• The FBM KLCI flatlined on Monday, although all the lower liners advanced – led by the FBM ACE (+1.4%), the FBM Fledgling (+0.5%) and the FBM Small Cap (+0.2%). The broader market, however, finished mixed, with the Industrial (- 0.1%), Trading/Services (-0.1%), Technology (-0.2%), Finance (-0.03%) and Plantations (-0.1%) sub-sectors in the red.

• Market breadth was slanted towards the positive side as advancers edged decliners on a ratio of 430-to-401 stocks. Traded volume also gained 13.7% to 2.83 bln shares, driven by buying-interest in the lower liners.

• Major Main Board movers were Genting Malaysia (+9.0 sen), DIGI (+4.0 sen), Hap Seng Consolidated (+4.0 sen), Hong Leong Financial Group (+2.0 sen) and IJM (+2.0 sen). Broader market gainers consists of Southern Acids (+19.0 sen), Lii Hen Industries (+17.0 sen), Chin Teck Plantations (+12.0 sen) and Fraser & Neave (+12.0 sen). Aeon Credit also gained 12.0 sen, after reporting upbeat quarterly results.

• Meanwhile, broader market decliners were Dutch Lady (-30.0 sen), Tasek (-24.0 sen), Perusahaan Sadur Timah (-13.0 sen), Kumpulan H&L (-11.0 sen) and Enra (-9.0 sen). Similarly, blue-chip constituents like BAT (-52.0 sen), Genting (-12.0 sen), Petronas Dagangan (-8.0 sen), Hong Leong Bank (-6.0 sen) and IHH Healthcare (-3.0 sen) declined due to selling-pressure on Monday’s session.

• Asian stocks closed mostly higher – led by the rally in Chinese equities following the weeklong holiday. The Shanghai Composite index jumped 1.3%, boosted by the central bank’s decision to trim the reserve requirement ratio. Trading on the Nikkei was halted for ‘Health and Sports Day’ holiday, while the Hang Seng (+0.5%) fell on the back of profit-taking after hitting record high last Friday. ASEAN stockmarkets ended mostly higher on Monday’s closing.

• Major U.S. bourses took a breather after last week’s rally, ahead of the earnings season. The Dow (-0.1%) fell into the red, despite hitting a fresh new intraday high, weighed down by General Electric (- 3.9%). Meanwhile, on the broader market, the Nasdaq (-0.2%) ended a nine-day winning streak, alongside the S&P 500 that fell 0.2%.

• Earlier, European bourses finished mostly up as investors digested a string of economic data. The CAC gained 0.1%, alongside the DAX (+0.2%) – led by higher-than-expected industrial output data. The FTSE, however, pared 0.2%, dragged down by a stronger Pound and losses in mining stocks.

The Day Ahead

• The market is still devoid of a clear direction after it closed unchanged yesterday with the buying interest still largely absent in view of the lack of fresh leads. This is leaving the market on a directionless mode with more of the same pattern over the near term.

• As it is, there are few leads to stir market players’ interest and this is likely to leave the key index directionless for longer. Therefore, we see the market finding the 1,770 level a formidable level to breach with the few catalysts to provide the impetus for the market to head significantly higher. There is also little downside pressure for now and this will allow the key index to find ample support at the 1,760 level over the near term.

• Meanwhile, we continue to see short-term plays prevailing among the lower liners and broader market shares but the upsides will be punctuated by bouts of profit taking as retail players will opt to cash out of their winning positions.

Company Update

• Protasco Bhd's 100%-owned subsidiary, Ikram Greentech Sdn Bhd will own a controlling 51.0% stake in a new energy business company under Protasco's internal restructuring to streamline the group's operations. Ikram Greentech will initially buy two shares or 100% in dormant company Ikram Infra Bina Sdn Bhd, which will be known as I2 Energy Sdn Bhd, for RM2.00.

• I2 Energy Sdn Bhd, which is intended to undertake new energy business, will increase its paid up capital from RM2.00 to RM100,000. Meanwhile, Icon Energy Solutions Sdn Bhd and KI Engineering Sdn Bhd will hold 45.0% and 4.0% stakes respectively in I2 Energy Sdn Bhd.

Comments

• We are neutral on the abovementioned acquisition as there will no financial impact for the time being given that I2 Energy Sdn Bhd is currently dormant. Nevertheless, we reckon that the addition of new energy business could improve the group’s profitability upon its operation, but the earnings are likely to be dominated by the existing construction, concession and property development divisions.

