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Author: MalaccaSecurities   |   Latest post: Fri, 19 Apr 2019, 2:48 PM

 

Mplus Market Pulse - 05 Dec 2018

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  • The FBM KLCI (-0.3%) erased some of its previous session gains, dragged down by profit taking activities in selected index heavyweights yesterday. Similarly, the lower liners – the FBM Small Cap (-0.4%), FBM Fledgling (-0.3%) and FBM Ace (- 1.3%) all retreated, while the Construction (+1.5%) and Property (+0.6%) sectors outperformed the negative broader market.
  • Market breadth turned negative as decliners outnumbered advancers on a ratio of 525-to-282 stocks. Traded volumes declined 3.3% to 2.44 bln shares amid signs of profit taking activities.
  • Key losers on the FBM KLCI were Nestle (-20.0 sen), Tenaga (-16.0 sen), Sime Darby Plantations (-11.0 sen), CIMB (-9.0 sen) and Genting (-8.0 sen). Notable decliners on the broader market include BAT (-52.0 sen), Hong Leong Industries (-47.0 sen), Ajinomoto (-40.0 sen), Top Glove (-23.0 sen) and Carlsberg (-20.0 sen).
  • In contrast, notable gainers on the broader market were United Plantations (+42.0 sen), UMW Holdings (+24.0 sen), Genting Plantations (+22.0 sen), Allianz (+18.0 sen) and Guan Chong (+17.0 sen). Meanwhile, Petronas Dagangan (+34.0 sen), Telekom (+14.0 sen), IOI Corporation (+9.0 sen), Genting Malaysia (+5.0 sen) and RHB Bank (+5.0 sen) led the key index’s winners list.
  • Asia benchmark indices ended on a mixed note as the Nikkei (-2.4%) staged a pullback from the previous session’s rally after the Japanese Yen advanced against the Greenback. Both the Hang Seng Index and Shanghai Composite gained 0.3% and 0.4% respectively after clawing their way to close in the positive territory inthe eleventh hour of trading. ASEAN equities, meanwhile, closed mostly lower yesterday.
  • U.S. stockmarkets took a beating overnight as the Dow sank 3.1% after optimism over the temporary trade truce faded. Market sentiment was dampened by the effect of existing tariff and potential new implementation of new tariffs should the two sides fail to make progress after 90 days. On the broader market, the S&P 500 slumped 3.3% with only the utilities sector (+0.2%) in the positive, while the Nasdaq tumbled 3.8% lower.
  • Earlier, European equities – the FTSE (- 0.6%), CAC (-0.8%) and DAX (-1.1%), all ended lower as investors remained concern over the lingering trade dispute between U.S. and China. The weakness was further compounded by comments from an advocate-general of the European Court of Justice that the U.K. could overturn its Brexit decision without seeking permission from other E.U. members.

THE DAY AHEAD

  • The market failed to mount a follow through uptrend yesterday amid the renewed weakness in regional bourses where market players remained unconvinced of the truce in the trade war between the U.S. and China. At the same time, there were also few details on the truce that also left the market wary.
  • The immediate equity market outlook remains unsettled after most global indices took a beating overnight as the whispers of a potential slowdown in the global economy rang louder. In addition, the lack of details on the trade truce also weighing on sentiments that is also poised to send Malaysian stocks lowerover the near term. As it is, the key index continues to find the 1,700 points level a formidable level to clear and the downside bias looks to continue that could send the key index back to the 1,690 support level. If the level is breached, the next support is at the 1,680 level. Above the 1,700 points resistance, the other resistance is at 1,710.
  • There was also no follow-through buying momentum on the lower liners and broader market shares yesterday as they remained subdued, which is set to persist over the near term amid the renewed global equity market weakness.

COMPANY UPDATE

  • Suria Capital Holdings Bhd has proposed a bonus issue of up to 58.3 mln new shares on the basis of one bonus sharefor-every five existing shares held on the entitlement date to be determined later.
  • As at 15th November 2018, Suria's share capital stood at RM288.2 mln, comprising 288.2 mln shares and 3.2 mln outstanding options granted under the employees’ share scheme (ESOS). Assuming all the outstanding ESOS options are exercised prior to the implementation of the proposed bonus issue, 58.3 mln bonus shares will be issued.
  • This will result in an enlarged issued share capital of up to RM368.3 mln comprising 349.7 mln shares. Barring any unforeseen circumstances, the proposed bonus issue is expected to be completed by 31st January 2019.

