More Gains, But 1,720 Is A Hurdle

• Late gains in selected index heavyweights powered the FBM KLCI (+0.4%) higher yesterday after the key index endured a choppy trading session. The lower liners – the FBM Small Cap (+0.5%), FBM Fledgling (+0.3%) and FBM ACE (+0.4%) all rebounded, while the broader market closed mostly higher.

• Market breadth turned positive as advancers outpaced decliners on a ratio of 440-to-378 stocks. Traded volumes rose 4.3% to 2.32 bln shares, lifted by the positive market sentiment.

• Topping the gainers list on the FBM KLCI were Nestle (+60.0 sen), Malaysia Airport Holdings (+55.0 sen), Petronas Dagangan (+48.0 sen), PPB Group (+32.0 sen) and DiGi (+16.0 sen). Consumer products stocks like Fraser & Neave (+RM1.26), BAT (+RM1.02), Ajinomoto (+RM1.00), Carlsberg (+44.0 sen) and Heineken (+38.0 sen) continues to outperform on the broader market.

• On the flipside, among the biggest losers on the broader market were United Plantations (-70.0 sen), Dutch Lady (-28.0 sen), KESM Industries (-20.0 sen), Allianz (-18.0 sen) and Hong Leong Industries (- 16.0 sen). Meanwhile, Hap Seng (-10.0 sen), Maybank (-10.0 sen), Hong Leong Financial Group (-8.0 sen), RHB Bank (- 8.0 sen) and Sime Darby Plantation (-8.0 sen) were the key index’s biggest decliners.

• Asian benchmark indices retreated yesterday as the Nikkei (-0.3%) swung into the negative territory in the final trading hour, dragged down by weakness in automotive stocks like Honda Motor (- 2.7%) and Nissan Motor (-1.1%). The Hang Seng Index fell 0.2% after enduring a choppy trading session, while the Shanghai Composite (-0.7%) extended its losses. ASEAN equities closed mixed yesterday.

• U.S. stockmarkets rallied overnight as investors digested the political gridlock resulting from the U.S. midterm election that saw the Republicans retaining control of the Senate, but losses the House of Representative. The Dow jumped 2.1% to close above the 26,000 psychological level, while the S&P 500 also finished 2.1% higher to close above the 2,800 psychological level.

• Earlier, major European equities – the FTSE (+1.1%), CAC (+1.2%) and DAX (+0.8%), all recovered their previous session losses as investors responded to the U.S. mid-term election results. Meanwhile, the Eurozone’s retail sales in September 2018 rose 0.8% Y.o.Y – outperform market expectations of 0.7% Y.o.Y growth.

The Day Ahead

• Once again, a last minute haul on selected index heavyweights lifted the key index yesterday in an otherwise uninteresting trading day where leads are far and in-between. However, we see the gains persisting over the near term after the conclusion of the U.S. mid-term elections that lifted some market uncertainties, albeit there are still few domestic catalysts.

• The lack of domestic leads could limit the near term upsides, in our view, as valuations are also fair and that is leaving little room for significant upsides. The lack of leads could also result in many market players remaining on the wayside for longer, as evidenced by the still indifferent traded volumes, with some market participants are still reeling from October’s steep market losses. Hence, we see the key index finding the 1,720 resistance level a firm hurdle to breach for now. The supports are at 1,708 and 1,700 points respectively.

• Elsewhere, the broader market is still experiencing a measure of tentativeness as many retail players are still wary of the current market environment, thus leaving little room for significant gains even after the recent selloff. Hence, we see the lower liners and broader market shares taking small upward strides for now.

COMPANY BRIEF

• Genting Malaysia Bhd is assessing the full impact of the additional taxes announced in the Budget 2019 announced last Friday. This comes after the sharp selldown in its shares after the Government revised certain gaming licence fees and casino duties, effective 1st January next year.

• The group is also expected to take appropriate steps which include a review of its marketing expenditure and cost structure to mitigate the impact of the tax increases.

• To recap, casino licence fee will be revised from RM120.0 mln to RM150.0 mln per annum, while the casino duties will be revised up to 35% - which represents a 10 percentage point increase over existing duty rates. (The Edge Online)

• Iris Corp Bhd has announced that Tan Sri Nik Mohamed Nik Yaacob will be its new Independent and Non-Executive Chairman effective 8th November 2018 following the retirement of Datuk Nik Azman Mohd Zain on 28th September 2018.

• Nik Mohamed was formerly the group Chief Executive Officer (CEO) of Sime Darby Bhd. (The Edge Online)

• Frontken Corporation Bhd’s 3Q2018 net profit jumped 65.0% Y.o.Y to RM15.2 mln, compared to RM9.2 mln in the previous corresponding quarter, on the back of better performance across its regional subsidiaries that benefited from growth in the semiconductor business. Revenue also rose 9.2% Y.o.Y to RM85.9 mln, from RM78.6 mln a year ago. The group has declared an interim dividend of 0.7 sen per share for 2018, with the entitlement and payment dates to be announced later.

• For the cumulative 9M2018, net profit spiked 68.0% Y.o.Y to RM33.6 mln, from RM20.0 mln in 9M2017, largely due to the aforementioned reasons, while revenue gained 10.0% Y.o.Y to RM238.6 mln, from RM216.2 mln.

• Moving forward, the group remains positive on the overall business condition for the remaining three months of 2018 as the World Semiconductor Trade Statistics has forecast that the industry will record an annual global market growth of 12.4% in 2018. (The Edge Online)

• Former Selangor Menteri Besar Datuk Seri Azmin Ali has withdrawn a counterclaim against Puncak Niaga Holdings Bhd in the Court of Appeal which relates to its RM14.0 bln lawsuit against him and his predecessor Tan Sri Khalid Ibrahim.

• This comes after almost a year-long lawsuit which started last November last year when Puncak Niaga had filed a RM14.0 bln lawsuit against Azmin and Khalid. The company claimed they had abused their powers in public office during their time as Selangor Menteri Besar by threatening to cause, or attempting to cause, the federal government to invoke the use of the Water Services Industry Act 2006 (WSIA) to force a take-over of the State’s water industry. (The Edge Online)

• Damansara Realty Bhd has announced that it has aborted its plan to issue Redeemable Convertible Notes (RCN) to raise up to RM150.0 mln as the group intends to anchor its financing through commercial borrowings and internal funds. (The Edge Online)

• I-Bhd‘s 3Q2018 net profit fell 21.0% Y.o.Y to RM5.7 mln, from RM7.2 mln a year ago, dragged down by lower property development revenue. The group has also cautioned that it expects the last quarter to be challenging as well. Revenue also fell 19.0% Y.o.Y to RM60.7 mln, from RM75.3 mln last year.

• For the cumulative 9M2018, however, net profit grew 6.0% Y.o.Y to RM52.5 mln, from RM49.3 mln previously, while revenue increased marginally by 4.0% Y.o.Y to RM327.2 mln, from RM315.7 mln in the same period last year.

• Moving forward, the group foresees a challenging business environment despite its continuous efforts to improve performance, including enhancing i-City development and improving the living experience. (The Star Online)

• BIMB Holdings Bhd has issued the first tranche of its Sukuk Murabahah programme to raise RM300.0 mln. The subordinated Sukuk Murabahah issued under the programme shall qualify as Tier 2 regulatory capital of Bank Islam Malaysia Bhd in compliance with Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components).

• Consequently, the group will be able to enhance the capital adequacy of the bank in line with the Basel III requirements. The sukuk has a 10-year tenure and is non-callable for five years. (The Edge Online)  

Source: Mplus Research - 8 Nov 2018