More Headwind

• The FBM KLCI (-1.5%) took another beating yesterday after the key index gapped down sharply lower to close at its lowest level in two months, spooked by the renewed volatility on Wall Street overnight. The lower liners – FBM Small Cap (-2.2%), FBM Fledgling (-1.2%) and FBM ACE (-2.5%) all extended their losses, while the construction sector (+2.1%) emerged as the sole winner on the broader market after its recent selldown was seen overdone.

• Market breadth was negative as losers hammered winners on a ratio of 804-to- 232 stocks, while 309 stocks closed unchanged. Traded volumes, however, rose 2.6% to 3.10 bln shares as selling activities remain unabated.

• Nestle (-RM1.00) led the FBM KLCI decliners list, followed by Petronas Gas (- 54.0 sen), Tenaga (-40.0 sen), Hong Leong Financial Group (-28.0 sen) and Hong Leong Bank (-26.0 sen). Among the biggest decliners on the broader were United Plantations (-RM1.08), Heineken (- 94.0 sen), Carlsberg (-64.0 sen), KESM Industries (-56.0 sen) and Ajinomoto (- 54.0 sen).

• Gamuda (+23.0 sen) rebounded after it welcomed the government’s decision to review the cancellation of the MRT 2 underground contract, while other notable advancers on the broader market were Top Glove (+20.0 sen), CMSB (+15.0 sen), Time dotCom (+15.0 sen) and Supermax (+11.0 sen). Meanwhile, Axiata (+16.0 sen), Telekom (+9.0 sen), Hartalega (+6.0 sen) and RHB Bank (+5.0 sen) were the only winners on the local bourse.

• Asian benchmark indices trended sharply lower yesterday, taking cue from the rout on Wall Street overnight on concern over rising interest rates, escalating Sino-U.S trade dispute and the IMF’s warnings on global growth. The Nikkei sank 3.9% to close below the 23,000 psychological level. The Shanghai Composite tumbled 5.2% to record its worst session since February 2016, while the Hang Seng Index dipped 3.5% to close below the 23,000 psychological level. ASEAN stockmarkets, meanwhile, were in a sea of red yesterday.

• U.S. stockmarkets took another beating overnight as the Dow sank 2.1% after erasing all its intraday gains as concern over rising interest rates and slowdown in global growth remain unabated. Likewise, the S&P 500 slipped 2.1% with all eleven major sectors in the red, while the Nasdaq finished 1.3% lower.

• Earlier, European indices – the FTSE (- 1.9%), CAC (-1.9%) and DAX (-1.5%), all extended their losses, spooked by the renewed global volatility. Nevertheless, European Union's chief Brexit negotiator, Michel Barnier has struck an optimistic tone on a deal for the U.K.

The Day Ahead

• We see further near term selling on Bursa Malaysia stocks after yet another round of steep losses on global stocks overnight that is set to permeate to local stocks and sending most stocks to end the week with more losses amid an increasingly frail market outlook.

• As it is, Malaysian stocks are already reeling from the purported introduction of new taxes in the upcoming Budget annoucement that could dampen market sentiments and the malaise on global stocks will further dampen confidence. This also means that the FBM KLCI’s intraday rebound to above the 1,700 points yesterday is likely to become undone again. Below the 1,700 points level, the supports are at 1,682 – yesterday’s low, and at 1,673. The resistances, meanwhile, are at 1,720 and 1,750 respectively.

• There should also be little reprieve for the lower liners and broader market shares as the prevailing weak market conditions will continue to see substantive selling as market players are likely to further trim their positions amid the uncertain market conditions and retreat to the sidelines.

COMPANY BRIEF

• Pasdec Holdings Bhd has been awarded a contract from Nissan South Africa (Pty) Ltd (Nissan SA) to manufacture and supply electrical wiring harness sets, which is expected to generate revenue of RM380.0 mln. The group’s 70.0%- indirectly owned subsidiary Pasdec Automotive Technologies (Botswana) (Pty) Ltd has been selected by Nissan SA to manufacture and supply electrical wiring harness set for its 3G-200 H60A vehicles for a period of seven years commencing from June 2019. (The Star Online)

• Barakah Offshore Petroleum Bhd has clinched a five-year contract to provide maintenance, construction and modification work for structures and facilities in oil and gas fields offshore Peninsular Malaysia, from Hess Exploration and Production Malaysia BV. The total value of the contract is not fixed and will depend on the actual scope agreed in work orders. The contract is also expected to commence until 2023. (The Edge Daily)

• Top Glove Corp Bhd’s 4QFY18 net profit grew 7.5% Y.o.Y to RM101.6 mln, from RM94.5 mln last year, on higher sales volume. Revenue for the quarter reached a record RM1.22 bln, up 34.8% Y.o.Y from RM902.4 mln a year ago. The group is proposing a final dividend of 10.0 sen per share for FY18, which would bring the total dividend payout for the year to 17.0 sen per share.

