May See A Quick Rebound

• The FBM KLCI closed slightly lower, dragged down by losses in Tenaga Nasional amid rotational play from the big caps to the lower liners. Consequently, all the lower liners – the FBM Small Cap (+0.8%), the FBM Fledgling (+0.2%) and the FBM Ace (+0.3%) rallied, while the majority of the broader market shares posted gains.

• Market breadth remained steady as advancers maintained the upper-hand against the decliners on a ratio of 438-to- 358 stocks. Traded volumes, however, inched 2.8% lower to 2.33 bln due to mild profit-taking in selected stocks.

• The main losers on the broad market were Hong Leong Industries (-32.0 sen), Carlsberg (-20.0 sen), Dutch Lady (-20.0 sen), United Malacca (-15.0 sen), Time Dotcom (-14.0 sen) and Fraser & Neave (- 12.0 sen). Financial-linked heavyweights like Public Bank (-28.0 sen) and Hong Leong Financial Group (-10.0 sen) weighed on the blue-chip gauge, together with Tenaga Nasional (-26.0 sen), Kuala Lumpur Kepong (-10.0 sen) and Petronas Gas (-8.0 sen).

• Significant Main Board winners, on the other hand, were Nestle (+40.0 sen), Malaysia Airports (+11.0 sen), Ambank (+5.0 sen), Axiata (+5.0 sen) and Dialog (+2.0 sen). Broader market advancers, meanwhile, include BAT (+62.0 sen), United Plantations (+28.0 sen), Ta Ann (+19.0 sen), Sungei Bagan Rubber (+16.0 sen) and Can-One (+13.0 sen).

• Major regional stockmarkets closed mixed as investors digest the latest development on the U.K’s political landscape. The Nikkei fell 0.6% as investors lock-in profits on companies with exposure to the Chinese economy. The Hang Seng Index, however, rose 0.3%, while the Shanghai Composite flatlined. ASEAN stockmarkets equities, meanwhile, closed with meager gains.

• U.S. equities extended their gains, boosted by upbeat earnings from giant banking groups like Goldman Sachs and Bank of America. The Dow gained 0.6% and closed above the 24,000 psychological level. Meanwhile, techheavy indices like the S&P 500 and the Nasdaq also added 0.2% each, although concerns on the prolonged government shutdown remained in the backdrop.

• Major European bourses finished on a higher note, with the exception of the FTSE (-0.5%), following the historic defeat of Prime Minister Theresa May’s Brexit withdrawal plan. The DAX (+0.4%) and the CAC (+0.5%), however, rallied – led by gains in banking shares on hopes of potential M&As between European banks.

The Day Ahead

• Once again, the FBM KLCI bucked the regional trend yesterday and headed lower amid renewed selling on selected index heavyweights and placing a lid on its upsides. After the bout of profit taking, however, we think the upsides should resume as the market could take cue from the positive trend in most global stock indices overnight.

• At the same time, we think the upsides are likely to be measured as the buying strength is still tame in view of the lack of domestic catalysts. This has also resulted in most market players remaining wary of the ongoing market environment and adopting hit-and-run tactics. Therefore, we think the mild upsides may only lift the key index to the 1,675-1,680 levels. The support is at 1,670 and 1,667 respectively.
• Meanwhile, the recovery of the lower liners and broader market shares should persist over the near term on the continuing bargain hunting activities after the FBM Small Cap, Fledgling and ACE Market listed stocks endured a near year low decline.

COMPANY BRIEF

• Matrix Concepts Holdings Bhd, has partnered Bondanza Educare Sdn Bhd in a bid to rationalise and re-organise the operations of the Matrix brand of schools, which comprises the Matrix International School, Matrix International Pre-School and Matrix Private School in Bandar Sri Sendayan, Negeri Sembilan.

