No Reprieve In Sight

• The FBM KLCI (-0.6%) extended its losses to close below the 1,700 psychological level after hovering in the negative territory for the entire trading session, dragged down by the sliding crude oil prices, coupled with the depreciation of Ringgit against the U.S. Dollar. The lower liners, however, ended mostly higher as the FBM FBM Fledgling and FBM ACE added 0.04% and 0.5% respectively, while the broader market finished mixed.

• Market breadth stayed negative as decliners outmuscled advancers on a ratio of 452-to-294 stocks. Traded volumes declined 1.3% to 1.63 bln shares as investors remain wary of the renewed market volatility.

• Hong Leong Financial Group (-40.0 sen) topped the FBM KLCI decliners list, followed by Petronas Dagangan (-30.0 sen), IHH (-18.0 sen), Tenaga (-16.0 sen)and PBB Group (-10.0 sen). Notable losers on the broader market were BAT (- RM1.48), Amway (-29.0 sen), LPI Capital (-28.0 sen), UMW (-23.0 sen) and Fraser & Neave (-22.0 sen).

• In contrast, MPI (+RM1.00), United Plantations (+40.0 sen), Genetec (+28.0 sen) and PMB Technology (+25.0 sen) were among the biggest gainers on the broader market. Dufu Technology jumped 53.0 sen to record its ninth straight session of advance. Key winners on the local bourse were Nestle (+20.0 sen), MISC (+17.0 sen), Malaysia Airport Holdings (+7.0 sen), Hong Leong Bank (+4.0 sen) and Genting Malaysia (+2.0 sen).

• Asian benchmark advanced after recovering all their intraday losses as the Nikkei added 0.1%. The Hang Seng Index rose 0.1% after enduring a choppy tradingsession, while the Shanghai Composite jumped 1.2% higher after the government rolled out a series of measures to support the private sector. ASEAN equities, meanwhile, closed mixed yesterday.

• U.S. stockmarkets extended their losses overnight as the Dow sank 2.3% as the selloff in technology stocks intensified after Lumentum Holdings Inc – the manufacturer of iPhone’s face recognition function guided reduce shipments. On the broader market, the S&P 500 slipped 2.0%, while the Nasdaq tumbled 2.8%.

• Earlier, major European equities – the FTSE (-0.7%), CAC (-0.9%) and DAX (- 1.8%), all retreated, dragged down by the weakness in technology shares. Market sentiment was also dampened by U.K.’s Prime Minister Theresa May dropping her plans for an emergency Brexit cabinet meeting due to resistance from her own government.

THE DAY AHEAD

• The near term outlook for stocks on Bursa Malaysia is still frail amid the continuing weakness in global stocks. Hence, there appears little reprieve for Malaysian stocks after the key index slipped below the psychological 1,700 points level yesterday to add to the already dour trend. At the same time, the market is also seeing increasingly more players staying away from equities, as evidenced by the thinning traded volumes and value of late.

• With Malaysian stocks set for another day of selling, we see the key index potentially drifting back to the 1,690 level but if it fails to hold, the 1,680 support level will come into play. The resistances are at the 1,700-1,710 levels. On the broader market, technology stocks could be at the receiving end amid the selloff of similarly classified stocks globally. As it is, profit taking activities are setting-in on technology stocks after their strong gains over the past few months amid the potentially slower growth prospects ahead. Other lower liners could also bear the brunt on increased selling due to the lack of catalyst to shore up both sentiments and confidence among retail players.

COMPANY BRIEF

• Malaysian Resources Corp Bhd’s (MRCB) indirect wholly-owned subsidiary, MRCB Lingkaran Selatan Sdn Bhd (MLSSB) has signed a termination and settlement agreement with the Federal Government in relation to the Concession Termination of the Eastern Dispersal Link Expressway (EDL). Under the agreement, the Government will pay MLSSB RM1.32 bln, subject to terms and conditions in the termination agreement. The termination agreement came into effect on 1st January 2018. (The Star Online)

• Fraser & Neave Holdings Bhd (F&N) announced that about 90.0% of its beverage products will be subjected to Malaysia's proposed sugar tax on sweetened beverages, although the impact of the tax on F&N's business cannot be determined until further details are obtained on the tax. (The Star Online)

