Mild Rebound In Store

• The FBM KLCI (+0.02%) managed eke out minor gains after enduring a choppy trading session yesterday to rebound from previous session heavy selloff. The lower liners – FBM Small Cap (+0.8%), FBM Fledgling (+0.7%) and FBM ACE (+1.3%) all recovered most of their previous session losses, while the broader market closed mixed.

• Market breadth turned positive as advancers outnumbered decliners on a ratio of 520-to-374 stocks. The positive market sentiment also lifted traded volumes by 11.8% with 2.32 bln shares exchanging hands.

• Half of the key index components advanced, led by KLK (+18.0 sen), followed by Maxis (+13.0 sen), Hartalega (+10.0 sen), Tenaga (+10.0 sen) and Axiata (+5.0 sen). Amongst the biggest advancers on the broader market were Vitrox (+32.0 sen), Dufu (+22.0 sen), Apex Healthcare (+20.0 sen) and Y.S.P. Southeast Asia (+19.0 sen). Guan Chong added 8.0 sen after posted a record high quarterly net profit.

• On the flipside, notable decliners on the broader market include Ayer Holdings (- 30.0 sen), Chin Teck Plantations (-22.0 sen), MPI (-160.0 sen), MISC (-15.0 sen) and Carlsberg (-10.0 sen). Key losers on the local bourse were Nestle (-60.0 sen), Petronas Dagangan (-42.0 sen), MISC (- 15.0 sen), KLCC (-11.0 sen) and Petronas Gas (-10.0 sen).

• Asia benchmark indices ended mixed yesterday as the Nikkei (+2.3%) reclaimed the 22,000 psychological level, snapping a four-day losing streak as the rally in Japanese Yen against the Greenback took a breather. The Shanghai Composite fell 0.2%, dragged down by the weaker-than-expected Industrial Production data in July 2018 that grew 6.0% Y.o.Y – lower than consensus estimates at 6.3% Y.o.Y growth. The Hang Seng Index (-0.7%) extended its losses, pressured by weakness in technology shares. ASEAN stockmarkets, meanwhile, closed mixed yesterday.

• U.S. stockmarkets rebounded from their longest slide since March 2018 after the rout in Turkey assets abated. The Dow gained overnight as the Dow rose 0.5% overnight. On the broader market, the S&P 500 (+0.6%) recovered all its previous session losses with all eleven major sectors advanced, while the Nasday finished 0.7% higher.

• Earlier, European equities closed mostly lower as the FTSE fell 0.4%, despite unemployment rate in July 2018 fell to 4.0% - the lowest level since February 1975, while the CAC edged 0.2% lower after erasing all its intraday gains. The DAX closed on a flat note after enduring a volatile trading session.

The Day Ahead

• After managing to eke-out some minor gains yesterday, we think the recovery could persist over the near term as the Turkish currency crisis eases. This could provide some measure of calmness to Emerging Market stocks and put a stop to the recent steep selloffs, although the concerns are far from over as the U.S. continues to exert political pressure on Turkey.

• While we think there will be continued recovery, the upsides may be limited due to the still cautious undertone. At the same time, the market is also still toppish thus, leaving little room for significant gains, in our view. On the upside, the FBM KLCI’s resistances are at 1,790 and 1,800, while the supports are placed at 1,780 and 1,770 respectively.

• The broader market shares also made a comeback yesterday and should continue to make gains over the near term on the back of the mild reprieve from the global geopolitical issues.

COMPANY BRIEF

• AirAsia Group Bhd has sold its remaining 25.0% equity stake in online travel agency, AAE Travel Pte Ltd to Expedia Inc for US$60.0 mln (RM240.0 mln), resulting in a disposal gain of RM230.4 mln. Meanwhile, at the group consolidated level, the total gain would amount to RM181.6 mln. AAE Travel was a 50:50 JV between AirAsia and Expedia, before AirAsia sold its 25.0% shareholding to Expedia in 2015. (The Edge Daily)

• Batu Kawan Bhd’s 3QFY18 net profit jumped 32.0% Y.o.Y to RM106.9 mln, from RM80.8 mln previously, on improved performance from all but its plantation segments, despite a 10.8% Y.o.Y drop in revenue to RM4.47 bln, from RM5.01 bln in 3Q2017.

