasing unit. The planned disposals of the other remaining 54 aircraft and 14 aircraft engines under the sales and purchase agreement it has signed with Incline B Aviation Ltd Partnership and FLY Leasing Ltd is also on schedule. (The Edge Daily)

• AirAsia X Bhd has finally agreed to acquire another 34 Airbus A330neo widebody aircraft in addition to 66 units ordered back in 2016, making the order backlog to 100 units to also be shared with its Thai and Indonesian operations. The model will be the AirAsia X’s primary fleet until 2028, with the airliner replacing some of its older A330ceo, as the neos are 11%-12% more cost-effective to operate. (The Edge Daily)

• The High Court has issued an interim order restraining APFT Bhd’s former Executive Chairman, Datuk Faruk Othman from participating in company management, trading its shares, or exercise his voting rights pending the full disposal of a suit brought by the aviation training firm against him. This is in relation to a lawsuit filed by APFT on 18th July 2018 against Faruk for alleged misappropriation of company funds which resulted in the company to obtain the Practice Note 17 status. It had also sought an interim injunction against him. (The Edge Daily)

• Malayan Flour Mills Bhd wants to raise up to RM275.1 mln — of which around 80.0% will be used to expand its poultry business and logistics facilities while the rest to pare down its revolving credit facilities. The proposed repayment of revolving credit facilities of up to approximately RM54.8 mln will result in an interest savings of up to approximately RM1.9 mln per annum, based on the interest rate of 3.5% per annum. The proposal is expected to be completed before end-2018. (The Edge Daily)

• PUC Bhd has followed up on its acquisition of a controlling stake in 11Street malaysia from Axiata Digital Services Sdn Bhd in April 2018 with two additional Memoranda of Understanding between the companies’ subsidiaries. The first was for PUC’s unit to be the agency for Axiata Digital’s advertising arm in handling all traditional media buying and planning services in exchange for digital services such as digital buying and social media management. The second was for PUC’s Presto and Axiata Digital’s Boost digital platform operators to collaborate to explore interoperability between the two services. (The Edge Daily)

• WZ Satu Bhd’s 3QFY18 net loss stood at RM7.3 mln vs. a net profit of RM8.0 mln recorded in the previous corresponding quarter after its three key segments — civil engineering and construction, oil and gas, and mining — all turned into the red. Revenue for the quarter fell 13.4% Y.o.Y to RM122.9 mln.

• For 9MFY18, cumulative net loss stood at RM6.6 mln, against a net profit of RM21.9 mln registered in the same corresponding period. Revenue for the period dropped 6.1% Y.o.Y to RM384.9 mln. (The Edge Daily)  

Source: Mplus Research - 20 Jul 2018