• The FBM KLCI closed higher, taking a breather from the recent selling-pressure, on the back of bargain-hunting activities in selected blue-chips. The lower liners – the FBM Small Cap (+0.4%), the FBM Fledgling (+0.2%) and the FBM Ace (+0.9%) also advanced amid a mostly positive broader market.

• Market breadth was slanted towards the negative side as decliners edged advancers on a ratio of 477-to-400 stocks. Traded volumes, however, gained 8.7% to 1.96 bln shares on buyinginterest in the lower liners.

• Telco heavyweights like Maxis (+5.0 sen) and Digi (+4.0 sen) led the gainers on the key-index, followed by Tenaga (+42.0 sen), KLCC (+12.0 sen) and Petronas Chemicals (+9.0 sen). Meanwhile, consumer-products giants like Nestle (+RM1.34) and Dutch Lady (+64.0 sen) rallied, followed by Hengyuan Refining (+32.0 sen), Pentamaster (+20.0 sen) and Tong Herr Resources (+20.0 sen).

• On the other hand, broader market losers were United Plantations (-24.0 sen), Aeon Credit (-22.0 sen), Carlsberg (-20.0 sen), Globetronics (-11.0 sen) and United U-Li Corp (-11.0 sen). Meanwhile, significant decliners that weighed on the blue-chip gauge include BAT (-94.0 sen), Petronas Gas (-18.0 sen), Hong Leong Bank (-8.0 sen), Genting (-7.0 sen) and Westports (- 7.0 sen).

• Key regional indices closed mostly higher, on bullish sentiments spilled over from Wall Street overnight. The Nikkei (+0.5%) ended higher, buoyed by the strength in financials-related stocks, while, the Shanghai Composite index closed 0.1% higher at 3,337.9 points. The Hang Seng (-0.2%), however, continued to trade lower, as investors booked profits, amid jitters from North Korea’s latest missile test. ASEAN stockmarkets, meanwhile, closed mixed on Wednesday.

• Key U.S. benchmarks were mostly downward pressured, on the back of mild profit-taking activities and amid a rotational play in the lower liners. Still, the Dow logged yet another fresh new high, boosted by improving U.S. economic outlook. The S&P500 (-0.04%) and the Nasdaq (-1.3%), however, declined as investors shift funds out of the tech-heavy indexes into banking stocks.

• European stockmarkets finished broadly in the green, lifted by banking shares on anticipation of financial deregulation under U.S. Federal Reserve Chairmannominee Jerome Powell’s term. The FTSE (-0.9%), however, lingered mostly in the negative territory, weighed down by a stronger Pound following a potential breakthrough in Brexit negotiations between the U.K and the E.U. The DAX (+0.02%), meanwhile, trimmed most of its intraday gains in the eleventh hour, albeit still closing a shade above the breakeven point, alongside France’s CAC (+0.1%).

The Day Ahead

• Despite the generally mixed-to-lower market environment, the key index managed to sprang higher yesterday amid the buying on selective index heavyweights that could mark the start of an overdue rebound from oversold. Yesterday’s rebound also saw the key index tipping back to the 1,720 level with further upsides in the offing as it continues to post a recovery.

• We see the ongoing recovery taking the key index up to the 1,725 level, but we think further upsides may be difficult to come by over the near term ahead of the long weekend. Therefore, bouts of profit taking could limit the gains. On the downside, there should be strong support at its recent low of 1,711 level.

• We also think quick profit taking activities could limit the gains among the lower liners and broader market shares as retail players are likely to stay cautious ahead of the long weekend.

Company Update

• Oldtown Bhd posted a 20.4% Y.o.Y jump in its 2QFY18 net profit to RM15.2 mln, from RM12.6 mln in the previous corresponding year, lifted by higher revenue contribution from its manufacturing division. Revenue for the quarter also grew 14.7% Y.o.Y to RM114.2 mln vs. RM99.5 mln previously.

• Consequently, 1HFY18 net profit expanded 20.3% Y.o.Y to RM32.0 mln, from RM26.5 mln in 1HFY17, while, revenue rose 10.4% Y.o.Y to RM223.5 mln, in comparison to RM202.4 mln last year. The group has also declared a first interim dividend of 3.0 sen per share, payable on 2th February 2018.

