Going Nowhere

• Tracking the negative sentiments in the regional bourses, the FBM KLCI succumbed to selling-pressure in the eleventh hour, albeit cushioned by gains in major banking counters. The lower liners were mostly splashed in red, with the exception of the FBM Small Cap (+0.1%), which pared losses just before the market’s close. The broader market, meanwhile, finished mostly lower on Monday.

• Market breadth was negative as decliners outstripped the winners on a ratio of 514- to-333 stocks. Traded volumes, however, jumped by 15.0% to 2.12 bln shares, inline with profit-taking activities in the lower liners.

• Major blue-chip losers include Petronas Gas (-46.0 sen), Hong Leong Financial Group (-26.0 sen), Kuala Lumpur Kepong (-16.0 sen), while Digi and Maxis each closed 6.0 sen lower. United Plantations (-86.0 sen), Hong Leong Industries (-42.0 sen), BAT (-22.0 sen), BLD Plantation (- 22.0 sen) and Gamuda (-16.0 sen) weighed on the broader market.

• Broader market outperformers were Heineken Malaysia (+58.0 sen), Fraser & Neave (+34.0 sen), Chin Teck Plantations (+27.0 sen), Hengyuan Refining (+20.0 sen) and KESM Industries (+20.0 sen). Meanwhile, significant advancers include banks like Public Bank (+10.0 sen) and Maybank (+4.0 sen), followed by Nestle (+40.0 sen), PPB Group (+10.0 sen) and Sime Darby Plantation (+5.0 sen).

• Asian equities were southbound as the tit-for-tat trade tariff between the world’s two largest economies continues to escalate. The Shanghai Composite (- 1.3%) declined for the fourth consecutive session after China upped the ante against Washington’s latest tariff threats by proposing additional tariffs on US$60.0 bln worth of U.S. goods. The Nikkei (-0.1%) also swung into the red, despite gains in steel and telecommunications sectors, while the Hang Seng Index fell from intra-day high, although still closing 0.6% higher. ASEAN stockmarkets, meanwhile, closed mixed.

• Key U.S. bourses extended their runup for the third consecutive session as investors digested a fresh wave of corporate updates. The Dow (+0.2%) rose, owing to gains in Walt Disney (+1.6%), while technology and consumer discretionary-related counters helped the Nasdaq (+0.6%) to finish in the green for the fifth-straight day. The S&P500 (+0,4%) also rallied at Monday’s closing bell.

• Earlier, European equities mostly retreated owing to fears of escalating trade tensions and the strengthening Greenback. The FTSE (+0.1%), however, eked-out gains, boosted by a rally in exporters as investors digested increased possibility of the U.K. leaving the European Union without a transitional agreement. The DAX, however, lost 0.1%, weighed down by disappointing manufacturing data, while the CAC flatlined.

The Day Ahead

• We maintain our view that there are few impetuses for Malaysian stocks to make significant headway amid an indifferent market environment and lack of fresh leads to drive investor interest. Overseas leads are also drying up amid a waiting game on the trade dispute between the U.S. and China and only the spate of stronger-than-expected U.S. corporate results that drove some of the recent gains.  The recent gains have left valuations on the lofty range and provide little room for Malaysian stocks to march higher. However, there are also few reasons for renewed selling as well and as a consequent, it appears that the rangebound trend is likely to continue for longer with the 1,780 level still serving the near term support and resistance for now. Beyond the above level, the other key support and resistance levels are at 1,760 and 1,800 respectively.

• Meanwhile, the low market following is most pronounced among the lower liners and broader market shares with the few trading catalysts and this trend is set to continue for now to leave the above listed shares to also drift for longer.

COMPANY BRIEF

• KKB Engineering Bhd has received a contract by Petronas Carigali Sdn Bhd for the construction of wellhead platforms for the D18 Phase 2 project. The contract is for a period of about 27 months, of which 15 months are for works execution and 12 months are the warranty period.

