• The FBM KLCI (-0.3%) ended the week in the negative territory, in-tandem with the bearish sentiments in Asian stockmarkets – led by the bigger-thanexpected fall in China’s export data. The key index was also lower by 0.2% W.o.W at 1672.5 points. The lower liners declined, with the exception of the FBM Fledging (+0.5%), while the broader market finished mostly in red.

• Market breadth turned negative as losers beat winners on a ratio of 464-to-327. Traded volumes slid 12.9% to 2.21 bln shares, amid profit-taking activities in the lower liners.

• More than half of key index members retreated – including BAT (-37.0 sen), Hong Leong Bank (-22.0 sen), Genting (- 11.0 sen), Hong Leong Financial Group (- 10.0 sen) and Petronas Gas (-10.0 sen). Meanwhile, other losers include LPI Capital (-30.0 sen), Sam Engineering (- 23.0 sen) Lafarge Malaysia (-15.0), Padini Holdings (-13.0 sen) and Malaysia Airport Holdings (-9.0 sen).

• Notable gainers included United Plantations (+58.0 sen), Panasonic Manufacturing Malaysia (+30.0 sen), TAHPS Group (+19.0 sen), Ajinomoto (+16.0 sen) and Excel Force (+10.0 sen). Telco heavyweights like Maxis (+4.0 sen), Axiata (+3.0 sen) and Digi (+3.0 sen) rallied, trailed by Hap Seng Consolidated (+3.0 sen) and Public Bank (+2.0 sen).

• China equities fell on Friday, dragged down by lower-than-expected trade data as the Shanghai Composite Index finished down 0.2% after a volatile trading session. On the other hand, the Nikkei gained 1.2%, propped up by gains defensive shares like the consumer staples (+1.8%) and utilities (+1.7%) sector. Meanwhile, the Hang Seng Index also advanced 0.5% – led by the positive close in China Petroleum & Chemical (+3.6%) and PetroChina (+2.6%). The majority of the ASEAN stockmarkets were painted in red at Friday’s closing bell.

• U.S. stockmarkets closed mostly up, buoyed by upbeat quarterly earnings from U.S. banks like JP Morgan Chase (+0.5%) and Bank of America (+0.4%). The Dow (- 0.03%) finished flattish at 19,885.7 points, although the S&P 500 (+0.2%) and the Nasdaq (+0.5%) advanced.

• Earlier, European equities finished largely in the green, as investors cheered betterthan-expected U.S. corporate earnings, amid the rebound in carmakers and healthcare shares. The CAC and the DAX added 1.2% and 0.9% respectively, while the FTSE (+0.6%) extended its gains for the 14th consecutive day – jumping 33.0% since its recent low in February last year.

The Day Ahead

• Last Friday’s consolidation came earlierthan-expected as the market mirrored the weaker performance in most regional indices. The pullback was also healthy as it allows the market to take a breather and to allow the gains to be digested.

• The start of the week, however, may see a quick recovery given that the general market undertone is still largely positive. As it is, market breadth remains encouraging as market interest is still improving and this is also a sign that investor confidence is still on the mend.

• The rebound could allow the key index to retest the 1,680 level as we think the rotational interest among the index heavyweights could return, while the broader market shares and the lower liners will continue to draw participation from retail players.

Company Update

• OCK Group Bhd, through its 60.0%-owned subsidiary OCK Vietnam Towers Pte Ltd (OCK Vietnam), has completed the acquisition of the entire equity interest in Southeast Asia Telecommunications Holdings Pte Ltd (SEATH) for US$50.0 mln (RM223.1 mln) on 13th January 2017.

• The 100% equity interest consists of 42.0 mln ordinary shares in SEATH and the purchase was fully satisfied by cash. SEATH is principally involved in the development, installation, ownership, operation and leasing out of base transceiver station towers, infrastructure and other related assets.

Comments

• We view this acquisition as positive and earnings accretive over the longer-term period given that SEATH has been profitable over the past three years. The expansion will also bring OCK one step closer to becoming one of the largest telecommunication tower operator in the South East Asia region. Following the completion of the aforementioned acquisition, OCK now owns approximately 3,000 tower assets across the ASEAN region.

• We made no changes to our earnings estimates as we have already incorporated its potential earnings into our forecast and we maintain BUY recommendation with an unchanged target price of RM0.95.

• Our target price is derived from a sum-ofparts (SOP) approach as we valued its telecommunication network services and green energy & power solutions business segments on a discounted cash flow approach (key assumptions include a WACC of 9.0%, terminal growth rate of 1.5%) to reflect its ability to generate recurring revenues and steady earnings.