• We made no changes to our forecast and we maintain our BUY recommendation with an unchanged price of RM1.20. We arrive at our target price on a sum-ofparts basis by ascribing an unchanged target PER of 11.0x to its 2018 construction earnings as well as a target PER of 8.0x (unchanged) to its 2018 concession and engineering services’ earnings. Its education and trading units valuations remain pegged at target PERs of 6.0x respectively due to their smaller scale businesses, while its property development division’s valuation is from ascribing an unchanged at 0.6x of its BV.

Company Brief

• Serba Dinamik Holdings Bhd will set up and operate a chlor-alkali plant in Tanzania in a partnership with Junaco (T) Ltd (JTL). Its wholly-owned subsidiary, Serba Dinamik International Ltd (SDIL) had inked a joint-venture (JV) agreement with JTL to develop the chlorine skid mounted chlor-alkali plant, which has a capacity of 45 tonnes per day, in Mlandizi ward, Kibaha District’s coast region. The plant is expected to be developed on 15,787 sq.m. industrial land in the Msufini area.

• SDIL and JTL will, either directly or through affiliates, form a specialpurpose vehicle in Dubai which will ultimately hold 100% shareholding in the project. SDIL will hold a 25.0% stake in the JV company, to be named Msufini LLC. Msufini LLC will, in turn, hold 100% stake in Msufini Chlor Tanzania Ltd which will be the direct owner of the plant. The JV agreement was expected to be completed by 1Q2018. (The Star Online)

• Mudajaya Group Bhd has bagged a Light Rail Transit Line 3 (LRT3) construction work, winning a contract valued at RM1.16 bln. Prasarana Malaysia Bhd awarded the contract for the construction of guideways, stations, park and ride, ancillary buildings and other associated works. The project is expected to be completed by February 2021 with a construction period of 39 months from the date of the letter of acceptance. Including the latest award, Mudajaya’s outstanding orderbook todate stands at RM3.50 bln. (The Star Online)

• Sanichi Technology Bhd seeks to raise up to RM99.1 mln via a proposed rights issue with warrants as its plan to diversify further into the property business. Sanichi proposed a renounceable rights issue of up to 990.6 mln new shares together with free detachable warrants on the basis of two rights shares together with a free Warrant E-for-every existing Sanichi share held on an entitlement date to be determined later.

• The proceeds would be used mainly to acquire identified landbank at strategic locations in Malaysia and/or to enter into joint ventures with land owner(s) to jointly develop their land for a percentage of the development profit. The company said it was still in the midst of identifying the suitable landbank. The proposed rights issue with warrants is expected to be completed by 1Q2018. (The Star Online)

• Hovid Bhd has received a conditional voluntary takeover offer from its controlling shareholder, Managing Director and Chairman, David Ho Sue San. Ho, who holds a 33.7% stake in the group, is offering to buy all the remaining shares he does not own at 38.0 sen per share in a bid to take the company private.

• The offer price represents a 6.0 sen or 18.8% premium over its last traded price before the announcement. The takeover offer, which sees Fajar Astoria Sdn Bhd acting as joint offeror, also includes an offer to purchase the group’s outstanding five-year warrants at 20 sen per warrant. Ho and Fajar Astoria collectively own 56.4% of the 181.8 mln warrants, which are due to expire on 5th June 2018 at an exercise price of 18.0 sen per warrant. (The Edge Daily)

• Prestariang Bhd is buying eight semidetached signature corporate offices and retail suites in Cyberjaya for a total of RM11.4 mln. The properties, which are adjacent to eight properties acquired for RM25.5 mln in January 2017, are in a strategic location to consolidate the group’s operations. The properties are expected to house the group’s Sistem Kawalan Imigresen Nasional (SKIN) and EduCloud operations, software & services, TalentXChange and group corporate office. (The Edge Daily)

• EKA Noodles Bhd’s wholly-owned unit, Kilang Bihun Bersatu Sdn Bhd (KBBSB) has been sued by two suppliers over non-payment of debts, totalling RM1.3 mln. KBBSB owes Great Line Success Sdn Bhd, which supplied plastic packaging materials to KBBSB, RM0.3 mln, which has been overdue since September 2016. It also owes Bukit Raya Sdn Bhd, which supplied broken rice to the firm, about RM0.9 mln. The payment has been overdue since December 2015. The suit for the late payments has been fixed for case management at the High Court in Penang on 7th November 2017. (The Edge Daily)

• Datuk Zakaria Arshad has been reinstated as Felda Global Ventures Holdings Bhd's (FGV) Group President and Chief Executive Officer effective 16th October 2017. Zakaria's return to FGV comes four months after he was suspended and forced to go on a leave of absence by former chairman Tan Sri Mohd Isa Abdul Samad, over alleged irregularities at one of the subsidiaries. (The Edge Daily)  

Source: Mplus Research - 10 Oct 2017