• The scope for the contract includes Engineering, Procurement, Construction, Transportation, Installation and Commissioning of D18 JT-D Wellhead Platform. The combined contract sum for both D28 Phase 1 and D18 Phase 2 projects is about RM226.0 mln. (The Star Online)

• The Malaysian Palm Oil Board (MPOB) has named Sime Darby Plantation Bhd Executive Deputy Chairman and Managing Director, Tan Sri Mohd Bakke Salleh as its Chairman for a two-year term, effective 31st July 2018. Mohd Bakke replaces Datuk Seri Ahmad Hamzah, whose term began from 1st September 2016 and was to end on 31st August 2018. (The Edge Daily)

• Pasukhas Group Bhd targets to comply with the Bumiputra Equity Requirements by end 2018. The company is currently in the midst of seeking institutional investors to invest in the group, adding that Bursa Malaysia Securities had given the company a deadline to comply with the Bumiputra Equity Requirements latest by January 2019. Currently, the company’s equity participation from Bumiputras is less than 1.0%. (The Edge Daily)

• SKH Consortium Bhd plans to diversify its business to include property development and property investment, as part of the group’s business plan to improve its financial performance as well as its shareholders’ value. The proposed diversification will allow the group to reduce reliance on its existing business in the information technology (IT) and information and communication technology (ICT) industries, as well as its construction activities.

• As part of its diversification plan, SKH is proposing to acquire an 80.0% stake in Kepayang Heights Sdn Bhd, which will own a 19.5 ac. piece of land in Bentong, Pahang, for RM13.6 mln. The land has a market value of RM15.5 mln.

• SKH is also looking to acquire a 70.0% stake for RM12.0 mln in Rimbun Gabungan Sdn Bhd (RGSB), which will be granted with an irrevocable, unconditional and full power of attorney from Rimbun Purnama Sdn Bhd (RPSB) to undertake an affordable housing development project with a gross development value of RM252.0 mln on a piece of government land in Setapak, Kuala Lumpur owned by RPSB. (The Edge Daily)

• Axis Real Estate Investment Trust’s (Axis REIT) 2Q2018 net property income (NPI) rose 15.3% Y.o.Y to RM26.8 mln as its portfolio size grew to 42 properties against 38 properties in the previous corresponding quarter. Revenue for the quarter added 14.0% Y.o.Y to RM47.5 mln. A distribution per unit (DPU) of 2.0 sen for the quarter, payable on 7th September 2018 was declared. (The Edge Daily)

• Only World Group Holdings Bhd (OWG) has proposed to undertake a bonus issuance of warrants on the basis of one warrant-for-every two existing shares held. The exercise price of the warrants will be determined and announced later. Based on OWG's issued share capital of RM183.6 mln comprising 267.1 mln OWG shares as at 25th July 2018, the maximum number of warrants to be issued pursuant to the proposed bonus issue of warrants is 133.6 mln warrants. (The Edge Daily)

• MCT Bhd's 4QFY18 net profit gained 69.7% Y.o.Y to RM30.7 mln, mainly due to a one-off gain on disposal of its subsidiary Ecity Hotel Sdn Bhd. Revenue for the quarter rose 9.4% Y.o.Y to RM184.6 mln.

• For FY18, cumulative net profit added 23.0% Y.o.Y to RM78.3 mln. Revenue for the year, however, fell 23.6% Y.o.Y to RM450.3 mln. (The Edge Daily)

• Advance Synergy Bhd is selling its indirect stake in 40.0%-owned associate Helenium Holdings Ltd, which owns a freehold mixed-use property in Kilburn High Road, London, for £8.7 mln (RM46.6 mln). The proposed disposal will enable it to realise cash and have ready capacity for any high potential investment or acquisition. The proposed disposal is expected to result in a gain of RM2.4 mln to the group. (The Edge Daily)  

Source: Mplus Research - 7 Aug 2018