Window Dressing To Continue

• The FBM KLCI (+0.6%) recovered all its previous session losses, anchored by gains in banking heavyweights on signs of window dressing activities on Tuesday. The lower liners – the FBM Small Cap (+0.6%), FBM Fledgling (+0.7%) and FBM ACE (+1.6%), all extended their gains, while all the sectors on the broader market closed on a positive note, led by the Finance sector (+1.1%).

• Market breadth stayed positive as gainers overcame losers on a ratio of 500-to-372 stocks, while 364 counters flat-lined. Traded volumes gained 30.6% to 2.15 bln shares amid the positive market environment.

• Banking heavyweights like Hong Leong Financial Group (+38.0 sen), Hong Leong Bank (+24.0 sen), CIMB (+23.0 sen) and Public Bank (+18.0 sen) topped the FBM KCLCI advancers list, while BAT gained 42.0 sen. Significant gainers on the broader market include Harrisons Holdings (+32.0 sen), Heineken (+32.0 sen), Dutch Lady (+30.0 sen), Padini (+28.0 sen) and Nestle (+28.0 sen). Kossan (+22.0 sen).

• In contrast, notable decliners on the broader market were Pos Malaysia (-29.0 sen) after its CEO has resigned, followed by LPI Capital (-22.0 sen), Unisem (-19.0 sen), Panasonic (-18.0 sen) and MPI Capital (-16.0 sen). Meanwhile, Astro (- 7.0 sen), RHB Bank (-5.0 sen), IJM (-5.0 sen), KLCC (-4.0 sen) and Tenaga (-2.0 sen) were amongst the key index biggest losers.

• Japanese equities retreated yesterday as the Nikkei fell 0.3% as investors turned cautious ahead of the two-day U.S. Federal Reserve meeting. The Hang Seng declined 0.6%, while the Shanghai Composite sank 1.3%, dragged down by financial shares on concerns that China’s Central Bank might follow the widely anticipated U.S. Federal Reserve to raise interest rates. ASEAN stockmarkets, meanwhile, ended mostly lower.

• Wall Street ended mostly higher overnight as the Dow gained 0.5% ahead of the two-day U.S. Federal Reserve interest rate policy meeting. On the broader market, the S&P 500 (+0.2%) extended its gains to close at another fresh record high level, anchored by gains in financial shares, but the Nasdaq closed 0.2% lower.

• Earlier, European benchmark indices trended higher, boosted by the energy sector after crude oil prices advanced to a two-and-a-half year high, coupled with the appreciation of U.S. Dollar against the Euro Currency. The FTSE (+0.6%) closed above the 7,500 psychological level after U.K. inflation (+3.1% Y.o.Y) hit a six-year high in November 2017. Meanwhile, both the CAC and DAX rose 0.8% and 0.5% respectively.

The Day Ahead

• The year-end window dressing activities seemed to have started in earnest and with the global market environment also in a buoyant mood, we see the near term upsides sustaining and allowing for the window dressing activities to continue.

• However, the upsides may be tempered by bouts of profit taking after yesterday’s gains and this may slow the market’s ascend. Nevertheless, we see the mild bargain hunting activities returning quickly that could still shore up the market over the near term. On the upside, the resistances are pegged at 1,734 and 1,740 levels, while the near term support is at the 1,720 level.

• The lower liners and broader market shares should also see the selected buying persisting as retail players will also use the more positive market undertone to take up some trading positions.

Company Brief

• Rhone Ma Holdings Bhd has received an amended agreement to halt the distribution of the multinational animal health company Merial’s swine, poultry, ruminant and veterinary public health products. Under the new products list, the group will continue to distribute companion animal products of Merial. The amendment is not expected to have any material impact on the FY17 earnings of the group, but is expected to have a negative financial impact to the group in FY18.
• Moving forward, Rhone Ma will mitigate the negative financial impact by exploring distribution options for its poultry, swine and ruminants products with other major international suppliers of animal health products, as well as increase efforts to market and sell other products, particularly in-house manufactured products, and expand market share in regional markets with growth potential. (The Edge Daily)

• UEM Sunrise Bhd is acquiring a 19.2-acre (7.79ha) leasehold land in Taman Equine, Seri Kembangan, Selangor from Kemaris Residences Sdn Bhd for RM109.5 mln. The land will be used for a boutique development for the upper-middle market segment, with a gross development value (GDV) exceeding RM700.0 mln. (The Edge Daily)