• Notion VTec Bhd has received RM44.4 mln from its insurer AXA Affin General Insurance Bhd as the final settlement of its claims for fire damage to its main plant in Klang, Selangor, that amounted to RM159.4 mln. (The Edge Daily)

• Hume Industries Bhd is planning a rights issue of Redeemable Convertible Unsecured Loan Stocks (RCULS) to raiseup to RM172.5 mln to pare debts and fund working capital needs. The five-year RCULS is issued at a nominal value of RM1.00 each and will be offered on the basis of 36 RCULS-for-every 100 existing shares held. The conversion price of the RCULS will be determined at a later date. (The Edge Daily)

• United Malacca Bhd has clarified that its proposed disposal of four of its oil palm estates in Melaka and Negeri Sembilan will not result in retrenchment of staff and workers. This comes following a media report that it is considering disposing of the four estates through an open tender to be handled by WTW Real Estate Sdn Bhd.

• The group also said that the gross proceeds from the proposed disposal will be used mainly for its development expenditure, particularly for its Sulawesi plantation in Indonesia.

• Separately, United Malacca’s 3Q2018 net profit fell 4.1% Y.o.Y to RM94.9 mln, from RM98.9 mln a year ago, mainly due to lower palm prices. Revenue was also 8.1% Y.o.Y lower to RM340.9 mln, from RM370.8 mln a year earlier. The group has declared an interim dividend of 20.0 sen per share and a special dividend of 10.0 sen per share, payable on 12th December 2018.

• Cumulative 9M2018 net profit also slipped marginally by 2.6% Y.o.Y to RM282.6 mln, compared to RM290.2 mln a year ago, while revenue declined 11.7% Y.o.Y to RM976.3 mln, from RM1.11 bln in 9M2017. (The Edge Daily)

• IOI Corp Bhd‘s 1QFY19 net profit plunged 60.0% Y.o.Y to RM143.8 mln, from RM360.0 mln in the same quarter last year, dragged down by lower operating profit and a currency translation loss on foreign currency-denominated borrowings and deposits. Revenue,however, was almost unchanged at RM1.88 bln (+0.5%), from RM1.87 bln a year ago. (The Star Online)

• Dialog Bhd’s 1QFY19 net profit narrowed 29.0% Y.o.Y to RM114.6 mln, from RM160.9 mln last year in the absence of fair value gains and weaker revenue from its Malaysian operations. Quarterly revenue also lost 11.3% Y.o.Y to RM690.9 mln, from RM778.7 mln in the last corresponding quarter. (The Edge Daily)

• United Plantations Bhd’s 3Q2018 net profit dropped 4.1% Y.o.Y to RM94.9 mln, from RM98.9 mln a year ago as a result of lower palm prices. Revenue also contracted by 8.1% Y.o.Y to RM340.9 mln during the quarter, from RM370.8 mln a year earlier. Even so, the group has declared an interim dividend of 20.0 sen per share and a special dividend of 10.0 sen per share, payable on 12th December 2018. (The Edge Daily)

• Malaysia Airports Holdings Bhd's (MAHB) total network of airports saw a slight growth in October with 10.7 mln (+0.5% Y.o.Y) passenger movements, mainly contributed by international passenger movements.

• MAHB’s Malaysian airports, however, saw passenger flows marginally lower by 1.3% Y.o.Y to 7.8 mln passenger. Meanwhile, passenger movements at its Istanbul Sabiha Gokcen International Airport (SGIA) in Turkey grew 5.6% Y.o.Y to 2.9 mln passengers, due to growth in its international and domestic passengers. (The Edge Daily)

• Guan Chong Bhd‘s 3Q2018 net profit grew 47.7% Y.o.Y to RM43.9 mln, from RM29.7 mln a year earlier, lifted by higher revenue contribution of RM598.8 mln (+10.3% Y.o.Y) on increased bean grinding and lower input costs.

• 9M2018 net profit, meanwhile, more thandoubled to RM126.2 mln, from RM58.3 mln in 9M2017. (The Edge Daily)

• Hong Leong Industries Bhd’s 1QFY19 net profit increased by 15.5% Y.o.Y to RM70.1 mln, from RM81.9 mln a year ago, despite a slower 6.9% Y.o.Y growth in revenue to RM672.9 mln (from RM629.4 mln), mainly due to lower contribution from an associate partner. (The Edge Daily)

Source: Mplus Research - 13 Nov 2018