• Following the renewed strength in the U.S. Dollar against the Ringgit, the FBM KLCI (-0.1%) ended marginally lower yesterday as the key index recorded its seventh straight session of decline after hovering mostly in the negative territory. The lower liners – the FBM Small Cap (+0.3%), FBM Fledgling (+0.2%) and FBM ACE (+0.3%), however, all rebounded, while the broader market ended mostly positive.

• Market breadth turned positive as gainers edged losers on a ratio of 401-to-376 stocks. Traded volume, however, sank 40.3% to 2.21 bln shares as selloff on the lower liners abated.

• Genting (-17.0 sen) topped the big board decliners list, followed by KLK (-8.0 sen), Hong Leong Finanical Group (-8.0 sen), Westports (-4.0 sen) and Tenaga (-4.0 sen). Significant losers on the broader market include Panasonic (-52.0 sen), KESM Industries (-28.0 sen), Star Media Group (-16.0 sen) and Scientex (-13.0 sen). Superlon sank 44.0 sen after reported a disappointing set of quarterly earnings.

• Amongst the biggest advancers on the broader market were Heineken (+28.0 sen), Hartalega (+25.0 sen), Hai-O (+17.0 sen) and Pintaras (+16.0 sen). JHM Consolidated added 18.0 sen, snapping a six consecutive session of losses. On the FBM KLCI, BAT (+18.0 sen), PPB Group (+16.0 sen), DiGi (+6.0 sen), Telekom Malaysia (+6.0 sen) and Axiata (+4.0 sen) were amongst the biggest gainers.

• Japanese equities extended their losses yesterday as the Nikkei dipped 0.3% as high-yield stocks such as automakers, railway operators and banks underperformed. The Shanghai Composite (+0.1%) advanced, while the Hang Seng Index (+0.5%) extended its gains on the recovery of property shares. ASEAN stockmarkets, meanwhile, ended mixed.

• U.S. stockmarkets advanced overnight on optimism over the implementation of President Donald Trump’s tax cut plan, offsetting the Federal Reserve’s hawkish tone on interest rates normalisation. The Dow gained 0.3% while the S&P 500 added 0.4% – the latter anchored by gains in the technology sector (+1.1%).

• Earlier, European benchmark indices – the FTSE (+0.4%), CAC (+0.3%) and DAX (+0.4%), all ended higher to close near their 10-week high, boosted by the rising U.S. Dollar against the Euro Currency. Notable advancers include Alstom (+4.3%) and Siemens AG (+1.5%) after both parties agreed to merge their rail operations.

The Day Ahead

• With yet another trading session in the red, the FBM KLCI is approching oversold and a rebound is due, albeit the market undertone is still one of cautiousness amid the continuing selling by foreign funds. While the market could still dip further, the near term downside will probably be subsiding at around the 1,760 level where we expect mild bargain hunting to provide some measure of support after successive days of weakness.

• The potential tax cut scenario in the U.S., where more details were unvieled overning, should bode well for the global equity markets over the near term and should provide some support to the market recovery, in our view, and a rebound towards the 1,770 level for now. ? The lower liners and broader market shares are also seeing some revival and should see some bouts of fresh buying from retail players that could aid the general market’s recovery over the near term.

Company Update

• V.S. Industry Bhd’s (VSI) 4QFY17 net profit more than tripled to RM36.8 mln, from RM10.9 mln a year ago, underpinned by significantly higher sales orders from an existing key client. Revenue for the quarter also jumped 77.4% Y.o.Y to RM983.4 mln, from RM554.2 mln in the last corresponding period.

• Consequently, FY17 net profit rose 32.6% Y.o.Y to a record high at RM156.3 mln vs. RM117.9 mln last year, in-tandem with a 50.8% Y.o.Y hike in revenue at RM3.28 bln, from RM2.18 bln a year ago. Subsequently, the group has declared a fourth interim dividend of one sen per share, payable on 27th October 2017, alongside a proposed final dividend of another one sen, bringing total dividend for the year to 5.9 sen, from 4.7 sen in FY16.

Comments

• The reported earnings was within our expectations, accounting to 101.6% of our full-year estimated net profit of RM153.8 mln, with the reported revenue coming in 9.1% higher than of our estimated FY17 revenue of RM3.01 bln. The difference in revenue was mainly due to stronger-than-expected revenue contribution from its Malaysian and Indonesian units.

