Profit Taking To End The Week

• The FBM KLCI (+0.1%) managed to inch higher for the fourth straight session after reversing most of its intraday gains yesterday. The lower liners – the FBM Small Cap (-0.7%), FBM Fledgling (-0.7%) and the FBM ACE (-1.4%), however, all erased their previous session’s gains, while the broader market ended mostly negative.

• Market breadth turned negative as decliners outstripped advancers on a ratio of 618-to-335 stocks. Traded volumes slipped 19.2% to 3.03 bln shares as signs of profit taking activities emerged.

• Key winners on the local bourse were Tenaga (+22.0 sen), Petronas Gas (+16.0 sen), KLK (+14.0 sen), MISC (+10.0 sen) and Maybank (+9.0 sen). Notable advancers on the broader market include Panasonic (+42.0 sen), Ajinomoto (+20.0 sen), Riverview Rubber (+20.0 sen) and IGB (+19.0 sen). Westports added 20.0 sen despite reporting a weak set of quarterly earnings.

• Elsewhere, significant decliners on the broader market were BAT (-70.0 sen), Heng Yuan (-17.0 sen), Apex Healthcare (-15.0 sen), Kluang Rubber (-15.0 sen) and CN Asia Corporation (-13.5 sen). On the FBM KLCI, Nestle (-80.0 sen), Axiata (-17.0 sen), Hong Leong Financial Group (-12.0 sen), PPB Group (-10.0 sen) and Malaysia Airport Holdings (-7.0 sen) were the biggest losers.

• Asia benchmark indices retreated after reversing all their intraday gains as the Nikkei fell 0.1%, dragged down by expectations that Bank of Japan will trim its buying in index-linked exchange traded funds. The Hang Seng Index slipped 0.4% on weakness in financials and technology stocks, while the Shanghai Composite (-0.7%) extended its losses on fresh concerns over the U.S.- Sino trade uncertainties. ASEAN stockmarkets, meanwhile, closed mixed yesterday.

• U.S. stockmarkets closed mostly lower overnight, dragged down by the weakness in the technology sector after Facebook Inc reported weaker-thanexpected quarterly revenue and provided weak future earnings guidance. The Dow managed to close 0.4% higher, but both the S&P 500 and Nasdaq slipped 0.3% and 1.0% respectively.

• Earlier, European equities – the FTSE (+0.1%), CAC (+1.0%) and DAX (+1.8%), all rebounded amid the positive developments in the trade deal between U.S. and the E.U. In the meantime, the European Central Bank has pledged to keep interest rate unchanged for the remainder of 2018.

The Day Ahead

• Although the key index continues to make headway, profit taking activities dominated yesterday’s trades amid the already toppish market environment following the consecutive days of uptrend.

• We see the selling activities continuing into the last trading day of week as market players are likely to lock-in their profits ahead of the weekend. Already, the key index has climbed over 6.0% in the past two weeks that resulted in its technical indicators veering into the overbought range.

• At the same time, the recent gains have resulted in valuations tipping closer to the top of its long-term PER range of 14x- 17x. As a result, we think further upsides will be more difficult to come for now.

• Similarly, many lower liners and broader market shares are also overbought following the FBM Small Cap’s near 10% gain in the past two weeks. Therefore, we also think the pullback will remain for now to allow the above stocks to take a breather after the recent strong recovery.

COMPANY BRIEF

• Tan Chong Motor Holdings Bhd has inked a joint-venture (JV) agreement with Warisan TC Holdings Bhd in New York to facilitate the development of new distribution channels in the US and Canada for exports from Southeast Asia.

• Tan Chong Warisan Resources Management is 51.0%-owned by Tan Chong, while Warisan TC Holdings Bhd holds the remaining 49.0% stake. The JV company will also be involved in sourcing new products, ideas and technologies in the US and Canada, which can bring value to the group. (The Edge Daily)

• Utusan Melayu (Malaysia) Bhd has announced the resignation of Datuk Mohd Noordin Abbas as group Managing Director, alongside the group's Executive Director and group Editor-in-chief Datuk Abdul Aziz Ishak. Separately, Utusan appointed Dr Badrul Hisham Mohd Yusoff as an independent and non-executive director of the group. (The Edge Daily)

• Versatile Creative Bhd is unable to meet the 31st July, 2018 deadline to publish the group’s annual report and audited FY18 financial statements due to unforeseen delays in the finalisation of the documents, pending the conclusion of a forensic audit. Subsequently, the group targets to issue and submit its annual report and audited financial statements to the exchange not later than five market days from 31st July 2018. (The Edge Daily)

• Pantech Group Holdings Bhd has issued profit warning as it expects to see a potential 20.0% reduction in revenue for the remaining months of the current financial year ending 28th February, 2019 (FY19), hit by the ongoing U.S.-China trade conflicts. Nevertheless, the group believes that its overall performance for FY19 will remain profitable.

