• The FBM KLCI finished 0.6% higher on Friday, buoyed by firm overnight gains in the U.S. stockmarkets and upbeat manufacturing data from China. Similarly, the key index also closed higher by 0.8% W.o.W to 1698.94 points. The lower liners advanced – led by the FBM Fledging (+0.8%), as the broader market closed mostly positive on Friday.

• Market breadth was positive as advancers beat the losers on a ratio of 542-to-338. Traded volumes also expanded by another 17.7% to 2.69 bln shares, on the back of increased risk appetite amid the improving conditions in major global economies.

• Significant gainers on the key index were BAT (+46.0 sen), Genting (+20.0 sen), Telekom Malaysia (+13.0 sen) and Hap Seng Consolidated (+12.0 sen). MISC Bhd rose 20.0 sen after reporting a 4.6% Y.o.Y gain in its FY16 net profit to RM2.58 bln. Meanwhile, broader market outperformers include Nestle (+82.0 sen), Malaysian Pacific Industries (+40.0 sen), Tasek Corporation (+40.0 sen), Kotra Industries (+34.0 sen) and Lafarge Malaysia (+20.0 sen).

• United Plantations (-56.0 sen), Far East Holdings (-15.0 sen), Mesiniaga (-11.0 sen), Malaysia Airport Holdings (-10.0 sen) and Fraser & Neave (-10.0 sen) were among the main losers. The only five decliners on the Main Board include Petronas-affiliated companies like Petronas Gas (-22.0 sen) and Petronas Dagangan (-2.0 sen), followed by IHH Healthcare (-6.0 sen), Astro (-5.0 sen) and Westports (-5.0 sen).

• Key Asian stockmarkets closed firmly in the green, following upbeat sentiment from Wall Street and better-thanexpected China trade figures. The Nikkei rose 2.5% as the weaker Yen boost export-related stocks. The Shanghai Composite Index gain 0.4% to 3,196.7 points, while the Hang Seng index (0.2%) advanced, with six-of-nine sectors in the green. The majority of ASEAN stockmarkets rallied on Friday’s close.

• Wall Street hit fresh highs as investors look forward to Donald Trump’s potential tax reform plans. The Dow (+0.5%) traded higher, closing above the 20,000 psychological level, while the S&P 500 gained 0.4%, mainly on gains in energy stocks amid crude oil production cuts. The Nasdaq also finished up 0.3% higher to 5,734.1 points.

• European shares finished on a positive note on the back of gains in commodityrelated stocks and higher-than-expected corporate earnings. The FTSE rose 0.4%, buoyed by Rio Tinto (+5.6%) and Anfofagasta (+4.7%). The DAX settled up by 0.2% - led by Thyssenkrupp (+2.6%) after the group’s earnings were in-line with analysts’ forecast, while the CAC (+0.04%) flatlined.

The Day Ahead

• We expect stocks on Bursa Malaysia to continue posting decent gains over the near term as investor sentiments are still positive amid the strong performance of most global stock indices that is buoyed by the impending announcement of President Trump’s tax cut plans.

• The tax reduction plan is seen as one to the President’s key election manifesto aimed at accelerating the U.S. economy’s recovery prospects, which could also have positive spillover effects on the global economy, despite the President’s trade protectionist rhetoric.

• We think the near term gains to be broadbased as both the index heavyweights and lower liners to be chased up by institutional and retail players respectively – providing further boost to market breadth and depth. The sustained runup should see the 1,700 points level cleared with relative ease and the key index could next target the 1,710 points level. MACRO BRIEF

• Malaysia’s Industrial Production Index’s (IPI) rose 4.7% Y.o.Y in December 2016, faster than economists’ expectations of a 4.0% Y.o.Y growth - driven by growth in manufacturing (+4.3% Y.o.Y), mining (+5.8% Y.o.Y) and electricity (+6.1% Y.o.Y). The improvement was, however, slower than the 6.2% Y.o.Y growth recorded in November 2016. (The Star Online)

Company Update

• OldTown Bhd is planning to expand to Yangon, Myanmar as part of its plan to venture into other territories in Southeast Asia. The coffee-chain operator has executed a licence agreement with Nikmat Mujur Sdn Bhd and its director and majority shareholder, Low See Nam to operate OldTown White Coffee café outlets in Yangon within nine months. The term of the licence agreement is for five years, with an option to renew for one consecutive term of five years.

• Consequently, Nikmat Mujur will hold an exclusive licence to operate three outlets in Yangon for two years. The company will also have a non-exclusive right to use the OldTown White Coffee trade name and trade mark, to operate the system, to sell the approved products and to provide specialised services within Yangon. ? Nikmat Mujur will pay Oldtown an area licence fee for three outlets of US$120,000, US$60,000 for renewal fee for the area licence for the three outlets a royalty fee of US$1,500 per outlet per month.

• The licensee will also establish, operate and open a pilot outlet to the public within nine months from the date of the license agreement or such other extended date as may be determined solely by Oldtown.

Comments

• The new license agreement with Nikmat Mujur, Myanmar is in-line with Oldtown’s strategy to expand aggressively towards international markets. We remain sanguine of the license agreement in Yangon, as it will allow Oldtown to penetrate into a new regional market, as well as act as a stepping stone for more new outlets to be opened in Myanmar, moving forward.

• At the current juncture, however, we leave our earnings estimates unchanged, pending a more information on the venture with Nikmat Mujur. We also reiterate our HOLD recommendation on Oldtown with an unchanged target price of RM2.10.

• Our target price is derived from ascribing a target PER of 16.5x to our FY18 net EPS of 12.9 sen. The targeted PER is based on a discount to the 21x-25x average PER of consumer products market leaders like Nestle and Dutch Lady due to Oldtown’s smaller market capitalisation.

