A Likely Quick Rebound

• The FBM KLCI (-0.1%) snapped its fourday winning streak and closed lower, ahead of the SST implementation in September and lingering worries on rising trade protectionism. On a weekly basis, however, the blue-chip gauge locked-in 1.4% gains after earlier weekly losses. However, all the lower liners - FBM Small Cap, FBM Fledgling and FBM Ace (-1.2%) were splashed in red amid the widespread decline in the broader market.

• Market breadth was negative as losers beat winners by more than two-fold, while traded volumes rose 15.1% to 2.59 bln as investors await further developments from the U.S. and China trade talks for signs of trade de-escalation.

• Significant decliners were Public Bank (- 42.0 sen), Petronas Gas (-30.0 sen), Petronas Dagangan (-12.0 sen), Hong Leong Financial Group (-4.0 sen) and MISC (-4.0 sen). Broader market losers, meanwhile, include sin-stocks like BAT (- 70.0 sen) and Carlsberg (-24.0 sen) ahead of the return of the sales and services tax in September, alongside Panasonic Manufacturing (-RM1.68), Allianz Malaysia (-44.0 sen) and Bintulu Port (- 38.0 sen).

• On the flipside, broader market gainers include Fraser & Neave (+26.0 sen), Litrak (+17.0 sen), Plenitude (+17.0 sen), Padini (+16.0 sen) and Watta Holding (+14.0 sen). Key-index advancers were Nestle (+50.0 sen), Hong Leong Bank (+16.0 sen), Genting (+10.0 sen) and KLCC (+9.0 sen). Telco giant Axiata (+10.0 sen) also advanced after reporting a 2Q2018 net loss, due to a one-off non-cash impairment provision, which was largely expected.
• Key regional benchmark stockmarkets ended mostly higher ahead of the Federal Reserve Chairman’s scheduled speech at Wyoming. The Nikkei rose 0.9%, lifted by a broad rally across its sub-sectors. The Shanghai Composite also expanded by 0.2%, although the Hang Seng Index (- 0.4%) extended its losses for the secondstraight day, alongside most of the ASEAN stockmarkets.

• Wall Street hit fresh record highs as investors cheered a more moderate monetary policy outlook by the Federal Reserve. The S&P 500 (+0.6%) and the Nasdaq (+0.9%) finished strongly in the green, owing to gains in streaming giant Netflix, while the Dow followed suit, closing slightly below 25,800.0 points.

• European equities ended Friday’s session with meagre gains as investors digested upbeat economic data and optimism spilled over from its U.S. counterparts. The DAX added 0.2% amid robust economic growth in 2Q2018. Similarly, both the FTSE and the CAC also finished in the positive territory with 0.2% gains at the closing bell.

The Day Ahead

• The FBM KLCI managed to trim its losses last Friday on the back of the late institutional support to leave the key index with only minute losses. Hence, the minor pullback is insignificant and continues to leave it tethering on the overbought zone.

• With global markets still on the ascend last Friday, however, we expect the positivity to also translate to a quick rebound on the key index as bouts of selected buying returns to shore up some of the index heavyweights. This could again hoist the FBM KLCI above the 1,810 points level and remain overbought for longer. The other resistances are at 1,814 and 1,820 respectively, while the main near term support is at the 1,800 psychological level.

• The lower liners and broader market shares could also stage a rebound along with the index linked stocks after undergoing a consolidation spell in the past week. However, we do not anticipate a strong recovery as there remains few sustainable catalysts to provide a strong lift.

MACRO BRIEF

• Malaysia's inflation, as measured by the consumer price index, rose 0.9% Y.o.Y in July 2018 was in line with consensus estimates. The inflation was driven mainly by higher transport prices with the sectorial index rising 6.7% Y.o.Y. On monthly basis, the inflation rate edged up 0.2% M.o.M. (The Edge Daily)

COMPANY BRIEF

• MMC Corp Bhd’s 2Q2018 net profit sank 66.4% Y.o.Y to RM20.1 mln due to lower contribution from Johor Port Bhd and Northport (Malaysia) Bhd and a lower share of profit from Malakoff. Revenue for the quarter, however, rose 27.1% Y.o.Y to RM1.20 bln.

