Set For Gains

• Taking cue from the prevailing bearish sentiment in regional markets, the FBM KLCI closed lower on Friday, albeit losses were capped by gains in selected energy heavyweights. On a weekly basis, however, the key-index eked-out 0.1% W.o.W gains, mainly due to trade agreement optimism. The FBM Small Cap (-0.3%) and the FBM Fledgling (-0.4%) ended the week on softer footing, although the FBM Ace (+0.1%) bucked the general downtrend, alongside most of the broader market constituents.

• Market breadth was muted as gainers overtook the losers on a ratio of 475-to- 354 stocks. Traded volumes also fell 21.2% to 3.06 bln shares as investors took to the sidelines to await for developments from the ongoing U.S.- China trade negotiations.

• Notable underperformers were Nestle (- 30.0 sen), IHH Healthcare (-16.0 sen), CIMB (-8.0 sen), Maybank (-8.0 sen) and Maxis (-7.0 sen). New Hoong Fatt (-12.0 sen), QL Resources (-12.0 sen), Aeon Credit (-10.0 sen) and KESM Industries (- 9.0 sen).

• Key broader market winners were dominated by consumer products constituents like Fraser & Neave (+64.0 sen), Heineken Malaysia (+42.0 sen), Carlsberg (+34.0 sen), and Dutch Lady (+24.0 sen). PLS Plantations also gained 15.0 sen on Friday. Top five heavyweight outperformers on the key index, meanwhile, were Petronas Dagangan (+32.0 sen), Dialog (+16.0 sen), Kuala Lumpur Kepong (+10.0 sen), Malaysia Airports (+6.0 sen) and IOI Corporation (+6.0 sen).

• Asian markets tumbled on Friday, fueled by fears of slowing U.S. growth prospects. The Shanghai Composite and the Hang Seng Index shed 1.4% and 1.9% respectively on weaker-than-expected China’s inflation data. The Nikkei (-1.1%) continued to be southbound, with the majority of its sectors in the negative territory. ASEAN equities were also painted in red in-line with global equities.

• Wall Street - the Dow (+1.7%), the S&P 500 (+1.1%) and the Nasdaq (+0.6%) all closed in the positive territory last Friday, supported by expectations of a trade deal between Washington and Beijing, as well as stronger crude oil prices.

• European equities also ended the week on an upbeat tone - led by gains in the banking sector and stronger-thanexpected corporate results. The DAX and CAC jumped 1.9% and 1.8% respectively, alongside the FTSE (+0.6%), albeit slightly offset by the ongoing Brexit uncertainties.

The Day Ahead

• Once again, the Malaysian stockmarket went nowhere last Friday with little fresh buying to lift the market, albeit it fared much better than regional stocks that went south on uncertainties over the trade negotiations between the U.S and China.

• However, the renewed optimism over the trade talks sent global stocks higher at the end of last week and that should help to provide some lift to Malaysian stocks over the near term, in our view. While we expect stocks on Bursa Malaysia to make headway, it remains to be seen how much the key index could gain for the ongoing optimism on global equities.

• As it is, the buying interest is still thin with the lack of strong catalyst and this could still leave the FBM KLCI on a largely sideway trend. On the upside, there are hurdles at the 1,690 and 1,694 levels, while the supports are at 1,682 and 1,680 points respectively.

• Meanwhile, the lower liners and broader market shares are starting to show some consolidation signs as their gains are topping out. We think that the downside bias trend could still prevail for now after the recent strong gains on the FBM Small Cap, FBM Fledgling and FBM ACE shares over the past month. However, we think the downsides could be supported by some bargain hunting activities.

COMPANY BRIEF

• Axiata Group Bhd has accepted the general offer for its 28.7% stake in Singapore’s M1 Ltd that will see it netting a gain of RM126.5 mln on the disposal of the shares. Axiata sold its M1 stake for a total cash consideration of approximately RM1.65 bln at the offer premium price of S$2.06 per share, based on the terms stipulated in the offer documents dated 7th January 2019.

• The cash proceeds from the proposed disposal of approximately S$546.7 mln (RM1.64 bln) are intended for general corporate purposes and/or repayment of existing debts. Axiata made the decision to accept the offer due to the need for capital reallocation and new priorities in line with its vision to be the Next Generation Digital Champion by 2022 and the investments required to achieve that. The company also prefers not to be a minority investor in a potentially privatised company, rendering the investment illiquid. (The Star Online)

• Luxchem Corp Bhd’s 4Q2018 net profit dipped 7.6% Y.o.Y to RM8.8 mln on lower margins and higher expenses. Revenue for the quarter, however, rose 4.6% Y.o.Y to RM206.3 mln.  For 2018, cumulative net profit fell 6.7% Y.o.Y to RM38.0 mln. Revenue for the year, however, grew 9.1% Y.o.Y to RM814.1 mln. An interim dividend of 1.25 sen per share was declared. (The Star Online)

• Tunku Alizakri Raja Muhammad Alias, the Chief Executive Officer of the Employees’ Provident Fund (EPF), has joined the board of Astro Malaysia Holdings Bhd as a Non-Independent and Non-Executive Director. Tunku Alizakri was appointed to the board as a nominee director of EPF, which holds a substantial 8.1% stake in Astro.

• Also joining Astro’s board as a NonIndependent and Non-Executive Director is Mazita Mokty, the General Counsel and nominee director of Astro’s substantial shareholder, Usaha Tegas Sdn Bhd. (The Edge Daily)

• Less than a month after his appointment as executive director of APFT Bhd, Jeya Kumar Jegathison has resigned from the post, citing “personal reasons”. The change took effect on 15th February 2018. Jeya Kumar was appointed to APFT’s board on 23rd January 2019, along with two other independent and Non-Executive Directors, namely Chan Tiam Hin and Datuk Md Ismail Hamdan. (The Edge Daily)

• London Biscuits Bhd is proposing to undertake its second private placement in less than a year, this time to raise up to RM22.7 mln via a placement to thirdparty investors to be identified later. The proceeds raised will be used to further pare down its bank borrowings and for working capital.

• As at 24th January 2019, the total bank borrowings of London Biscuits stood at RM363.5 mln, largely consisting of banker’s acceptances, medium term notes, revolving credits and bank overdrafts. The proposed private placement will involve the issuance of up to 45.5 mln new shares, representing not more than 15.0% of its enlarged issued shares. (The Edge Daily)  

Source: Mplus Research - 18 Feb 2019