• For the full year, Top Glove also hit a record net profit of RM433.6 mln (+32.0% Y.o.Y) vs RM328.6 mln in the previous year, while revenue rose 23.6% Y.o.Y to RM4.21 bln, from RM3.41 bln a year earlier. (The Star Online)

• Revenue Group Bhd is proposing to undertake a bonus issue of 111.4 mln five-year warrants on the basis of one warrant-for-every two existing shares at an exercise price to be fixed at a later date. The proposed issuance is expected to be completed by the 1Q2019. (The Edge Daily)

• Ta Win Holdings Bhd is collaborating with Chinese copper manufacturer and a Hong Kong-based metal trading company to jointly-operate a new copper rod manufacturing line in Malaysia. The jointventure (JV) with China-based Full Dragon Electric (Guang Dong) Co Ltd and Hong Kong firm Wing Ying Non-Ferrous Trading Ltd will be the stepping stone into higher-margin business lines.

• The business venture also aims to expand in all three markets in Malaysia, mainland China and Hong Kong, and to “enhance fund-raising prospects from overseas capital markets” for future expansions.

• Moving forward, Ta Win Copper Sdn Bhd will act as the special purpose vehicle (SPV) for the JV, which will be held by Ta Win, Full Dragon and Wing Ying at 65%/10%/25% stake respectively.

• The initial arrangement of capital contribution will see Ta Win contributing up to US$1.9 mln via internal funds, followed by US$1.0 mln each from Full Dragon and Wing Ying.

• From the total US$3.9 mln, some US$1.8 mln will be capitalised as paid-up equity in the SPV, while the balance will be treated as long-term debt. Any additional funding will be arranged and injected by Ta Win in the form of debt at local market financing rate not exceeding 7.0%, or any other rate agreed by JV partners. (The Star Online)

• Cuscapi Bhd, which is currently operating from leased premises, is acquiring a commercial space at Empire City in Damansara Perdana for RM20.0 mln. The 33,340 sq ft commercial space is located within the podium level below MyEG Tower, from Cosmopolitan Avenue Sdn Bhd, a unit of Mammoth Empire Holdings Sdn Bhd and will be ready for occupation in 18 months.

• Subsequently, Cuscapi has entered into a put option agreement with Cosmopolitan to obtain an option at Cuscapi’s sole discretion to sell the commercial space back to Cosmopolitan at a sum equal to 66.7% of the purchase consideration within six months from delivery of vacant possession. The group intends to finance the acquisition through a mixture of internally-generated funds and bank borrowings. (The Edge Daily)

• Supermax Corp Bhd has appointed an Australian, Albert Saychuan Cheok, as its new independent and non-executive Chairman effective 19th October, 2018, following the resignation of Tan Sri Rafidah Aziz six months ago.

• Cheok has extensive experience in the Australian government, having been the Chief Manager at the Reserve Bank of Australia from October 1988 to September 1989. He also served as Chairman of Bangkok Bank Bhd in Malaysia from September 1995 to November 2005. (The Edge Daily)

• Orion IXL Bhd has signed a 15-year agreement to develop and operate an online end-to-end loan application system. The technical services agreement with the group's 10.0%-owned affiliate, Sukaniaga Sdn Bhd, followed a service level agreement between Sukaniaga and MyAngkasa Holdings Sdn Bhd for the development of the fintech system, dubbed Angkasa Az-Zahara. The move is an expansionary strategy to establish a new customer base as a tech company. (The Edge Daily)

• Kerjaya Prospek Group Bhd is acquiring a majority stake in Yakin Land Sdn Bhd (YLSB), which has a 36-storey condominium project in Batu, Kuala Lumpur, for RM10.8 mln. The group has acquired the 90.0% stake in YLSB for RM1.4 mln, while also agreeing to pay RM9.5 mln owed by YLSB to its previous shareholders. (The Edge Daily)  

Source: Mplus Research - 12 Oct 2018