Market Gyration To Continue

• The FBM KLCI (-0.8%) followed the regional equities lower as concerns of faster-than-expected interest rate hikes in 2018 reverberated across global bourses, prompting sharp selling pressure. All the lower liners were splashed in red, alongside the broader market. The consumer products (+0.3%) sub-sector, however, managed to close higher amid a sea of reds on Wednesday’s close.

• Market breadth was depressed as decliners more than tripled the advancers, although traded volumes increased by 7.0% to 2.95 bln shares on the back of the sharp selling pressure in the local bourses.

• Notable losers on the Main Board include Kuala Lumpur Kepong (-48.0 sen), PPB Group (-48.0 sen), Ambank (-40.0 sen), Petronas Gas (-28.0 sen) and IHH Healthcare (-20.0 sen). Broader market decliners, meanwhile, were Dutch Lady (- RM3.30), Hengyuan Refining (-RM1.94), Thong Guan Industries (-52.0 sen), Petron Malaysia (-50.0 sen) and Pos Malaysia (- 45.0 sen).

• Meanwhile, broader market constituents like BAT (+40.0 sen), Muda Holdings (+40.0 sen), Batu Kawan (+28.0 sen), Pharmaniaga (+16.0 sen) and Lingkaran Trans Kota (+13.0 sen) went against the general negative market trend to close higher yesterday. Similarly, Nestle (+RM6.00) provided some cushion to the blue chip gauge on Wednesday, followed by Hong Leong Bank (+94.0 sen), MISC (+7.0 sen), Press Metal (+2.0 sen) and Sime Darby (+1.0 sen).

• Key regional equities continued to slump yesterday, dragged down by lower-thanexpected Chinese manufacturing data and worries of accelerated U.S. interest rate hikes. The Nikkei fell 1.4%, weighed down by manufacturers, technology, automakers and financial-related stocks. The Shanghai Composite index (-1.0%) declined on the back of soft manufacturing data due to holidaythinned month, while the Hang Seng (- 1.4%) fell – led by the weakness in banking large caps. ASEAN stockmarkets also closed mostly in the negative territory.
• Wall Street ended February on a grim note as concerns on rising inflation and bond yields dented investors’ risk appetite. The Dow (-1.5%) and the S&P 500 (-1.1%) logged its worst monthly decline since January 2016. The Nasdaq also fell (-0.8%).
• Earlier, European equities also retreated, dragged down by fears of faster-thanexpected interest rates hikes. The FTSE narrowed 0.7% on the back of losses in mining firms like Fresnillo (-4.2%) after the British-Mexican miner reported lowerthan-anticipated earnings. The DAX (- 0.4%) and CAC (-0.4%) also ended on a similar note, closing lower on Wednesday.

THE DAY AHEAD

• We see further weakness on Bursa Malaysia over the near term following the rout in leading global equity indices overnight. As it is, investor sentiments are turning increasingly fragile with inflation and the corresponding potential for faster interest rate hike concerns escalating. This is likely to dampen the near term market prospects, particularly after the key index failed to hold on to the 1,860 level yesterday.

• Consequently, we see the key index potentially retesting the 1,850 support level amid the ongoing market weakness, but it gives way the next supports are at the 1,830-1,840 levels. Meanwhile, the resistances are at the 1,860 and 1,880 levels.
• The lower liners and broader market shares will continue to experience selling amid the weak market sentiments and this could further dampen the already frail confidence among the retail participants. MACRO BRIEF
• Malaysia’s January 2018 inflation, as measured by the consumer price index (CPI), grew 2.7% Y.o.Y – the lowest since December 2016. The figure was also below the consensus estimate of a 2.9% Y.o.Y growth. The inflation rate was driven mainly by transportation which grew 5.7% Y.o.Y and food & non-alcoholic beverages which rose 3.8% Y.o.Y. On a monthly basis, the CPI rose 0.3% M.o.M. (The Edge Daily)

COMPANY UPDATES

• HIL Industries Bhd’s 4Q2017 net profit tanked 47.7% Y.o.Y to RM3.5 mln, from RM6.7 mln in the same quarter last year, dragged down by higher thinner gross margins, higher operational expenses, although the downside was offset by higher deferred tax asset. Revenue, however, gained 6.8% Y.o.Y to RM29.3 mln vs. RM27.5 mln last year. The group has also proposed a first and final singletier dividend of 1.75 sen per share, which will be payable at a date to be announced later.

• Full year net profit for 2017 also fell by 17.7% Y.o.Y to RM13.5 mln, from RM16.4 mln a year ago, sapped by forex losses amounting to RM1.9 mln, compared to a forex gain of RM1.1 mln in 2016. Meanwhile, revenue rose 5.0% Y.o.Y to RM102.2 mln, from RM97.3 mln last year.