• This comes after the group has suspended selected carbon steel buttweld fittings shipment to the U.S. due to significantly higher import tariffs after some local companies were determined by the U.S. Department of Commerce (DoC) to have circumvent the antidumping duties on butt-weld fittings from China.

• Separately, Pantech 1QFY19 net profit rose marginally by 1.1% Y.o.Y to RM14.1 mln, from RM14.0 mln a year ago, mainly due to the increase in sales demand from both trading and manufacturing divisions, while revenue added 17.7% Y.o.Y to RM178.4 mln, from RM151.5 mln in 1QFY18. (TheSunDaily)

• TMC Life Sciences Bhd's 3QFY18 net profit dropped by 5.5% Y.o.Y to RM5.6 mln, from RM6.0 mln a year earlier, due to higher operating expenses that were incurred to strengthen the group's human capital. Quarterly revenue, however, gained 9.1% Y.o.Y to RM44.4 mln, from RM40.7 mln in the previous corresponding year.

• Further, TMC Life has awarded a sewerage treatment plant construction and upgrading project to Dataran Tenaga Sdn Bhd to facilitate the commencement of construction work on the Thomson Iskandar Medical Hub in Johor. The contract worth about RM19.3 mln will internally-funded by TMC Life. (The Edge Daily)

• Pavilion Real Estate Investment Trust's (REIT) 2Q2018 net property income (NPI) rose 18.1% Y.o.Y to RM90.6 mln vs. RM76.7 mln a year ago, mainly contributed by rental income from Elite Pavilion Mall that was acquired at the end of April 2018, higher rental income from Pavilion Kuala Lumpur Mall and higher occupancy rate at Intermark Mall. The group has also declared an interim income distribution per unit (DPU) of 4.3 sen, payable on 5th September 2018.

• For 1H2018, Pavilion REIT’s NPI grew 15.4% Y.o.Y to RM179.6 mln, from RM155.7 mln a year ago, while revenue rose 11.4% Y.o.Y to RM266.6 mln from RM239.2 mln previously. (The Edge Daily)

• ViTrox Corp Bhd posted a 30.0% Y.o.Y jump in 2Q2018 net profit to RM27.8 mln, from RM21.34 mln a year ago, driven by higher revenues from the machine vision system and automated board inspection segments. Quarterly revenue was also 35.0% Y.o.Y higher to RM105.0 mln, from RM77.6 mln in 2Q2017. (The Star Online)

• Ajiya Bhd‘s 2QFY18 net profit tripled to RM4.9 mln, from RM1.6 mln a year earlier, on the back of improved revenue margins in selected products. Quarterly revenue also rose 14.6% Y.o.Y to RM103.7 mln, from RM90.5 mln in the same period last year. (The Edge Daily)

• Ancom Bhd has doubled its 4QFY18 net profit to RM8.5 mln, from RM4.2 mln previously, driven by higher segmental profit from its agricultural and industrial chemicals, logistics, and information technology (IT) divisions, while revenue surged 21.3% Y.o.Y to RM580.1 mln, from RM478.2 mln recorded in the same quarter last year.

• For the full year, Ancom's net profit was flattish at RM17.6 mln against RM17.5 mln last year, despite a 15.0% Y.o.Y increase in revenue to RM1.95 bln, from RM1.70 bln. (The Edge Daily)

• Tasek Corp Bhd notched its third consecutive quarter of losses, following a 2Q2018 net loss of RM4.7 mln, compared with a net profit of RM1.5 mln a year ago, due to its ongoing loss-making cement business. Quarterly revenue was down slightly by 1.0% Y.o.Y to RM133.6 mln, from RM135.0 mln a year ago, on the back of lower contribution from its readymixed concrete segment, as well as the lower average net selling price for both cement and ready-mixed concrete. (The Edge Daily)  

Source: Mplus Research - 27 Jul 2018