• Gains in Petronas-related shares from the extended window dressing activities sent the FBM KLCI to recoup all its intraday losses before closing 0.3% higher yesterday. The lower liners also ended mostly higher as the FBM Small Cap and FBM Fledgling climbed 0.1% and 0.2% respectively, while the Construction (- 0.6%) and Finance (-0.3%) sectors underperformed the positive broader market.

• Market breadth turned negative as decliners outstripped gainers on a ratio of 481-to-398 stocks, while 383 counters flat-lined. Traded volumes declined 2.3% to 2.48 bln shares as investors lock in recent gains.

• Petronas-related shares like Petronas Gas (+58.0 sen) and Petronas Chemicals (+12.0 sen) anchored the big board advancers list, while Nestle (+40.0 sen), Tenaga (+10.0 sen) and Genting (+22.0 sen) advanced. Petronas Chemicals (+4.0 sen) and Press Metal (+3.0 sen). Notable gainers on broader market include Batu Kawan (+36.0 sen), Tong Herr (+33.0 sen), Aeon Credit (+26.0 sen), Malaysian Pacific Industries (+26.0 sen) and Globetronics (+22.0 sen).

• Hartalega (-58.0 sen) snapped an eleven consecutive winning streak, while other notable decliners on the broader market were Panasonic (-30.0 sen), KESM Industries (-16.0 sen), Heng Yuan (-14.0 sen) and Sungei Bagan Rubber (-14.0 sen). Banking heavyweights like Hong Leong Financial Group (-48.0 sen), Am Bank (-9.0 sen), Hong Leong Bank (-8.0 sen) and RHB Bank (-7.0 sen) fell, while Petronas Dagangan declined 12.0 sen.

• Japanese equities retreated yesterday as the Nikkei fell 0.1%, after the Bank of Japan left its left its monetary policy unchanged. The Hang Seng Index (+0.5%) rebounded, while the Shanghai Composite (+0.4%) re-captured the 3,300 psychological level after Beijing pledged to deepen structural reforms and curb risks to its financial system. ASEAN stockmarkets, meanwhile, closed mixed.

• Wall Street ended higher overnight as the Dow gained 0.2% on the solid 3Q2017 GDP data that expanded 3.2% Y.o.Y – the quickest since 1Q2015, whilst investors assess the newly approved $1.50 trl tax bill impact. On the broader market, the S&P 500 added 0.2%, lifted by gains in banking and energy shares, while the Nasdaq inched 0.1% higher.

• Earlier, European benchmark indices – the FTSE (+1.1%), CAC (+0.6%) and DAX (+0.3%), all recovered their intraday losses, taking cue from the bullish sentiment in Wall Street. However, trading volumes began to thin as investors’ trimmed position ahead of the extended year end festive break.

The Day Ahead

• Although the key index tipped higher yesterday, the general market environment is still largely insipid, judging by the thin market breadth. There also remain few noteworthy leads on the domestic front, while the optimism post U.S. tax reformation plan seemed to have run its course.

• Under the prevailing market environment, we expect the key index to consolidate, ranging between the 1,730-1,760 levels over the near term with bargain hunting activities and buying support to cushion the key index above the 1,730 support level. Any gains, meanwhile, will be capped towards the 1,760 and 1,770 levels.

• We also expect the lower liners and broader market to remain listless as retail players are likely to trim their holdings ahead of the year end festive breaks.

Company Update

• Protasco Bhd’s wholly owned subsidiary, Protasco Development Sdn Bhd has received a Letter of Award from Unit Perumahan Penjawat Awam 1Malaysia, Jabatan Perdana Menteri, to construct 1,681 unit apartments in the Federal Territory of Putrajaya under the Pembangunan Projek Perumahan Penjawat Awam 1Malaysia (PPA1M).

• Protasco Development Sdn Bhd will undertake the project jointly with Kop Mantap Berhad at a ratio of 51.0% (Protasco Development Sdn Bhd) and 49.0% (Kop Mantap Berhad). The project with a gross development cost of RM442.7 mln.

Comments

• The above mentioned project marks the second major construction project secured by Protasco in 2017. Similar with the previous construction contracts secured, we expect the project to command EBITDA margins of 9%-11%. Protasco’s outstanding construction orderbook now stands at approximately RM930.0 mln will underpin earnings visibility over the next two years.

• Despite the construction orderbook replenishment YTD at RM400.2 mln have exceeded our targeted orderbook replenishment of RM300.0 mln for 2017, we leave our earnings forecast unchanged as the latest orderbook win will only see its contribution from 2018. Hence, we maintain our BUY recommendation on Protasco 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

• Felda Global Ventures Holdings Bhd's (FGV) indirect unit Felda Marketing Services Sdn Bhd (Felma) is planning to dispose its 12.9% equity stake in AXA Affin General Insurance Bhd () to Affin Holdings Bhd for RM180.5 mln. The group will also sell its remaining 3.1% stake AXA Affin GI to AXA Asia for RM43.8 mln.