Comments

• The reported earnings came in below our expectations – accounting to 41.8% of our FY18 forecast net profit of RM76.5 mln, while quarterly revenue accounted for 45.9% of our full year revenue estimate of RM486.5 mln. We regard the lower-than-expected results as a norm, as Oldtown usually register better results in the second half of its financial year.

• Although the reported results were under our estimates, we leave our earnings forecast unchanged and we maintain our BUY recommendation on Oldtown with an unchanged target price of RM3.10, pending an analyst briefing later. We expect results to improve in 2HFY18, on the back of seasonal increase, intandem with festive seasons and annual sales such as the ‘Singles Day’ or 11/11 sales events in China.

• Our target price is derived from ascribing an unchanged target PER of 19.0x to its unchanged FY18 EPS of 16.5 sen. The target PER is at discount to the average PER of consumer products bellwethers like Nestle and Dutch Lady due to Oldtown’s smaller market capitalisation.

• Kimlun Corporation Bhd’s 3Q2017 net profit declined 13.8% Y.o.Y to RM14.2 mln, mainly due to: (i) lower contribution from the construction segment as several projects secured in mid-2016 are at the early stages of completion, (ii) one-off provision for doubtful debt amounting to RM5.9 mln, and (iii) lower share profit from joint venture after its property development project – The Hyve was completed in 2016. Revenue for the quarter, however, gained 10.7% Y.o.Y to RM248.1 mln.

• For 9M2017, cumulative net profit slipped 23.1% Y.o.Y to RM44.4 mln. Revenue for the period fell 13.1% Y.o.Y to RM613.1 mln. The reported earnings came in slightly below our expectations, accounting to 66.9% of our previous full year estimated net profit of RM66.4 mln. The variance is due to the one-off provision of doubtful debt as its normalised net profit for 9M2017 of RM48.8 mln would make up to 73.5% of our earnings forecast. Meanwhile, the reported revenue came within expectation, accounting to 75.4% of our full year revenue forecast of RM812.8 mln.

Comments

• With the reported earnings coming below our estimates, we trim our earnings forecast by 9.4% and 3.0% to RM60.2 mln and RM73.1 mln for 2017 and 2018 respectively, to account for the one-off provision of doubtful debt in 2017, coupled with lower construction segment’s margins arising from cost escalations that would also extend to 2018.

• Despite that, we reiterate our HOLD recommendation on Kimlun with an unchanged target price of RM2.40. Our target price is derived from ascribing an unchanged target PER of 11.0x to its 2018 construction earnings and PER of 6.0x (unchanged) to its manufacturing earnings, while its property development segment’s valuation remains unchanged at 0.6x its BV due to its relatively small-scale development projects.

• Protasco Bhd’s 3Q2017 net profit slipped 28.0% Y.o.Y to RM10.3 mln, dragged down by cost overrun for certain construction projects, lower contribution from the property development segment in absence of new launches and higher finance cost. Revenue for the quarter declined marginally by 0.5% Y.o.Y to RM301.2 mln mainly on lower contribution from the property development segment.

• For 9M2017, cumulative net profit sank 51.1% Y.o.Y to RM21.5 mln. Revenue for the period contracted 20.9% Y.o.Y to RM653.2 mln. The reported earnings only amounted to 62.3% of our 2017 earnings forecast of RM34.5 mln, whilst the reported revenue amounted to 78.1% of our full year estimate of RM836.5 mln.

Comments

• Although the reported earnings only make up to 62.3% of our results, we believe that earnings should pick up moving into 4Q2017 due to higher billings from the PPA1M Phase 2 project, coupled with improved works from the concession division. We made no changes to earnings forecast and we maintain our BUY recommendation with an unchanged target price of RM1.20.

• We arrive 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 0.6x to its BV.

Company Brief

• Dolomite Bhd is ceasing, albeit temporarily, its thermal power generation business in Shandong, China, after less than a year of operation. Dolomite blamed the Shandong government for the temporary halt to the operation which began its steam and electricity business on 3rd March 2017.

• SDTPL has yet to achieve the required steam sales mainly as a result of the Shandong government not fully enforcing its directive to shut down small boilers of nearby industries. China planned to eliminate 44,000 coalfired industrial boilers and switch households to natural gas or electric heating. Dolomite did not provide a timeframe of when the operation would resume. (The Star Online)

• Media Prima Bhd’s 3Q2017 net loss narrowed to RM101.1 mln vs. a net loss of RM109.4 mln recorded in the previous corresponding quarter, on lower restructuring expenses and higher other operating income. Revenue for the quarter, however, declined 8.9% Y.o.Y to RM288.5 mln.