• Cocoaland Holdings Bhd has received revised tax audit findings for the years of assessment 2010 to 2014, from the Inland Revenue Board (IRB) showing an additional income tax of RM10,239.7 and 45.0% penalty of RM4,607.9, totalling RM14,847.6. The revised amount is significantly lower than the initial figure (about RM4.1 mln and a 45.0% penalty of RM1.8 mln in October 2017), mainly because the IRB has allowed the claim of reinvestment allowance on certain plant and machinery disputed in the initial tax audit findings dated 19th October 2017. (The Star Online)
• Kuala Lumpur Kepong Bhd (KLK) is planning to acquire Elementis BV’s surfactant chemicals business and its 16.2-h,. Delden manufacturing plant in the Netherlands for a total enterprise value of €39.0 mln (or RM187.2 mln), on a cash-free debt-free basis and with a normal level of working capital.
• KLK has entered into an agreement with the global specialty chemicals company to take-up its entire interest in Elementis Specialties Netherlands BV (ESN), comprising 3,404 shares of a nominal value of €1,000 each, which will include ESN’s working capital, plant and machinery, storage facilities, laboratories and all other tangible assets and inventories associated with the surfactant chemicals business conducted at ESN’s plant in Delden. (The Star Online)

• Aeon Co (M) Bhd has reduced its equity stake in the joint-venture (JV) with Thai company Index, Living Mall Company Ltd (ILM) following a supplemental agreement to the original JV agreement dated 20th September 2013 to revise the shareholding structure of Aeon Index Living Sdn Bhd.

• Under the supplemental pact, the new shareholding structure of Aeon Index according to the investment ratio has been revised to 51:49 between ILM and Aeon, from 30:70 previously.

• To recap, both parties collaborated and established JV company Aeon Index to become a one-stop furniture retailer in Malaysia, providing complete sections of home or office furniture, home fashion products accessories and related services, under the trademark Index Living Mall in September 2013. (The Edge Daily)

• Magni-Tech Industries Bhd's 2QFY18 net profit dropped 28.0% Y.o.Y to RM20.5 mln vs. RM28.5 mln in the same quarter last year, due to lower garment sales and the closure of its offset printing packaging business. Quarterly revenue also lost 9.8% Y.o.Y to RM252.3 mln, from RM279.8 mln a year ago. Even so, the group declared a second interim dividend of 4.5 sen per share, payable on 12th January, 2018.

• For 1HFY18, net profit fell 23.0% Y.o.Y to RM40.1 mln – due to higher foreign exchange losses, operating expenses and raw material costs. Meanwhile, revenue also slipped 1.0% Y.o.Y to RM546.0 mln. (The Edge Daily)

• Anzo Holdings Bhd’s construction unit has secured a sub-contract worth RM28.9 mln to build a 14-storey office building in Jalan Hospital Bandar, Ipoh, Perak. The job is expected to be completed on 14th June 2019. (The Star Online)

• Fajarbaru Builder Group Bhd has clinched a contract for RM22.1 mln, from Pos Malaysia Bhd to renovate the latter’s Integrated Parcel Sortation Centre at Pos Malaysia International Hub at the Kuala Lumpur International Airport. The project is slated to be completed in eight months. (The Edge Daily)

• Meanwhile, Pos Malaysia Bhd‘s key revenue contributor, Pos Laju is expected to contribute about RM700.0 mln to revenue this year and sustain a growth of about 20.0% next year. The courier arm will remain as a key revenue growth driver, boosted by ecommerce growth (Bernama)
• Minority shareholders of Scomi Energy Services Bhd have been advised to accept its proposed merger with 65.7% shareholder Scomi Group Bhd and associate Scomi Engineering Bhd. Independent adviser BDO Capital Consultants Sdn Bhd said the offer price is fair as the fair value and market price of Scomi shares, following the proposed merger, is higher than the price of Scomi Energy shares.
• The offer is also at a premium of approximately 15.0%- 30.0% over the value of Scomi Energy shares, based on its volume-weighted average market price (VWAMP) for the three-month and five-day period ended 6th December, 2017. (The Edge Daily)

• To recap, Scomi Energy shareholders were offered three Scomi shares for five Scomi Energy shares held — together with one-for-ten free warrants — for an implied offer price of 13.4 sen, which is a discount to its fair value of between 28.4 sen and 29.7 sen.

• Malaysia Airports Holdings Bhd (MAHB) saw a 4.8% Y.o.Y (or 7.9 mln passengers) increase in the number of passengers passing through the 39 airports it manages in Malaysia in November 2017. The single digit growth of passenger traffic movements for airports in Malaysia for November 2017 was in line with its expectations.

• Meanwhile, international traffic rose 13.2% Y.o.Y to about 4.1 mln passengers, mostly contributed by the Middle East, South Asia, North East Asia and South East Asia sectors. Domestic traffic, however, fell 3.0% Y.o.Y to 3.8 mln passengers, essentially contributed by AirAsia.
• Istanbul Sabiha Gokcen International Airport's (SGIA) passenger traffic grew 10.9% Y.o.Y in November 2017 on higher international and domestic traffic (+15.6% Y.o.Y and 9.0% Y.o.Y respectively). Overall average load factor was 74.1%, slightly lower compared to November last year.
• Cumulative 11MFY17 passenger traffic in Malaysia improved 9.3% to 87.5 mln, from 80.0 mln a year ago, while SGIA handled 4.8% more passengers at 28.7 mln, from 27.4 mln in 11M16.

Source: Mplus Research - 13 Dec 2017