Company Briefs

• MMC Corp Bhd is taking a 70.0% equity interest in KMB Seaport Sdn Bhd, the operator of Tanjung Bruas Port in Malacca from Seaport Management Services Sdn Bhd for RM21.0 mln in cash.

• The proposed acquisition is a relatedparty transaction as Seaport Management’s holding company, Seaport Terminal (Johore) Sdn Bhd is also MMC’s major shareholder (with a 51.8% stake in MMC).

• In May 2016, KMB Seaport Sdn Bhd inked a privatisation agreement with the Federal government and Malacca Port Authority that gave it a 30-year concession to operate the port. The proposed acquisition is expected to be completed in 1H2017. (The Star Online)

• Only World Group Holdings Bhd’s revenue and pretax profit for the financial year ended 30th June 2016 will be affected due to the temporary closure of its 14 outlets at First World Hotel, Genting Highlands.

• The outlets are temporarily closed due to the ongoing redevelopment and transformation of Resorts World Genting. The outlets, comprising food service, family attraction and retail stores, contributed between 39.0% and 59.0% to its revenue and pretax profit. Meanwhile, the group is finalising the terms of the tenancy agreement with the landlord for the opening of food service outlets at Genting Premium Outlets, Resorts World. (Bernama)

• Dagang NeXchange Bhd (DNeX) has bagged a RM104.3 mln subcontract from TCSens Sdn Bhd to operate and manage the Vehicle Entry Permit and Road Charges (RC) System Project for five years, through its 51.0%-owned subsidiary DNeX RFID Sdn Bhd.

• DNeX RFID's business operations are focused on research and development, design, manufacturing and trading of radio frequency identification technology, security systems and related equipment. (The Edge Daily)

• Leweko Resources Bhd is hiving off its sawn and moulded timber business along with three freehold industrial lands with buildings and structures, machineries and equipment for RM15.5 mln, which it expects to cut its liabilities by RM14.0 mln as well as reducing its operating loss.

• Leweko’s wholly-owned subsidiary, Maju Weko Timber Industries Sdn Bhd has signed a sale and purchase agreement with SYF Resources Bhd's wholly-owned subsidiary, Great Platform Sdn Bhd for the disposal of the lands, measuring 8.7- ha. in total, in Gerik, Perak. Leweko expects to realise a net gain of approximately RM7.8 mln from the proposed disposal. (The Edge Daily)

• Atlan Holdings Bhd’s 3QFY17 its net profit rose 22.1% Y.o.Y to RM16.7 mln, mainly due to higher foreign exchange gain of RM9.6 mln contributed by Duty Free International Limited. Revenue for the quarter, however, fell 6.3% Y.o.Y to RM181.6 mln.

• For 9MFY17, cumulative net profit gained 34.1% Y.o.Y to 41.9 mln. Revenue for the period added 7.1% Y.o.Y to RM613.0 mln. A second interim single tier dividend of 10.0 sen per share, payable on 13th March 2017 was announced. (The Edge Daily)

• Willowglen MSC Bhd’s Singapore-based wholly-owned unit, Willowglen Services Pte Ltd has won a RM7.7 mln contract to deliver various electrical instrumentation control panels.

• Willowglen will also design and supply a programmable logic controller and supervisory control and data acquisition system under the contract offered by Sanli M&E Engineering Pte Ltd. The contract commenced on 11th January 2017 and will be completed by 21st Deccember 2017. (The Edge Daily)

• Gadang Holdings Bhd’s wholly-owned unit, Renigional Utilities Sdn Bhd, together with BT Solar Sdn Bhd has proposed to jointly develop a 5.9MW a.c. photovoltaic plant in Kota Marudu, Sabah.

• The joint-venture, RUSB-BTS has accepted the letter of acceptance from the Energy Commission dated 15th Deccember 2016, but would need to satisfy certain obligations including completion of negotiation and execution of the project documents prior to the commission issuing the formal letter of award for the project. (The Edge Daily)

• Malaysian Resources Corp Bhd (MRCB) is disposing of its wholly-owned building and facilities maintenance service unit, Semasa Services Sdn Bhd for RM4.8 mln, nearly 16.0% lower than the price it was acquired in 1982.

• The buyer is Crystal Clear Cleaning Sdn Bhd, which involved in general cleaning services. The proposed disposal is expected to be completed by 2Q2017. (The Edge Daily)  

Source: Mplus Research - 16 Jan 2017