• For 9M2017, cumulative net loss widened to RM272.5 mln, from RM64.2 mln recorded in the previous corresponding period. Revenue for the period fell 8.3% Y.o.Y to RM889.5 mln. (The Star Online)

• Ikhmas Jaya Group Bhd's 3Q2017 net profit surged 49.9x Y.o.Y to RM11.3 mln, on increase in its overall construction activities as one major key project is entering the advance constrcution phase. Revenue for the quarter increased 19.2% Y.o.Y to RM60.6 mln.

• For 9M2017, cumulative net profit improved 25.4% Y.o.Y to RM50.8 mln. Revenue for the period added 12.6% Y.o.Y to RM185.1 mln. (The Star Online)

• Serba Dinamik Holdings Bhd has been awarded four engineering, procurement, construction and commissioning (EPCC) contracts and four operation and maintenance (O&M) contracts worth a combined RM496.0 mln. It entered into three EPCC contracts and one O&M contract with Greenearth Landmark Sdn Bhd, which are altogether worth RM385.0 mln. Additionally, the company secured an EPCC contract from Malaysia LNG Sdn Bhd and three separate O&M contracts from JX Nippon Oil & Gas Exploration (Malaysia) Ltd, Malaysia LNG and Petronas Dagangan Bhd, which are worth a combined RM111.0 mln. (The Edge Daily)

• Yinson Holdings Bhd’s associate company, Yinson Energy Sdn Bhd (YESB) is taking over the Layang floating production storage and offloading (FPSO) project, following TH Heavy Engineering Bhd’s (THHE) application to the Kuala Lumpur High Court for leave to novate the project to YESB. The charter contract — which is for EPCIC and leasing of a floating production storage and offloading facility to be deployed at the Layang field in Block SK10, offshore Miri, Sarawak was initially made between JX Nippon Oil & Gas Exploration (Malaysia) Ltd and THHE. (The Edge Daily)

• MyEG Services Bhd’s 1QFY18 net profit rose 30.3% Y.o.Y to RM52.8 mln, boosted by foreign workers rehiring programme services (FWR) and foreign workers’ insurance from both the foreign worker permit (FWP) and FWR, stronger revenue contribution from its motor vehicle trading-related services and higher online FWP renewals. Revenue for the quarter grew 24.7% Y.o.Y to RM98.0 mln. (The Edge Daily)

• AirAsia Bhd’s 3Q2017 net profit grew 29.6% Y.o.Y to RM434.3 mln, boosted by lower deferred tax and strong demand for air travel. Revenue for the quarter climbed 15.0% Y.o.Y to RM2.45 bln.

• For 9M2017, cumulative net profit fell 19.4% Y.o.Y to RM1.27 bln. Revenue for the period, however, improved 41.1% Y.o.Y to RM7.05 bln. (The Edge Daily)

• Wah Seong Corp Bhd’s 3Q2017 net profit stood at RM30.7 mln vs. a net loss of RM25.4 mln in the previous corresponding quarter, The improvement is due to higher contribution from the oil and gas segment. Revenue for the quarter jumped 169.7% Y.o.Y to RM750.1 mln.

• For 9M2017, cumulative net profit stood at RM47.1 mln vs. a net loss of RM30.0 mln in the previous corresponding period. Revenue for the period rose 59.9% Y.o.Y to RM1.51 bln. (The Edge Daily)

• Gas Malaysia Bhd has reported that gas prices supplied to the non-power sector in Peninsular Malaysia would rise up by 18.0% from 1st January 2018 to 30th June 2018. The average base tariff will increase to RM30.90 per mln British thermal units (mmBtu), from RM28.05 per mmBtu currently, after taking into account costlier liquified natural gas.

• Also, under the gas cost pass through (GCPT) mechanism, a surcharge of RM1.62 per mmBtu will apply to all tariff categories. This means the average effective tariff is RM32.52 per mmBtu. Under the revised effective tariff after GCPT, residential consumers will pay RM23.92 per mmBtu from 1st January 2018, up 18.2% from RM20.23 currently. (The Edge Daily)  

Source: Mplus Research - 30 Nov 2017