A Timely Recovery

• The FBM KLCI saw further sellingpressure in selected heavyweights, intandem with the panic-selling in global equities following a sharp selldown in U.S. technology stocks on fears of growth deceleration and a stronger Greenback. All the lower liners, meanwhile, also took a beating alongside the broader market.

• Market breadth was grim as decliners trounced the advancers on a ratio of 102- to-865 stocks. Traded volumes also dropped by 4.4% to 2.24 bln shares as investors monitor global developments and fresh corporate earnings announcements from the sidelines.

• Among the key-index losers were Hong Leong Financial Group (-26.0 sen), Nestle (-20.0 sen), Genting (-18.0 sen), Dialog (- 15.0 sen) and Hartalega (-13.0 sen). Semicon manufacturers like Malaysian Pacific Industries (-RM1.08) and KESM Industries (-60.0 sen) were the worst hit stocks on the broader market, followed by Ajinomoto (-50.0 sen), Fraser & Neave (-46.0 sen) and Batu Kawan (-38.0 sen).

• Notable gainers were Rapid Synergy (+16.0 sen), BLD Plantation (+10.0 sen), MI Equipment (+8.0 sen), Cypark (+7.0 sen) and 7-Eleven Malaysia (+7.0 sen). Significant advancers on the FBM KLCI, meanwhile, were MISC (+22.0 sen), Petronas Gas (+22.0 sen), KLCC (+12.0 sen), Axiata (+11.0 sen) and Digi (+10.0 sen).

• The rebound in the Asian stockmarkets was short-lived as some Asian bourses slipped into a bear market yesterday, following a contagion from the selldown on Wall Street overnight. The Shanghai Composite eked-out gains, lifted by government efforts to stem the fall in Chinese stockmarkets. The Hang Seng (- 1.1%) and the Nikkei (-3.7%), however, retreated together with most of the ASEAN stocks.

• Key U.S. indices - the Dow (+1.6%), the S&P 500 (+1.9%) and the Nasdaq (+3.0%) all rebounded on Thursday as investors digested strong corporate earnings from technology giants like Microsoft and Comcast. The strong rally was also helped by positive manufacturing data ahead of the GDP announcement on Friday.

• Earlier, European stocks advanced after the European Central Bank left interest rates unchanged as expected. The recovery on Wall Street and a series of corporate news also buoyed the markets as the FTSE (+0.6%), DAX (+1.0%) and the CAC (+1.6%) ended on an upbeat tone at Thursday’s closing bell.

The Day Ahead

• After a few tumultuous sessions, the FBM KLCI is set for a rebound and to end the week on a positive note, taking cue from the positivity of overseas indices overnight. As it is, the key index was already setting up for a recovery after it managed to recoup most of its steep intraday losses and only ended the day with marginal losses yesterday.

• Already many stocks are oversold from the recent selloff, but a full recovery may still be illusive for now due to the largely cautious market undertone where market players are still wary of the rising geopolitical and trade tensions, coupled with the prospects of higher interest rates that could collectively dampen future earnings growth. Nevertheless, we think a near term spike is possible as bargain hunting activities could give share prices a kicker and to send the key index potentially back above the 1,700 points level to end the week.

• The lower liners and broader market shares are also severely oversold and a rebound is overdue. Hence, we think the more positive near term market undertone will give room to the FBM Small Cap, Fledgling and ACE Market shares to stage a meaningful recovery over the near term.

COMPANY BRIEF

• Public Bank Bhd's 3Q2018 net profit slipped marginally by 1.5% Y.o.Y to RM1.38 bln, due to one-off gain on investment of RM43.0 mln recorded in the previous corresponding quarter. Revenue for the quarter, however, increased 5.8% Y.o.Y to RM5.62 bln.

• For 9M2018, cumulative net profit rose 5.0% Y.o.Y to RM4.18 bln. Revenue for the period improved 5.8% Y.o.Y to RM16.41 bln. (The Star Online)

• Luxchem Corp Bhd’s 3Q2018 net profit added 8.6% Y.o.Y to RM9.8 mln, due to higher contributions from its trading segment. Revenue for the quarter grew 12.8% Y.o.Y to RM212.3 mln.

• For 9M2018, cumulative net profit fell 6.6% Y.o.Y to RM29.2 mln. Revenue for the period declined marginally by 0.3% Y.o.Y to RM607.8 mln. (The Star Online)

• CCM Duopharma Biotech Bhd (CCM Duopharma) has bought a 5.8% stake in South Korea's SCM Lifescience Co., Ltd which specialises in stem cell therapeutics for RM20.2 mln, marking its foray into regenerative medicine.

• It also entered into an exclusive marketing and commercialisation deal with SCM. It acquired the rights to market and commercialise products developed by SCM in selected Asean countries.