Comments

• The reported earnings were within our forecast as 2017’s net profit accounted to 102.1% of our full-year forecast of RM13.2 mln, while revenue was at 103.0% of our estimated revenue of RM99.2 mln.
• Subsequently, we also introduce our 2019 forecast net profit and revenue at RM17.0 mln and RM126.2 mln as we wrap up 2017.

• We tweak our FY18 net profit higher to RM14.1 mln (+16.8%) as we pencil in higher margins from the manufacturing division. Meanwhile, revenue forecast is lowered to RM117.5 mln to account for lower utilisation rate.

• Consequently, we upgrade our recommendation on HIL to BUY (from Hold) on the back of a higher target price of RM0.92 (from RM0.90) by ascribing to an unchanged target PER of 11.0x to its manufacturing business and a 25% (from 35%) discount to our revalued net asset value (RNAV) estimate of HIL’s property unit.

• The target PER is similar to other smallto-mid cap peers and is trading at a slight discount to its closest competitor, APM Automotive Holdings due to the latter’s larger market capitalisation.

COMPANY BRIEF

• Malayan Banking Bhd’s 4Q2017 net profit declined 9.7% Y.o.Y to RM2.13 bln due to due to higher overhead expenses and one-off proceeds from the sale of securities in 2016. Revenue for the quarter, however, added 4.8% Y.o.Y to RM11.79 bln.

• For 2017, cumulative net profit gained 11.5% Y.o.Y to RM7.52 bln. Revenue for the year grew 2.1% Y.o.Y to RM45.58 bln. A final dividend of 32.0 sen per share, comprising 18.0 sen per share to be paid in cash and an electable portion of 14.0 sen per share which can be reinvested into new ordinary shares or paid in cash was declared. (The Star Online)

• AMMB Holdings Bhd’s 3QFY18 net profit fell 30.1% Y.o.Y to RM219.0 mln, dragged down by an increase in impairments and lower provisions. Revenue for the quarter, however, added 9.2% Y.o.Y to RM2.16 bln.

• For 9MFY18, cumulative net profit declined 11.1% Y.o.Y to RM878.7 mln. Revenue for the period, however, grew 3.7% Y.o.Y to RM6.37 bln. (The Star Online)

• Boustead Holdings Bhd's 4Q2017 cumulative fell 28.6% Y.o.Y to RM86.1 mln on weaker other operating income and share of loss in joint venture companies. Revenue for the quarter, however, rose 14.9% Y.o.Y to RM2.78 bln.

• For 2017, cumulative net profit gained 25.2% Y.o.Y to RM462.0 mln. Revenue for the year added 19.7% Y.o.Y to RM10.02 bln. A final dividend of 2.5 sen a share, payable on 29th March 2018, was declared. (The Star Online)

• CIMB Group Holdings Bhd's 4Q2017 net profit rose 24.1% Y.o.Y to RM1.06 bln on better overall performance. Revenue for the quarter grew 4.9% Y.o.Y to RM4.52 bln.

• For 2017, cumulative net profit climbed 25.8% Y.o.Y to RM4.48 bln. Revenue for the period rose 9.7% Y.o.Y to RM17.63 bln. A second interim dividend of 12.0 sen per share was declared. (The Edge Daily)
• Hap Seng Consolidated Bhd’s 4Q2017 net profit rose 64.7% Y.o.Y to RM144.2 mln on the recognition of contingent consideration and profit guarantee relating to a subsidiary acquisition during the quarter, as well as the exclusion of a previously recorded impairment loss. Revenue for the quarter grew 16.5% Y.o.Y to RM1.41 bln.
• For 2017, cumulative net profit added 10.4% Y.o.Y to RM 1.10 bln. Revenue for the year climbed 8.1% Y.o.Y to RM5.29 bln. (The Edge Daily)

• EITA Resources Bhd has bagged an RM80.6 mln contract to supply 114 escalators for the Light Rail Transit Line 3 (LRT3) from Bandar Utama to Johan Setia. The contract was awarded by Prasarana Malaysia Bhd, making it the designated contractor for the supply, delivery, installation, testing and commissioning for Package ESC (E). (The Edge Daily)

• Mudajaya Group Bhd is disposing of a 7.1% stake in R.K.M Powergen Pte Ltd to Apollo Ventures Co Ltd for US$19.5 mln (RM76.6 mln) in cash, which would see its stake in the Indian independent power producer drop to 18.9% Y.o.Y from 26.0% Y.o.Y. Mudajaya is expected to realise a loss of RM49.1 mln from the proposed disposal. (The Edge Daily)

• 7-Eleven Malaysia Holdings Bhd’s 4Q2017 net profit jumped 66.6% Y.o.Y to RM15.9 mln, contributed by higher revenue and improvement in its gross margin. Revenue grew 4.3% Y.o.Y to RM546.2 mln.

• For 2017, cumulative net profit fell 3.9% Y.o.Y to RM50.1 mln. Revenue for the quarter, however, increased 4.3% Y.o.Y to RM2.19 bln. (The Edge Daily)

Source: Mplus Research - 1 Mar 2018