• The FBM KLCI (-0.4%) was beaten down last Friday amid selling pressure on selective heavyweights. Similarly, the key index also closed 1.3% W.o.W lower for the second consecutive week. The lower liners ended mostly in the negative territory, with the exception of the FBM Ace (+0.4%), while the broader market was splashed in red – led by Mining (- 2.5%), Plantations (-0.7%) and Technology (-0.6%) sectors.

• Market breadth remained negative as underperformers dominated the winners by more than two-fold. Traded volumes thinned by 25.7% to 1.0 bln shares as trading activities turned tepid ahead of the Christmas weekend.

• Significant key index decliners were BAT (-50.0 sen), Hong Leong Financial Group (-20.0 sen), Kuala Lumpur Kepong (-20.0 sen), KLCC (-10.0 sen) and Hong Leong Bank (-8.0 sen). Broader market decliners include Heineken Malaysia (-38.0 sen), Malaysian Pacific Industries (-29.0 sen), C.I. Holdings (-9.0 sen), Felda Global Ventures (-9.0 sen) and Lafarge Malaysia (-9.0 sen).

• On the other side of the trade, Dutch Lady (+36.0 sen), Warisan TC Holdings (+17.0 sen), Panasonic Manufacturing Malaysia (+14.0 sen), AEON Credit Service (+12.0 sen) and Keck Seng (+11.0 sen) led the broader market higher. Meanwhile, only CIMB (+3.0 sen) advanced on the Main Board last Friday.

• Asian equities finished broadly lower on Monday as Japanese shares landed on soft footing. The Nikkei lost 0.2%, dragged down by losses in the banking and export-related counters, while the Hong Kong stockmarkets closed for the Christmas holiday. The Shanghai Composite Index, however, rebounded to end 0.4% higher after investors shrugged off concerns over tighter property cooling measures in anticipation of increased government spending in 2017. The majority of the ASEAN stockmarkets was splashed in red.
   
• Wall Street rose despite the thin trading volume last Friday, as gains in healthcarerelated shares offset the losses in consumer-discretionary and energy stocks. The Dow (+0.1%) closed in green – led by the positive close in United Health Group (+0.9%) and Procter & Gamble (+0.6%). Meanwhile the S&P 500 and the Nasdaq finished up 0.1% and 0.3% respectively.
   
• European benchmark equities finished broadly higher, following the civil claims settlement between Deutsche Bank and Credit Suisse with the U.S. Department of Justice (DoJ) in relation to the banks’ mortgage bond activities prior to the global financial crisis. The FTSE eked-out a 0.1% gain as mining stocks rose to offset the drag in banking heavyweights, while the CAC was also up by 0.1% to 4,839.7 points. The DAX, however, lost 0.1% after falling from its intraday high.

The Day Ahead

• We think that conditions on Bursa Malaysia remains dour as there are still few positives for market players to follow. In addition, we think that most market players are still on their year-end holidays and market breadth is expected to remain on the thin side, thus leaving few options for the market to climb, in our view.

• Therefore, we expect the market to continue drifting over the near term after the key index broke below the 1,620 level – a sign that the market’s weakness is still unfolding. The sustained weakness could also lead the FBM KLCI to retest the psychological level of 1,600 points before the end of the year.

Company Update

• Barakah Offshore Petroleum Bhd's whollyowned subsidiary, PBJV Group Sdn Bhd has secured a contract from Murphy Sabah Oil Co Ltd for the provision of production riser tensioner overhaul, including maintenance and upgrade works. The contract is valued at around RM20.0 mln over a duration of two years with an extension option of a year, commencing December 2016. (The Edge Daily)

Comments

• The aforementioned contract marks the second contract secured by Barakah Offshore in 4Q2016. With the aforementioned contract falling within our orderbook replenishment rate of RM400.0 mln – RM500.0 mln in 2016, we made no changes to our earnings estimates.

• We maintain our HOLD recommendation with unchanged target price of RM0.65. Our target price is arrived by ascribing an unchanged PER of 15.5x to our fully diluted revised 2017 EPS estimate of 4.3 sen. Moving forward, Barakah Offshore’s outstanding orderbook of approximately RM1.20 bln will continue to provide earnings visibility over the next two years.