• Consequently, Felma will pocket about RM224.4 mln in proceeds, which will give FGV a net gain of RM26.9 mln, based on its effective investment cost of RM33.3 mln in the shares, which Felma bought for RM90.6 mln in April 2010.

• The deals translate to RM11.8 per share in AXA Affin GI - about 1.5 times AXA Affin GI’s book value of RM7.9 per share as at 31st December, 2016 and will leave Felma with just 100 shares in AXA Affin GI. It now has RM19.1 mln shares (or 16.0% shareholding) in the general insurer.

• Post-acquisition, Affin’s stake in AXA Affin GI will rise to 49.95%, from 37.07% presently, while AXA Asia’s stake will climb to 49.99%, from 46.88%. The balance 0.05% in AXA Affin GI will remain with minority shareholders. (The Star Online)

• Muhibbah Engineering (M) Bhd has secured a RM189.0 mln work package by Mass Rapid Transit Corp Sdn Bhd for the construction of the MRT Sungai Buloh-Serdang-Putrajaya line (MRT2). Contract works includes the design, supply, installation, testing and commissioning of noise barriers and enclosures for the package, which is expected to commence immediately and be substantially completed by end- 2019. (The Edge Daily)

• Ahmad Zaki Resources Bhd (AZRB) was awarded a RM138.4 mln contract to build two academic buildings for the faculty of geosciences and petroleum engineering, as well as a Tenaga Nasional Bhd 33kv substation, at Universiti Teknologi Petronas (UTP) in Bandar Seri Iskandar, Perak. The 30- month project is scheduled to be completed by 15th July, 2020. (The Edge Daily)

• Daya Materials Bhd‘s 67.0%-owned subsidiary Daya Secadyme Sdn Bhd has secured a contract from Petronas Carigali Sdn Bhd for the provision of integrated production chemicals supply and services worth an estimated RM67.0 mln, raising its outstanding orderbook to RM608.0 mln.

• The five-year contract for SK Oil — Miri Waters has commenced from 11th December, 2017, with a one-year extension option. (The Edge Daily)

• Wah Seong Corp Bhd plans to sell its plantation unit WS Agro Industries Pte Ltd to Agro Panorama Sdn Bhd for US$6.0 mln (RM24.5 mln), in order to streamline, realign and rationalise its business activities, while unlocking the value for its non-core operations. (The Edge Daily)
• Aeon Credit Service (M) Bhd’s 3QFY18 net profit gained 5.2% Y.o.Y to RM70.6 mln, from RM67.1 mln, on the back of higher profit from operations, while revenue rose 11.4% Y.o.Y to RM312.4 mln, from RM280.4 mln last year. For the cumulative 9MFY18, net profit was higher by 17.7% Y.o.Y to RM217.8 mln, from RM185.0 mln, in-tandem with stronger revenue (+14.2% Y.o.Y) contribution at RM926.0 mln, from RM811.1 mln in the same period last year. (The Star Online)

• Sarawak Cable Bhd has bagged a twoyear contract valued at RM18.4 mln from the Ministry of Health for helicopter services in the state. The Medical Evacuation Service and Flying Doctor Service will be undertaken by its unit, Aerial Power Lines Sdn Bhd, which provides chartered or non-scheduled helicopter services. (The Edge Daily)

• JKG Land Bhd posted a 3QFY18 net profit of RM2.7 mln, compared to a net loss of RM835,000 a year ago, lifted by stronger property development contribution. Meanwhile, revenue for the quarter more than tripled to RM14.2 mln, from RM3.7 mln a year earlier.

• For the cumulative 9MFY18, net profit added 9.8% Y.o.Y to RM11.0 mln vs RM10.0 mln last year, thanks to a 25.1% Y.o.Y gain in revenue at RM53.9 mln, from RM43.1 mln in 9MFY17. (The Edge Daily)

• Asia Poly Holdings Bhd's 51.0% indirectly-owned Indonesian unit PT Rimba Tripa has obtained the environmental and location permits for its proposed 12 megawatt power capacity hydro-electric power plant in Aceh province.

• The permits will allow PT Rimba to carry on the project which has passed the environmental study at the designated location. PT Rimba has also been given the authority to purchase the land required for the project. (The Edge Daily)

• Datasonic Group Bhd has launched its new factory in Petaling Jaya to manufacture the new generation of electronic international Malaysian passport (e-passport) on 21st December, 2017. The group started manufacturing the new e-passports in October this year and has made almost 650,000 e-passports, which was officially rolled out on 15th November, 2017. The new version of the Malaysian e-passport comes with enhanced security features which comply with the standards of International Civil Aviation Organization Document 9303 (ICAO). (The Edge Daily)  

Source: Mplus Research - 22 Dec 2017