Company Briefs

• Westports Holdings Bhd’s 4Q2016 net profit rose 16.9% Y.o.Y to RM155.0 mln, underpinned by healthy growth in its throughput volume at its terminal. Revenue for the quarter gained 20.2% Y.o.Y to RM573.3 mln.

• For 2016, cumulative net profit added 26.1% Y.o.Y to RM636.9 mln. Revenue for the year climbed 20.8% Y.o.Y to RM2.03 bln. A 6.7 sen dividend per share, payable on 8th March 2017, was declared. (The Star Online)

• AirAsia X Bhd will start flying to Hawaii from 28th June 2017, marking the budget airline’s maiden service to the U.S. The airline would operate four flights a week from Kuala Lumpur to Honolulu via Osaka, Japan. (The Edge Daily)

• Kia Lim Bhd has reported that a fire broke out at a factory belonging to its wholly-owned subsidiary, Kia Lim Kilang Batu Bata Sdn Bhd. The affected buildings housed machinery for firing materials preparation and storage as well as the firing materials transportation and feeding system together with a tunnel kiln..

• At this juncture, the company is unable to ascertain the financial loss, but believe that all the affected building and machinery are adequately insured. The loss of production will likely be mitigated gradually by another factory located within the same locality as the affected factory. (The Edge Daily)

• Paramount Corporation Bhd’s 4Q2016 net profit jumped 103.1% Y.o.Y to RM30.3 mln on stronger sales momentum across its property development projects. Revenue for the quarter climbed 21.4% Y.o.Y to RM179.7 mln.

• For 2016, cumulative net profit increased 10.8% Y.o.Y to RM75.0 mln. Revenue for the year, however, fell marginally by 0.5% Y.o.Y to RM573.1 mln. A final single-tier dividend of six sen per share was declared. (The Edge Daily)

• Malaysia Airports Holdings Bhd's (MAHB) passenger traffic kicked off to a good start in January 2017 with 7.8 mln (+13.3% Y.o.Y) passengers passing through the 39 airports it manages in the country. This was driven by double digit growth in both international and domestic passenger traffic as more people travelled during the Chinese New Year holiday period. International traffic for the month saw a 14.1% Y.o.Y increase to 4.1 mln, while domestic traffic grew 12.5% Y.o.Y to 3.8 mln. (The Edge Daily)

• MWE Holdings Bhd has sold off its entire stake in U.S.-based medical mobile monitoring company, Integrity Tracking for approximately US$10.3 mln (RM44.8 mln), where the cash proceeds from the sale will be used to reduce the group’s debt and to fund its future working capital.

• MWE originally invested in Integrity Tracking for US$4.0 mln in 2012,. The company looks to pocket an estimated US$9.9 mln within 45 days from the date of sale, while the remaining US$389,000 is held by a third party to pay for possible expenses after Integrity Tracking’s merger with MobileHelp. (The Edge Daily)

• Excel Force MSC Bhd’s co-founder, Wang Kuen-Chung @ Jeff Wang, who was previously the group's Executive Chairman as well as the Managing Director, has given up his Chairmanship to Datuk Norraesah Mohamad with immediate effect. Wang, however, remains the Managing Director of the company. (The Edge Daily)

• MISC Bhd’s 4Q2016 net profit fell 29.6% Y.o.Y to RM529.8 mln as it recorded lower revenue in nearly all of its operating segments. Revenue for the quarter shrank 23.9% Y.o.Y to RM2.52 bln.

• For 2016, cumulative net profit added 4.6% Y.o.Y to RM2.58 bln. Revenue for the year, however, decreased 12.0% Y.o.Y to RM9.60 bln. (The Edge Daily)

• 7-Eleven Malaysia Holdings Bhd has appointed Hishammudin Hasan as its new Deputy Chief Executive Officer (CEO) on 10th February 2017. Hishamuddin, who is a Singaporean, had been the director of business development at Berjaya Corp Bhd since 2015 and he also held directorships in Danone Indonesia and Kraft Malaysia Sdn Bhd.

• Separately, Puan Sri Rohani Parkash Abdullah was appointed as an Independent Non-Executive Director. Rohani also holds directorships in Nylex (Malaysia) Bhd and CCM Duopharma Biotech Bhd. (The Edge Daily)

• WZ Satu Bhd is acquiring a PR1MA housing project’s construction company from funeral service provider, Nirvana Asia Ltd’s founder-cum-Executive Chairman, Tan Sri Kong Hon Kong and Deputy Chief Executive Officer, Kong Yew Foong for RM30.0 mln, to be satisfied via issuance of new shares. Upon the completion of the acquisition, Hon Kong is expected to hold 7.8% direct interest in WZ Satu. (The Edge Daily)

• IRIS Corp Bhd confirms that its CEO and Group Managing Director (MD), Datuk Tan Say Jim, has been on a leave of absence since 7th November 2016, due to personal reasons. This confirms a previous report by The Edge Financial Daily on 27th December 2016, that Tan, who has ceased to be a substantial shareholder of the group amid plans for a major overhaul of its operations, has been on leave since November 2016. ? Tan had a 5.0% direct stake in the company, with an indirect 1.5% stake, as at 20th June 2016, was last noted paring down his stake in IRIS to 2.7% on 24th January 2017 by disposing of 4.0 mln shares at 13 sen apiece. A new operations advisory committee (OAC) with tenure of three months was formed on 10th February 2017 to oversee operations in the group. (The Edge Daily)  

Source: Mplus Research - 13 Feb 2017