Company Briefs

• Information Technology solutions company, Mesiniaga Bhd has disposed a three-and-half storey commercial building in Shah Alam to Worldwide Holdings Bhd for RM1.7 mln cash. The original cost of investment for the property was RM1.4 mln in Dec 2011. As at 30th November 2016, the net book value of the property is RM1.3 mln.

• Mesiniaga is expected to gain about RM0.3 mln from the proposed disposal. The property has never been utilised and an excess asset to the group. Hence, the management is of the view that the proposed disposal is in the best interest of Mesiniaga. (The Star Online)

• VS Industry Bhd’s 1QFY17 net profit slipped 44.3% Y.o.Y to RM33.5 mln, mainly to the high initial startup costs incurred by their Malaysian operations in preparation for the upcoming substantial box built order for 2H2017. Revenue for the quarter, however, added 11.0% Y.o.Y to RM680.0 mln. An interim dividend of 1.2 sen per share, payable on 15th March 2017, was declared. (The Star Online)

• Printing firm Tien Wah Press Holdings Bhd has agreed to dispose of its remaining 30.0% stake in Benkert Malaysia Sdn Bhd to Benkert UK Ltd for RM25.8 mln. Tien Wah has accepted Benkert UK’s offer in order to avoid any conflict of interest, considering that Benkert Malaysia may be in direct competition with PT Bintang Pesona Jagat.

• To recap, Tien Wah had announced in October 2016 that it is acquiring British American Tobacco Indonesia’s printing business Bintang Pesona Jagat for about RM96.9 mln. The completion of the disposal of Benkert Malaysia is expected to be by 1Q2017. (The Edge Daily)

• Perisai Petroleum Teknologi Bhd and Emas Offshore Ltd (EOL) have come to a settlement on their dispute over the disposal of Perisai’s 51.0% stake in SJR Marine (L) Ltd to EOL. The companies have agreed to a consideration of US$43.0 mln of the put option shares to be satisfied by EOL. This would comprise US$20.0 mln cash on the completion date and US$23.0 mln in a deferred payment amount.

• The consideration of US$20.0 mln (RM89.5 mln) is crucial to ensure the success of Perisai’s debt restructuring plan and following completion of the sale of the put-option shares, SJR Marine will no longer be part of Perisai Group and this is consistent with the Perisai Group's plan to exit the offshore construction segment. The proposed settlement agreement is expected to be completed by 3Q2017. (The Edge Daily)

• REV Asia Bhd is buying three Malay content websites — Siraplimau, Myresipi and Kongsiresepi for RM2.7 mln. REV Asia’s 70.0%-owned subsidiary, Rev Lifestyle Sdn Bhd has entered into a conditional sale and purchase agreement with Dua Marhalah Sdn Bhd for the proposed acquisition, which is expected to be completed end of December 2016. (The Edge Daily)

• Minho (M) Bhd is providing its indirect subsidiary, Euro-CGA Sdn Bhd a term loan of RM3.0 mln at an interest rate of 8.9% p.a. for 12 months to assist the latter in purchasing imported sawn timber for its manufacturing of moulded timber. The loan is fully financed from internal funds. Euro-CGA is one of the significant companies within the Minho Group, contributing about 9.0%-13.0% to the group's total combined revenue. (The Edge Daily)

• Fitters Diversified Bhd has decided not to proceed with plans to list its whollyowned subsidiary, Future NRG Sdn Bhd (FNRG) on the Catalist board of the Singapore Exchange (SGX) for the time being. No reason, however, was given for its decision although the group said it may re-consider listing the subsidiary in the future. The company first announced plans on the proposed listing of FNRG on 10th January 2014. (The Edge Daily)

• Icon Offshore Bhd has bagged a RM5.6 mln contract to provide one straight supply vessel to EQ Petroleum Production Malaysia Ltd for the Seligi/PM 8 (Extension) oil field offshore Peninsular Malaysia. The contract will commence in December 2016 and will continue for a period of one year. (The Edge Daily)

• IRIS Corp Bhd’s Group Manging Director and CEO, Datuk Tan Say Jim has ceased to be a substantial shareholder of the company after disposing of 56.6 mln shares via a direct business transaction. Tan had disposed of the shares, which is equivalent to a 2.5% stake in the company, for RM6.2 mln on 22nd December 2016. Following the disposal, Tan's stake in Iris dwindled to 3.9%. (The Edge Daily)

Source: Mplus Research - 27 Dec 2016