• For 1H2018, cumulative net profit slipped 47.0% Y.o.Y to RM61.4 mln. Revenue for the period, however, gained 32.7% Y.o.Y to RM2.48 bln. (The Star Online)

• SKP Resources Bhd's 1QFY19 net profit fell 22.6% Y.o.Y to RM25.8 mln due to a decline in sales. Revenue for the quarter decreased 18.0% Y.o.Y to RM430.5 mln. (The Star Online)
• Southern Steel Bhd's 4QFY18 net profit surged 493.3% Y.o.Y to RM35.5 mln, mainly due to higher sales volume. Revenue for the quarter rose 35.7% Y.o.Y to RM888.6 mln. For 1H2018, cumulative net profit jumped 121.9% Y.o.Y to RM211.3 mln. Revenue for the period added 40.2% Y.o.Y to RM3.70 bln. (Bernama)

• Sapura Energy Bhd (SEB) has proposed a rights issue of new ordinary shares and Islamic Redeemable, Convertible Preference Shares (RCPS-i) to raise up to RM3.98 bln to reduce borrowings. As at 30th April 2018, the total borrowings of the SEB Group are approximately RM16.40 bln.

• The part repayment of the bank borrowings of the SEB Group is expected to result in interest savings of approximately RM190.0 mln per annum based on an interest rate of approximately 4.8% per annum. (The Edge Daily)

• PUC Bhd’s wholly-owned subsidiary Founder Pay Sdn Bhd, (FPSB) has partnered with Revenue Monster Sdn Bhd (RMSB) for FPSB to lease payment terminals to RMSB for its merchants. The MoU also provides an opportunity for both parties to unlock business potential by exploring other business collaborations in the future. (The Edge Daily)

• Axiata Group Bhd’s 2Q2018 net loss stood at RM3.36 bln vs. a net profit of RM407.2 mln due to a one-off non-cash impairment provision of RM3.38 bln arising from the de-recognition and reclassification of Idea Cellular Ltd from associate to simple investment. Revenue for the quarter declined 3.2% Y.o.Y to RM5.87.

• For 1H2018, cumulative net loss stood at RM3.50 bln vs. a net profit of RM646.2 mln in the previous corresponding period. Revenue for the period fell 2.7% Yo.Y to RM11.62 bln. (The Edge Daily)

• Cahya Mata Sarawak Bhd’s (CMSB) 2Q2018 net profit grew 59.5% Y.o.Y to RM91.6 mln, mainly attributed to the increase in share of results of its associates. Revenue for the quarter rose 15.4% Y.o.Y to RM395.3 mln.

• For 1H2018, cumulative net profit added 56.8% Y.o.Y to RM130.6 mln. Revenue for the period increased 15.4% Y.o.Y to RM750.3 mln. (The Edge Daily)

• Magnum Bhd's 2Q2018 net profit fell 19.9% Y.o.Y to RM48.1 mln, on lower gaming sales due to the FIFA World Cup event that took place in June 2018. Revenue for the quarter declined 3.3% Y.o.Y to RM600.4 mln.

• For 1H2018, cumulative net profit gained 13.8% Y.o.Y to RM103.0 mln. Revenue for the period, however, fell marginally by 0.4% Y.o.Y to RM1.31 bln. The group declared a three sen per share dividend, payable on 28th September 2018. (The Edge Daily)

• Dayang Enterprise Holdings Bhd’s 2Q2018 net profit stood at RM38.9 mln, compared to a net loss of RM48.1 mln in the same quarter last year, on higher work orders. Revenue for the quarter increased 15.8% Y.o.Y to RM221.3 mln.

• For 1H2018, cumulative net profit stood at RM17.7 mln, against a net loss of RM90.8 mln recorded in the previous period. Revenue for the period jumped 19.8% Y.o.Y to RM370.1 mln.(The Edge Daily)

• MSM Malaysia Holdings Bhd’s 2Q2018 net profit stood at RM14.3 mln vs. a net loss of RM21.5 mln registered in the previous corresponding quarter due to lower raw material costs and favourable foreign exchange (forex) rates. Revenue for the quarter, however, fell 17.1% Y.o.Y to RM573.2.

• For 1H2018, cumulative net profit stood at RM30.1 mln vs. a net loss of RM56.1 mln recorded in the previous corresponding period. Revenue for the period slipped 16.4% Y.o.Y to RM1.12 bln. (The Edge Daily)

• Pos Malaysia Bhd’s 1QFY19 net profit plunged 86.1% Y.o.Y to RM5.0 mln, due to lower revenue from its postal services segment, coupled with increased costs. Revenue for the quarter fell 3.5% Y.o.Y to RM590.5 mln. (The Edge Daily)

• Adventa Bhd plans to vary the terms of its proposed renounceable rights issue of new Irredeemable Convertible Preference Shares (rights ICPS) with free warrants, to a basis and issue price to be determined and announced later.

• It would also make an application to exempt its major shareholder Low Chin Guan and persons acting in concert with him from being obligated to undertake a mandatory offer for the remaining Adventa shares not already owned by them on the subsequent conversion of the rights ICPS and the exercise of the rights warrants into new Adventa shares. (The Edge Daily)  

Source: Mplus Research - 27 Aug 2018