• The FBM KLCI ended the week on a stronger footing, lifted by strong lastminute buying-support ahead of the long weekend. On a weekly basis, the Main Board also closed 0.4% W.o.W higher to 1,760.2 points. All the lower liners – the FBM Small Cap (+0.1%), FBM Fledgling (+0.1%) and FBM ACE (+0.2%) closed marginally higher as well, alongside the broader market, with the exception of the Technology (-0.1%) and the Properties (- 0.3%) sectors.

• Market breadth was negative as losers outnumbered gainers on a ratio of 442- to-400 stocks, while 429 counters flatlined. Traded volumes plunged 33.9% to 1.64 bln shares as investors stayed on the sidelines ahead of the long weekend.

• Significant Main Board gainers were Nestle (+RM2.00), Hong Leong Financial Group (+56.0 sen), Telekom Malaysia (+50.0 sen), Petronas Gas (+14.0 sen) and Genting (+13.0 sen). Broader market winners, meanwhile, include BAT (+RM1.18), Allianz (+50.0 sen), Pharmaniaga (+40.0 sen), Genting Plantations (+36.0 sen) and Ajinomoto (+34.0 sen).

• In contrast, among the biggest decliners on the broader market were Panasonic Manufacturing (-36.0 sen), Aeon Credit (- 28.0 sen), Heineken Malaysia (-18.0 sen), SP Setia (-16.0 sen) and Southern Acids (-13.0 sen). Meanwhile, only three blue chips closed lower on Friday, being CIMB (-6.0 sen), PPB Group (-4.0 sen) and Petronas Dagangan (-2.0 sen).

• Major regional benchmark indices finished on a downward bias last Friday ahead of the Christmas holiday. The Nikkei, however, inched 0.2% higher, logging a new 26-year high, although Chinese shares weakened as the Shanghai Composite slipped 0.5%, dragged down by extended weakness in the small-caps which offset gains in property heavyweights. The Hang Seng Index was closed for Christmas Day, while ASEAN stockmarkets closed mostly lower.

• Wall Street closed lower amid profittaking activities after President Donald Trump signed the long-awaited tax bill into law on Friday. The Dow declined 0.1%, weighed down by losses in healthcare and consumer discretionary stocks. On the broader market, both the S&P 500 and the Nasdaq also slipped into the red, closing 0.1% lower.

• European benchmark indices was splashed in red on Friday, as investors booked profits following latest political news from Spain before the Christmas break. The FTSE ended 0.2% lower in a shortened trading session, slightly below 7,600 points. Meanwhile, the CAC and the DAX finished lower by 0.4% and 0.3% respectively.

The Day Ahead

• Once again, the end-of-day institutional window dressing activities last Friday lifted the key index in an otherwise quiet market environment where most market participants are already on their Christmas and year-end break.

• We see the dull market environment persisting at the start of the last week of the year as there remains few catalysts for market players to follow and many market participants are also still on their break. Despite the likelihood of a tighter market breadth, there will still be selected interest as we see the window dressing activities persisting that will ensure that the key index remains above the 1,750 level support. Upsides are now seen at the 1,770 and 1,780 levels, which is still a possibility given the continuing window dressing activities.

• The lower liners and broader market shares, however, will continue to see reduced following as many retail players are on their holidays as with fewer leads for the retail players to follow. Therefore, we also see market depth remaining on dull side until the start of the year.

Company Update

• Kim Loong Resources Bhd’s 3QFY18 net profit added 11.2% Y.o.Y to RM27.9 mln, buoyed by higher production and average crude palm oil prices amid the recovery from the El-Nino weather phenomenon during 2015-2016. Revenue for the quarter grew 16.7% Y.o.Y to RM289.4 mln. For 9MFY18, cumulative net profit increased 46.2% Y.o.Y to RM79.8 mln. Revenue for the period improved 26.5% Y.o.Y to RM805.5 mln.

• The results came above our expectations with its revenue amounting to 88.1% of our full-year forecast of RM914.7 mln, while its net profit came in at 86.6% of our estimate of RM92.2 mln.

