Stuck in First Gear

• Despite signs of further recovery at the start of the trading day, the FBM KLCI (- 0.1%) succumbed to quick selling pressure, erasing all its intraday gains as the weakness was also in tandem with the negative momentum across regional peers. Similarly, the lower liners – FBM Small Cap (-0.5%), FBM Fledgling (-0.4%) and FBM ACE (-0.8%) all retreated, while the broader market closed mixed.

• Market breadth turned negative as loser outnumbered winners on a ratio of 532- to-342 stocks, while 358 stocks closed unchanged. Traded volumes were lower by 8.5% with 2.03 bln shares exchanging hands amid the return of the negative market sentiments.

• Half of the key index components declined, dragged down by Petronas Gas (-24.0 sen), IHH (-8.0 sen), DIGI (-7.0 sen), Genting Malaysia (-6.0 sen) and Press Metal (-4.0 sen). Among the biggest decliners on the broader include Heineken (-54.0 sen), KESM Industries (- 54.0 sen), Carlsberg (-30.0 sen), Hong Leong Industries (-20.0 sen) and UMW Holdings (-20.0 sen).

• In contrast, notable advancers on the broader market were BAT (+50.0 sen), United Plantations (+48.0 sen), Top Glove (+44.0 sen), MPI (+34.0 sen) and Fraser & Neave (+18.0 sen). Meanwhile, Nestle (+90.0 sen), Petronas Dagangan (+32.0 sen), Malaysia Airport Holdings (+15.0 sen), Hartalega (+15.0 sen) and Petronas Chemicals (+12.0 sen) advanced on the FBM KLCI.

• Asia benchmark indices were downbeat on Monday amid the gloomy remarks by officials in the International Monetary Fund annual meeting over the weekend. The Nikkei (-1.9%) erased all its previous session’s gains to close at eight-week low, while the Hang Seng Index slipped 1.4%. The Shanghai Composite (-1.5%) sank below the 2,500 psychological level to close at its lowest level since 2014. ASEAN stockmarkets, meanwhile, closed mostly negative yesterday.

• U.S. stockmarkets trended lower after enduring a choppy trading session as the Dow fell 0.4%, dragged down by the selloff in technology shares, coupled with the sluggish September retail sales data that only expanded 0.1% Y.o.Y. On the broader market, the S&P 500 fell 0.6% with the technology sector (-1.6%) taking the heaviest beating, while the Nasdaq closed 0.9% lower.

• Earlier, major European indices trended mostly higher as the FTSE and DAX rose 0.5% and 0.8% after recovering all their intraday losses ahead of the negotiation over Brexit in the upcoming European summit. The CAC (-0.02%), however, underperformed its regional peers.

The Day Ahead

• The key index went nowhere yesterday as there was little follow through buying interest to sustain recovery. At the same time, bouts of foreign selling also contributed to yesterday’s lingering weakness to scuttle the early day recovery.

• With the buying interest remaining thin and the broad equity market condition still uncertain, we see the indifferent trend on Bursa Malaysia stocks persisting for longer. As it is, there is still a measure of tentativeness on the market’s direction as global equities are adjusting from their overbought spell which we see continuing over the near term. The talk that there will be no introduction of capital gains and inheritance tax in the upcoming Budget 2019 announcement, however, will provide some measure of support. Therefore, we think the key index will remain supported above the 1,720 level for now, while the resistances are at the 1,740-1,750 range.

• The recovery of the lower liners and broader market shares has also stalled following the recent market malaise that looks to sustain for longer. Retail players are still apprehensive over the near term market outlook and this will continue to send most of them to the sidelines until clarity returns.

COMPANY BRIEF

• Ideal United Bintang International Bhd's substantial shareholders, Tan Sri Ooi Kee Liang and his spouse Puan Sri Phor Li Wei is planning to inject three private property companies into the group in a bid to boost its current portfolio of development projects and improve its profile as a property developer by participating in more projects which are profitable.