• Cumulative 9M2018 net profit, however, declined 10.7% Y.o.Y to RM1.08 bln, from RM1.20 bln, dragged down by lower contributions from its plantations and property development segments, while revenue narrowed 9.9% Y.o.Y to RM14.64 bln vs RM16.25 bln. (The Edge Daily)

• Kuala Lumpur Kepong Bhd reported a 25.9% Y.o.Y spike in its 3QFY18 net profit to RM141.9 mln, from RM112.8 mln a year before, mainly due to higher contributions from its manufacturing and property development segments. Revenue for the quarter, however, fell 11.1% Y.o.Y to RM4.33 bln, from RM4.87 bln last year.
• The cumulative 9M2018 net profit was 14.6% Y.o.Y lower to RM651.8 mln, compared to RM763.0 mln in the same period last year, in-tandem with a 10.3% Y.o.Y fall in revenue to RM14.2 bln, from RM15.8 bln in 9M2017. (The Edge Daily)

• DKSH Holdings (M) Bhd has established a subsidiary in Brunei to expand its chocolate chip cookies and chocolaterelated businesses under the Famous Amos brand. DKSH is the owner of the franchise holder for the Famous Amos brand in Malaysia, which it acquired in January 1997. (The Edge Daily)

• Hock Seng Lee Bhd (HSL) has secured a RM101.2 mln contract from Petroliam Nasional Bhd (Petronas) to build the fourth Mara Junior Science College (MRSM) in Sarawak on a 40-ac site in Bintulu. The 36-month contract will begin in September for the. (The Edge Daily)

• Shareholders of Fortis Healthcare Ltd has agreed for IHH Healthcare Bhd to take up a 31.1% equity stake in the India-based healthcare group for 4,000 crore rupees (RM2.35 bln). While the deal could still face hiccups amid a legal battle between Fortis founders and Japan-based Daiichi Sankyo Co, the decision is a step forward for IHH, which also seeks to make an open offer for an additional 26.0% equity stake in Fortis to the latter's shareholders at 170 rupees (about RM9.98) per share. (The Edge Daily)

• Nestlé (Malaysia) Bhd's 2Q2018 net profit inched higher by 2.9% Y.o.Y to RM166.2, from RM161.4 mln in the last corresponding year on the back of higher gross profit margin. It’s revenue also grew by a similar quantum to RM1.31 bln (+2.0% Y.o.Y), from RM1.28 bln in the same quarter last year. The consumer products manufacturer has declared an interim dividend of 70.0 sen per share, payable on 27th September, 2018.
• Its cumulative 1H2018 net profit also grew 1.4% Y.o.Y to RM397.4 mln, from RM392.1 mln a year ago, while revenue eked-out a 3.1% Y.o.Y gain to RM2.74 bln, from RM2.66 bln previously. (The Star Online)

• Pasdec Holdings Bhd’s Executive Director, Datuk Seri Tew Kim Thin has failed to take over the firm via his majority-owned private unit, Jasa Imani Sdn Bhd after securing only 48.4% of the voting shares in the company, below the 50.0% minimum threshold. Earlier, independent adviser, Public Investment Bank Bhd deemed Tew’s offer at 52.5 sen per Pasdec share and one sen per warrant as “not fair” and “not reasonable” on 3th August 2018. (The Edge Daily)

• Scomi Group Bhd has proposed a capital reduction of RM440.0 mln to pare the ballooning accumulated losses on its balance sheet. Following the exercise, the group’s capital is expected to shrink to between RM225.0 mln and RM347.2 mln, while its gearing is expected to decline to 1.5x from 2.0x currently under the maximum scenario. The remaining capital surplus of between RM140.9 mln and RM234.7 mln, meanwhile, may be used in “such a manner as the board deems fit”. (The Edge Daily)

• Tan Chong Motor Holdings Bhd reported a 2Q2018 net profit of RM12.4 mln, in comparison to a net loss of RM23.0 mln last year, despite a Y.o.Y decline in car sales, due to favourable sales mix and a stronger Ringgit in the quarter during review. Quarterly revenue, however, fell 9.0% Y.o.Y to RM1.09 bln, from RM1.20 bln a year ago.

• The group also recorded a cumulative 1H2018 net profit of RM16.6 mln vs a net loss of RM58.3 mln last year, while revenue slid marginally by 3.0% Y.o.Y to RM2.12 bln, from RM2.19 bln in 1H2017. The group has declared an interim dividend of two sen per share, which will be paid on 28th September 2018. (The Edge Daily)

• NSK Trading Sdn Bhd, which is the largest shareholder in Versatile Creative Bhd, has proposed seven new board members for the company, including two new Executive Directors, amid the ongoing boardroom tussle. All the proposals are subject to the approval of shareholders at an extraordinary general meeting (EGM) to be held on 30th August 2018. (The Edge Daily)

• YTL Hospitality REIT's (YTL REIT) unit, Starhill REIT Niseko G.K. (Starhill Niseko) is acquiring a ski resort in Hokkaido, Japan, from Niseko Village K.K for RM222.5 mln in a related-party transaction. The group will lease the properties, comprising 10,728 sq.m. of land and hotel buildings called The Green Leaf Niseko Village to Niseko Village for 30 years with an option to renew for another 30 years. (The Star Online)  

Source: Mplus Research - 15 Aug 2018