Comments

• With the reported results coming in above our estimates, we raised our earnings forecast by 8.8% and 12.9% to RM100.2 mln and RM104.1 mln for FY18 and FY19 respectively, accounting for the higherthan-expected average CPO price of RM2,787 in 9MFY18. Consequently, we also upgrade our recommendation to BUY on KLR with a higher target price of RM4.65 (from RM4.15) as we rolled over our valuation metrics to FY19 by ascribing an unchanged target PER of 14.0x to its revised FY19 EPS of 33.4 sen. The ascribed target PER is in line with the industry average of around 13.5x-15.5x.

• Meanwhile, Kim Loong has proposed a series of corporate exercise involving (i) share split on a one-to-three (1-to-3) basis and a bonus issue of up to 46.8 mln free warrants, on the basis of one warrant for every 20 subdivided shares held after the proposed share split. We view the aforementioned corporate exercise positively as part of the group’s effort to improve the trading liquidity of its shares and as a reward to its shareholders.

Company Briefs

• Paramount Corp Bhd’s unit Aneka Sepakat Sdn Bhd has accepted the development rights from Kumpulan Hartanah Selangor Bhd (KHSB) to develop two parcels of leasehold commercial land measuring 9.7 ac. in Section 14, Petaling Jaya. The proposed development will include four blocks of high-rise residential buildings consisting of about 1,600 units of residential properties, including 20.0% for affordable properties.

• Aneka Sepakat will claim 84.0% of the development’s projected gross development value (GDV) of RM1.0 bln, with 16% or RM160.0 mln development rights value going to KHSB. The gross development cost of the property is projected at RM835.0 mln, while profit is expected to be about RM165.0 mln, both attributable entirely to Aneka Sepakat. (The Star Online)

• Boustead Holdings Bhd will acquire a prime land worth RM143.5 mln in Kuala Lumpur from Lembaga Tabung Angkatan Tentera (LTAT). The 6.6 ac. land in Jalan Cochrane will be acquired at a discount of 0.4% or RM500,000 to its market value. The purchase is expected to be fully funded by the proceeds from the group’s rights issue exercise, which was completed in June 2016. (The Star Online)

• Pentamaster Corp Bhd’s automated solutions arm, Pentamaster International Ltd (PIL), is expected to be listed in Hong Kong on 19th January 2018. The Stock Exchange of Hong Kong Ltd (SEHK) had given its approval-in-principle for the proposed listing on 21st December 2017. The prospectus of PIL was expected to be issued on 29th December 2017 and posted on the websites of the SEHK and PIL on the same date respectively. (Bernama)

• CCM Duopharma Biotech Bhd has bagged a contract worth RM156.0 mln to supply pharmaceutical and/or nonpharmaceutical products to hospitals, clinics and others to the Malaysian government hospitals from Pharmaniaga Logistics Sdn Bhd. The supply period for the products is from 1st December 2017 until 30th November 2019, or such other date as directed by the government. (The Edge Daily)

• Knusford Bhd has announced that its US$166.0 mln (RM677.0 mln) engineering, procurement and construction (EPC) contract for the ArthaLand Cebu Exchange project in the Philippines has been called off. Knusford said that the parties were unable to reach mutually-agreed terms and conditions for the EPC contract. (The Edge Daily)

• Sentoria Group Bhd has won a contract to design and build 1Malaysia People’s Housing Programme (PR1MA) units in Kuantan, Pahang from HA Properties Sdn Bhd for RM67.3 mln. The contract, due for completion in 21st December 2020, is to build 320 single-storey semi-detached houses in Mukim Penor and another 198 such units in Sri Damai. (The Edge Daily)

• TMC Life Sciences Bhd has awarded the main contract worth RM260.0 mln to Putra Perdana Construction Sdn Bhd to expand capacity of its hospital. The expansion of Tropicana Medical Centre’s hospital facilities will increase its existing 205 beds to 635 beds, comprising a new block of 12-storey hospital facilities and a new sevenstorey block with 1,150 car parking lots. The contract, for 31 months plus nine months, will be funded through internally-generated funds and bank borrowings. (The Edge Daily)  

Source: Mplus Research - 26 Dec 2017