More Sideway Moves

• The FBM KLCI inched lower after lingering mostly in the negative territory amid rotational play in the lower liners. Subsequently, the majority of the lower liners closed higher, with the FBM Ace (+1.7%) at the forefront, despite most of the broader market constituents being in the red. The only exceptions were the Industrial Products & Services (+0.2%), Financial Services (+0.1%), Plantation (+0.7%) and Energy (+1.1%) sectors.

• Market breadth also turned slightly bearish as decliners overtook the winners on a ratio of 413-to-393 stocks, while traded volumes plunged 23.9% to 2.33 bln shares as investors stayed on the sidelines amid the prevailing negative sentiment in the global markets.

• On the key-index laggards’ list were Malaysia Airports (-66.0 sen), Petronas Gas (-34.0 sen), Nestle (-20.0 sen), Hong Leong Financial Group (-14.0 sen) and Kuala Lumpur Kepong (-6.0 sen), while other notable decliners included Dutch Lady (-60.0 sen), BAT (-50.0 sen), KESM Industries (-18.0 sen), MY E.G. (-15.0 sen) and Magni-Tech (-11.0 sen).

• On the positive side, broader market winners were Amway (+22.0 sen), Guan Chong (+20.0 sen), Aeon Credit (+18.0 sen), Hong Leong Industries (+18.0 sen), Panasonic Manufacturing (+12.0 sen), and Allianz (+10.0 sen). Blue-chips like IOI Corporation (+7.0 sen), Sime Darby Plantation (+7.0 sen), Ambank (+5.0 sen), Top Glove (+5.0 sen) and IHH Healthcare (+4.0 sen), meanwhile, also advanced.

• Major regional indices edged down on Thursday, with the exception of the Hang Seng index, backed by gains in property stocks. The Nikkei dipped slightly as investors booked profits after its recent rally, albeit cushioned by gains in consumer discretionary, healthcare and communication services-linked shares. The Shanghai Composite also weakened, together with the majority of the ASEAN equities.

• Wall Street - the Dow (+0.1%), S&P 500 (+0.3%) and the Nasdaq (+0.4%) finished just shy of its previous record highs, following a string of upbeat corporate earnings, albeit slightly capped by weaker-than-expected housing and manufacturing data.

• U.K. shares traded mostly higher as the FTSE notched 0.2% gains after the U.K. and EU leaders reportedly reached a new Brexit deal. The DAX (-0.1%) and the CAC (-0.4%), however, gave back their earlier gains amid scepticism of the Brexit deal going through the British Parliament this weekend.

The Day Ahead

• The broad market environment remains mixed with market players still displaying hesitation over its direction as there remains few compelling market leads. While the buying interest is also tentative, the selling pressure is also meek for now that is helping to provide some measure of stability to the beaten down market.

• As a result, we think that Malaysian stocks could end the week on a firmer note due to the easing selling pressure that could also allow the key index to build up a higher base at around the 1,570-1,580 levels after its bout of oversold. Amid the base building process, we also think that the broad market conditions will remain largely mixed due to the confluence of profit taking and bargain hunting activities that could also keep the near term upsides modest for now. The supports, meanwhile, are at 1,566 and 1,550 points respectively.

• The lower liners and broader market shares have become mixed once again after the recent recovery, but we think that there should be some near term upsides due to the improving market sentiments that could allow most of them to end the week on a firmer note. The upsides, however, could also be mild due to the lack of compelling local leads and the gains will largely be on trading activities.

COMPANY BRIEF

• Widad Group Bhd is buying Serendah Heights Sdn Bhd whose unit YBK Usahasama Sdn Bhd has a concession with the government and Universiti Teknoloji MARA (ÜiTM) to develop the facilities and maintain the UiTM campus in Jasin, Melaka. Serendah Heights owns 100.0% of YBK which has a remaining concession of 14 years ending 2034, totalling RM861.6 mln.

• The purchase consideration of RM95.9 mln would be satisfied via cash of RM86.3 mln, which is 90.0% of the purchase consideration, and issuance of new shares in Widad with value of RM9.6 mln. It represents a strategic opportunity for the company to strengthen its remaining order book from approximately RM910.0 mln currently to RM1.80 bln post proposed acquisition and diversifying its service offerings into the education industry. (The Star Online)

• KIP Real Estate Investment Trust’s (KIP REIT) 1QFY20 net property income (NPI) rose 35.8% Y.o.Y to RM13.5 mln, boosted by a newly acquired property, AEON Mall Kinta City in Ipoh, Perak. Revenue for the quarter grew 18.6% Y.o.Y to RM18.5 mln. An interim distribution per unit (DPU) of 1.37 sen was declared. (The Star Online) 
   
• Perdana Petroleum Bhd (PPB) is on track to return to the black in its coming financial year ending 31st December 2020, since its shareholders have given their nod for the group’s proposed rights issue exercise as well as proposed provision of financial assistance to its major shareholder Dayang Enterprise Holdings Bhd (DEHB), which forms part of its debt restructuring plan.

• The proposed renounceable rights issue of Redeemable Convertible Preference Shares (RCPS) is up to RM506.0 mln in value. Also, with the expected increase in contracts going forward, PPB is expected to see reduced dependency on its major shareholder for charters, especially if PPB could get better charter rates with other companies. (The Edge Daily)

• Setia City Mall — a joint venture between S P Setia Bhd and Lendlease Development (Malaysia) Sdn Bhd is set to be the largest mall in Shah Alam when its expansion, which sees an investment of over RM500.0 mln, is completed by 2H2020. Lendlease Development (Malaysia) Sdn Bhd has reported that the mall has achieved a 95% tenancy rate while the second phase has already secured a 70.0% tenancy rate, adding that the mall's traffic footfall is expected to increase by 30.0% following the completion of the expansion plan. (The Edge Daily)

• Animation Theme Park Sdn Bhd (ATP), a 51.0%-owned unit of loss-making Perak Corp Bhd (PCB), has defaulted on its repayment of a syndicated term loan facility of up to RM280.0 mln, which was granted by Affin Hwang Investment Bank Bhd, Affin Bank Bhd, Bank Pembangunan Malaysia Bhd and Malaysia Debt Ventures Bhd. ATP — the developer, owner and operator of Movie Animation Park Studios (MAPS) has defaulted on an RM25.7 mln repayment on 26th September 2019, citing cash flow constraints.

• PCB confirmed it has been seeking to dispose of its interest in ATP to Perbadanan Kemajuan Negeri Perak (PKNP) and that the latter had confirmed, on 21st February 2019, its intent to takeover MAPS for no less than RM245.0 mln. (The Edge Daily)

• Selangor Dredging Bhd’s proposed disposal of 16 pieces of freehold land in Damansara Heights for RM71.0 mln has fallen through as the purchaser, Bukit Selesa Developmemnt Sdn Bhd, has yet to obtain approval from the relevant authority in regards to the development order. (The Edge Daily)

• Avillion Bhd plans to raise up to RM22.7 mln via a private placement up to 20.0% of its total number of issued shares to independent third party investors to be identified later, to help ease the group’s cash flow requirements by providing it with immediate funds for asset enhancement and refurbishment of the group's hotels and resorts.

• The money will also be used to repay bank borrowings, for use as general working capital and to fund its property development project in Johor. It also plans to undertake an issuance of up to 566.6 mln free warrants on the basis of one warrant for every two shares held. (The Edge Daily)  

Source: Mplus Research - 18 Oct 2019