Comments

  • We are positive on the proposed bonus issue announcement. The aforementioned corporate exercise served as a reward for Suria’s existingshareholders and it will also improve the trading liquidity of Suria’s shares. Current three-month average trading volume stood at 27,448 shares.
  • We made no changes to our earnings forecast and maintain our BUY recommendation on Suria with an unchanged target price of RM2.20 (exbonus issue adjusted price of RM1.83).
  • We value Suria through a sum-of-parts (SOP) approach as we valued both its port operations and property development segments on a discounted cash flow approach (key assumptions include a WACC of 8.5%, terminal growth rate of 1.5%) to reflect its ability to generate recurring revenues and steady earnings growth over the longer term. Meanwhile, we ascribed a 10.0x (unchanged) target PER to both its logistics and bunkering contract as well as engineering and ferry terminal operations businesses, based on their potential earnings contribution in 2019.

COMPANY BRIEF

  • Independent adviser Public Investment Bank Bhd (PIVB) is in the view that the offer price by Tan Sri Robert Tan Hua Choon for shares in Computer Forms (Malaysia) Bhd (CFM) is still “not fair and not reasonable”, even after the price was increased to RM1.35 per share, from RM1.25 earlier.
  • The revised offer price represents a discount of 69.0 sen or 33.8% to what it deems to be the fair value based on the real net asset value (RNAV) valuation methodology of RM 2.04 a share. (The Edge Daily)
  • Malakoff Corp Bhd’s business partner in an Algerian sea water desalination plant — state-owned Algerian Energy Co (AEC) wants Malakoff to sell its stake in the plant operator following the termination of a water purchase agreement.
  • Malakoff's 70.0%-owned Tlemcen Desalination Investment Co SAS (TDIC) currently has a 51.0% ownership in the joint-stock company Almiyah Attilemcania SPA, under which the plant is parked. The remainder 49.0% is held by AEC, the government company that handled the power and water privatisation exercise in Algeria.
  • AEC had notified TDIC and the offtakers of its decision to transfer TDIC's shares in the joint-stock company to AEC on 30th November 2018. (The Edge Daily)
  • Parkson Holdings Bhd’s Singapore-listed subsidiary, Parkson Retail Asia Ltd has been placed on the Singapore Stock Exchange’s watch list due to its low trading price. Parkson Retail has reportedly been trading at S$0.20 since May 2016, the minimum price of the exchange’s Minimum Trading Price (MTP) Entry Criterion.
  • Consequently, the group now has 36 months to find a way to exit the list in order to avoid delisting. It can exit by undertaking consolidation, operation restructuring or transfer to Catalist. (The Edge Daily)
  • Hibiscus Petroleum Bhd is targeting to achieve a net production of between 10,000 and 12,000 barrels (bbl) of oil per day for both its Anasuria cluster and North Sabah Production Sharing Contract by the end of FY20. The group is currently producing up to 9,000 bbls per day for both wells. (The Edge Daily)
  • TRC Synergy Bhd has secured a RM498.7 mln contract from Putrajaya Holdings Sdn Bhd to develop an integrated development at Plot 8MD3 in Precinct 8, Putrajaya. The contract, which is also its largest contract year-to-date, will beef itsorderbook up to RM3.0 bln. (The Star Online)
  • Sasbadi Holdings Bhd was awarded a Ministry of Education (MoE) contract to print Form 3 Science text books for three years, for approximately RM892,680. (The Edge Daily)
  • Ikhmas Jaya Group Bhd is being sued by building materials trader Ipmuda Bhd for RM3.0 mln over the former’s failure to pay for goods supplied. Ikhmas Jaya said Ipmuda is claiming a principle sum of RM2.4 mln and interest of RM627,153. (The Edge Daily)
  • Utusan Melayu (Malaysia) Bhd is selling its five-storey corner shop-office at The Right Angle in Section 14, Petaling Jaya, for RM7.0 mln. The group has inked a sale and purchase agreement (SPA) with Eden Resources Sdn Bhd and the sale is expected to result in a net gain of about RM4.0 mln. (The Star Online)
  • Tadmax Resources Bhd’s Managing Director-cum-Chief Executive Officer, Datuk Seri Anuar Adam has been reducing his stake in the group. Datuk Seri, who is also Tadmax’s largest shareholder, had disposed of some 44.5 mln shares in the group, reducing his stake to 17.1% from 26.4% previously between 30th November and 3th December. (The Edge Daily)

Source: Mplus Research - 5 Dec 2018

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