• We increased our FY18 earnings and revenue forecast by 15.4% and 9.5% to RM260.9 mln and RM4.36 bln respectively, premised on potentially higher revenue as VSI boost capacity to cater to additional box-build orders from an existing key client and potentially higher margins from new orders. We also introduce our FY19 earnings and revenue forecast at RM289.7 mln and RM5.2 bln respectively.

COMPANY BRIEF

• Astro Malaysia Holdings Bhd has announced that there is no financial or operational impact from the termination of an agreement with MEASAT Satellites Systems Sdn Bhd (MSS) to supply transponder capacity for MEASAT-3c satellites to the latter. The agreement that was signed between both parties in May 2013 was terminated by MSS through a no-fault terminating event, and thus, no penalties were charged.

• Under the agreement, Astro was to utilise the transponder capacity of six Ku-band to MSS in tranches for a fee of US$166.4 mln (RM497.5 mln at the time). The agreement was for 15 years, beginning with the expected launch of M3c satellites in 3Q2015. However, since the satellites M3c was still not launched by 15th November 2016, MSS had terminated its satellite agreements to procure M3c. (The Star Online)

• Yinson Holdings Bhd's 2QFY17 net profit rose 38.5% Y.o.Y to RM83.6 mln, from RM60.4 mln last year, lifted by the chartering commencement of a floating production storage and offloading (FPSO) vessel John Agyekum Kufuor or JAK in Ghana and a stronger Greenback. Quarterly revenue, meanwhile also jumped 89.8% Y.o.Y to RM217.2 mln, from RM114.5 mln in 2QFY16. Subsequently, the company declared a 4.0 sen interim dividend, payable on 22th December 2017. (The Edge Daily)

• Wong Engineering Corp Bhd's 3QFY17 net profit grew over 37 times to RM3.1 mln, from RM82,000 in the previous corresponding period, mainly due to a 35.0% Y.o.Y growth in revenue to RM11.9 mln, from RM8.8 mln in the similar period last year and better operational efficiency. (The Edge Daily)

• PRG Holdings Bhd has inked a 49:51 joint-venture (JV) agreement with Syarikat Perumahan Negara Bhd (SPNB) to develop RM5.0 bln worth of affordable housing projects. The JV company, Premier Aspirasi Development Sdn Bhd (PADSB) is another meaningful step towards growing the group and demonstrates PRG’s focus on diversifying its income stream. (The Edge Daily)

• Glomac Bhd‘s 1QFY18 net profit plunged 97.5% Y.o.Y to RM2.1 mln, from RM85.5 mln a year ago, dragged down by lower revenue that recorded a one-off land sale gain in the previous year's corresponding quarter. Consequently, revenue for the quarter lost 61.2% Y.o.Y to RM97.5 mln, from RM251.4 mln previously. The group has also attributed the softer earnings to the slower pace of launches over the past two years. (The Edge Daily)

• Guan Chong Bhd has won the bid to acquire the assets of two companies for US$8.4 mln (RM35.4 mln) in a sale authorised by a bankruptcy court in New York. The group has signed an agreement with Cocoa Services LLC and Morgan Drive Associates LLC to acquire their assets, which comprised of a fully-furnished building with its inventories in New Jersey, a butter melting plant, a butter deodoriser plant and a liquor melting plant, all intellectual property assets owned by the sellers as well as other inventories, including finished goods and work-inprogress.

• The asset acquisition will be funded via a combination of 40.0% internally generated funds and 60.0% banking facilities and is expected to be finalised in the 4Q2017. (The Edge Daily)

• Shareholders of Goh Ban Huat Bhd have received a mandatory takeover offer from Paragon Adventure Sdn Bhd (PASB) at RM1.40 per share (2.1% discount to its last traded price of RM1.43). The proposed takeover also included GBH warrants not held by PASB at 40.0 sen per share, which is at a 13.0% discount to its last traded price.

• The offer came following the emergence of PASB as a 51.0% shareholder of GBH on 27th September 2017 after it acquired the equity stake from Tan Sri Datuk Tan Hua Chun, together with 51.0% of the total outstanding GBH warrants.

• PASB intends to keep the listing status of GBH and that the takeover price of RM1.40 was made after taking consideration GBH shares' volumeweighted average market price of between RM1.35 and RM1.41 over the past six months. (The Star Online)  

Source: Mplus Research - 28 Sept 2017