• The group has signed an agreement with Ooi and Phor for the acquisition of Modular Platinum Sdn Bhd, Ideal Homes Properties Sdn Bhd and Premium Flame Development Sdn Bhd for RM353.1 mln. Ideal also plans to undertake a proposed private placement of up to 393.1 mln new shares (or 30.0% of its shareholding) to raise RM200.5 mln, which will fund the development costs of the three property projects. (The Star Online)

• Minority shareholders of Hovid Bhd have been advised to accept the takeover offer by Fajar Astoria Sdn Bhd and Hovid Managing Director David Ho Sue San for the remaining shares in the pharmaceutical company for 38.0 sen per offer share and 20.0 sen per offer warrant. AmInvestment Bank Bhd is of the view that the offer to acquire Hovid is “fair” and “reasonable”. As at 9th October 2018, the offer shares comprised 173.1 mln shares or 21.0% of the total issued shares. (The Edge Daily)

• Aturmaju Resources Bhd plans to raise up to RM10.1 mln via a renounceable rights issue to finance its diversification into the provision of information technology solutions and services. The proposed diversification is-in line with the group’s plans to diversify its business activities and to provide another stream of revenue to reduce its dependence on its core existing business in the resourcebased timber-related business. (The Edge Daily)

• KIP Real Estate Investment Trust (REIT) 1QFY19 net property income rose marginally by 3.3% Y.o.Y to RM9.9 mln, from RM9.6 mln previously, as rental fee and occupancy rates eked out modest improvements. The retail REIT’s gross revenue grew 2.0% Y.o.Y to RM15.6 mln, from RM15.3 mln, attributable to the increase in occupancy rate which grew from 83.0% in 1QFY18, to 86.3% currently.

• The total comprehensive income attributable to unitholders, however, fell 4.6% Y.o.Y to RM7.3 mln, compared with RM7.7 mln earlier, mainly due to higher management fee charged at 0.6% of its total asset value, compared with 0.4% in the same quarter last year. An interim distribution per unit of 1.45 sen per unit, amounting to RM7.3 mln, payable on 13th November, 2018 was declared. (The Edge Daily)

• Berjaya Media Bhd (BMedia) has sold its 0.2% (or 11.3 mln shares) equity stake in Berjaya Corp Bhd (BCorp) for RM3.0 mln, bringing its shareholding in BCorp to about 0.8% on 10th October, 2018. The disposal proceeds will be used for working capital. BMedia acquired the BCorp shares in 2010, whose average carrying value was 27.0 sen per share. (The Edge Daily)

• Xian Leng Holdings Bhd will participate in the construction of a 500-unit multistorey flat at Ulu Melaka in Langkawi, Kedah under the 1Malaysia People's Housing Programme. The group has inked a Memorandum of Understanding (MoU) with TH Mestika Sdn Bhd, the sub-contractor of the project.

• TH Mestika will be responsible for the planning and design of the project as well as provision of machineries and equipment for the construction works, while Xian Leng will provide resources and services for the construction works. (The Edge Daily)

• Diversified Gateway Solutions Bhd has proposed a share capital reduction exercise to wipe out its accumulated losses. The proposal will result in the reduction of the share capital from RM160.1 mln, to RM60.1 mln and give rise to a credit of RM100.0 mln to set off the group’s accumulated losses, which amounted to RM102.6 mln as at 31st March 2018.

• Additionally, the group is also proposing for the consolidation of every 2 existing shares into 1 new consolidated share held at a date to be determined later. (The Edge Daily)

• Doh Properties Holdings Sdn Bhd, the biggest shareholder of DBE Gurney Resources Bhd, will be returning all DBE shares and warrants acquired under its conditional mandatory takeover offer after it failed to secure more than 50.0% of the voting shares of the group after the closing time for the offer at 5pm yesterday.
• Doh Properties and parties acting in concert is understood to be holding about 38.3% of the voting shares of DBE and thus did not fulfil the acceptance condition.

• To recap, the takeover offer was triggered in September when Doh Properties, through open market acquisitions, increased its shareholding in the integrated poultry group to 33.0% from 32.9%.

• The offer for the shares was set at 3.5 sen apiece, representing a 7.4% premium to DBE Gurney’s five-day volume weighted average price of up to 30th August 2018 of 3.3 sen. (The Edge Daily)  

Source: Mplus Research - 16 Oct 2018