• SCM specialises in stem cell therapeutics with proprietary platform technology in the field of high-purity isolation and cultivation of mesenchymal stem cells. (The Star Online)

• Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) 3Q2018 net loss stood at RM22.7 mln vs. a net profit of RM16.4 mln recorded in the previous corresponding quarter, due to losses in the marine division. Revenue for the quarter, however, increased 34.5% Y.o.Y to RM289.8 mln.

• For 9M2018, cumulative net loss widened to RM97.5 mln, from a net loss of RM14.7 mln recorded in the previous corresponding period. Revenue for the period fell 1.0% Y.o.Y to RM701.1 mln. (The Star Online)

• The Wen family, who holds a 68.2% stake in Selangor Properties Bhd, is looking to take the company private through a proposed selective capital reduction and repayment exercise (SCR). The proposed SCR entails a selective capital reduction and a corresponding capital repayment of RM5.70 per share in Selangor Properties held by all the shareholders. (The Edge Daily)

• Serba Dinamik Holdings Bhd has secured a total of 13 operations and maintenance (O&M) contracts worth an aggregate sum of at least RM512.2 mln. Four contracts were awarded for O&M works in the Middle East and another nine local contracts to be carried out on a call-out basis. The duration of the contracts ranges from one-to-three years, of which some have commenced in June 2018. (The Edge Daily)

• Pavilion Real Estate Investment Trust’s (Pavilion REIT) 3Q2018 net property income (NPI) rose 20.5% Y.o.Y to RM94.2 mln, mainly helped by higher rental income from Elite Pavilion Mall, Pavilion Kuala Lumpur and higher occupancy rates at Intermark Mall. Revenue for the quarter increased 16.5% Y.o.Y to RM141.4 mln.

• For 9M2018, cumulative NPI added 17.1% Y.o.Y to RM273.8 mln. Revenue for the period grew 13.1% Y.o.Y to RM407.9 mln. A distribution per unit of 2.14 sen was proposed. (The Edge Daily)

• ViTrox Corp Bhd’s 3Q2018 net profit expanded 25.0% Y.o.Y to RM28.0 mln, due to higher contribution from the Automated Board Inspection (ABI) and Machine Vision System (MVS). Revenue for the quarter grew 20.6% Y.o.Y to RM101.8 mln.

• For 9M2018, cumulative net profit rose 22.0% Y.o.Y to RM76.0 mln. Revenue for the period gained 22.7% Y.o.Y to RM284.1 mln. (The Edge Daily)

• FGV Holdings Bhd’s wholly-owned subsidiary, FGV Trading Sdn Bhd has commenced arbitration proceedings against Twin Wealth Macao Commercial Offshore Ltd for outstanding payments of US$13.3 mln (RM55.2 mln) under various palm olein contracts. The proceedings commenced on 18th September 2018 under the auspices of the Palm Oil Refiners Association of Malaysia.

• FGV Trading is alleging that Twin Wealth had only made part payments (about US$1.4 mln or RM5.7 mln) for 2,000 tonnes out of the 21,765 tonnes bulk purchase of its refined, bleached, and deodorised palm olein. (The Edge Daily)

• Syarikat Takaful Malaysia Keluarga Bhd’s 3Q2018 net profit jumped 72.9% Y.o.Y to RM84.0 mln, owing to higher net wakalah fee income. Revenue for the quarter rose 36.3% Y.o.Y to RM648.9 mln.

• For 9M2018, cumulative net profit increased 35.9% Y.o.Y to RM204.4 mln. Revenue for the period improved 19.8% Y.o.Y to RM1.94 bln. (The Edge Daily)

• Perak Corp Bhd and Only World Group Holdings Bhd (OWG) have scrapped plans to co-manage and co-operate in the Movie Animation Park Studios (MAPS) in Ipoh, Perak. Both companies have mutually agreed to end the terms of the HOA on 23rd October 2018 as the parties have not executed the definitive master services agreement. (The Edge Daily)

• Cypark Resources Bhd has proposed the issuance of one bonus share-for- every two existing shares held at an entitlement date to be determined later. Up to 157.2 mln bonus shares could be issued and this will result in an enlarged issued share capital of up to 471.5 mln shares, from 299.8 mln shares as at 4th October 2018. The bonus issue is expected to be completed in 4Q2018. (The Edge Daily)

• Paramount Corp Bhd has proposed to dispose of three of its tertiary education campuses in Penang and Selangor to a special purpose vehicle (SPV), for a combination of cash amounting to RM420.0 mln and new Cumulative Redeemable Non-Convertible Preference Shares in the vehicle. The proposed sale of the campuses) also entails a subsequent leaseback of the properties.

• The properties to be sold are its Jalan Anson Campus Properties and Batu Kawan Campus Properties, both in Penang, for RM50.0 mln and RM120.0 mln, respectively, while its Utropolis Glenmarie Campus Properties in Selangor is sold for RM250.0 mln. The original investment cost for the three properties was RM377.6 mln. (The Edge Daily)  

Source: Mplus Research - 26 Oct 2018