• The collaboration will offer an improved business proposition and outlook which are expected to boost the operational efficiency of MGS. Matrix Educate Sdn Bhd (MEC), a wholly owned subsidiary of MGE, will serve as the joint venture company where 49.0% of the shareholding will be held by Bondanza. MEC will acquire the relevant operating assets from MGE and Matrix Properties Sdn Bhd for a net book value of RM9.8 mln. (The Star Online)

• Netx Holdings Bhd has proposed to raise as much as RM15.4 mln by placing out 1.00 bln new shares in the company to independent third party investors. The new shares will be placed out at 1.48 sen a share and proceeds from the exercise will be used for the development of its lifestyle mobile application known as GEM. The GEM app was launched in October 2018 and has attracted more than 10,000 registered users with more than 300 participating merchants.

• The group intends to utilise proceeds of RM6.0 mln from the proposed private placement to fund the continuous development and enhancement of the GEM app over the next two years and RM9.1 mln to market the GEM app. (The Star Online)

• Hengyuan Refining Company Bhd has approved the full fund release for the H2GEN Project worth US$66.4 mln, to be executed within its refining complex in Port Dickson, Negeri Sembilan.

• The project is undertaken to supply the refinery with 30 tonnes per day of hydrogen for hydro desulphurisation unit number 2 and the extractive desulphurisation hydro-treating process to meet the 10 parts per mln by weight (ppmw) sulphur specification. The project will be financed using a mix of cash flow generated from operations and further drawdowns of existing loans. (Bernama)

• Hibiscus Petroleum Bhd has reported that as of 31st December 2018, the gross proved plus probable reserves (2P reserves) and the gross contingent resources (2C resources) of oil in the North Sabah Fields were estimated at 55.3 mln stock tank barrels (MMstb) and 85.7 MMstb respectively.

• Its holds 50.0% participating interests in the North Sabah PSC and is the operator of the North Sabah Fields, while Petronas Carigali Sdn Bhd holds the remaining participating interests. (The Edge Daily)

• Barakah Offshore Petroleum Bhd has won a five-year contract to service Petrofac (Malaysia-PM304) Ltd’s oil and gas fields offshore Peninsular Malaysia. The contract, for the years 2018 to 2023, includes Pan Malaysian maintenance, construction and modification works for structures and facilities for the client’s oil and gas fields.

• The contract's total value is not fixed and will depend on the actual scope based on work orders to be issued by the client from time to time throughout the contract duration, which is effective from 17th July 2018. (The Edge Daily)

• JAKS Resources Bhd has released the payment on a bank guarantee of RM50.0 mln to Star Media Group Bhd, marking the end of a dispute between the two parties that has been ongoing for almost a year on 9th January 2019.

• This follows the dismissal by the Federal Court of JIC’s application for leave to appeal. As JAKS has 51.0% equity interest in the company that undertook the project, RM25.5 mln will be charged off in the financial statements of the group on 31st December 2018. (The Edge Daily)

• Scomi Group Bhd has still not paid RM28.4 mln of the RM64.3 mln it borrowed from its 65.6%-subsidiary Scomi Energy Services Bhd. This was after Scomi Group paid RM300,000 cash and transferred property valued at RM6.5 mln, in response to queries by Bursa Malaysia on the matter.

• Scomi Energy also clarified that the interest rate on the advances is 7.0% per annum, while no late payment charges have been imposed on the advances. (The Edge Daily)

• My EG Services Bhd has received the government's nod for the renewal of its courier service license for a three-year period which will allow the company to expand its e-fulfilment service. The renewed license is effective from 1st January 2019 to 31st December 2021, and is renewable upon expiry. (The Edge Daily)

• Aturmaju Resources Bhd has entered into a Memorandum of Understanding with Yes’ Comm. Enterprise Sdn Bhd (YESS) to collaborate in a new retail business model and to supply the latter’s five retail outlets with an inventory tracking system. The formalising of an agreement could result in a deal providing RM20.0 mln in annual revenue for the company. (The Edge Daily)

• mTouche Technology Bhd has paid US$5.0 mln (RM20.6 mln) in exchange for rights to sell special edition books in Asia Pacific countries, under a sports memorabilia collection brand called the Iconic Global Sports Collection. mTouche’s unit mTouche (HK) Ltd has inked the exclusive distribution rights agreement with Australian firm TIG Asia Pty Ltd, which itself was previously appointed as having worldwide marketing rights for the products. (The Edge Daily)  

Source: Mplus Research - 17 Jan 2019