Attempting To Find A Bottome

• The FBM KLCI (-0.5%) remain under pressure yesterday, as the key index recorded its third straight session of decline after hovering in the negative territory for the entire trading session. The lower liners – the FBM Small Cap (- 0.3%), FBM Fledgling (-0.04%) and FBM ACE (-0.8%), all retreated, while only the consumer products (+0.1%) and utilities (+0.2%) sectors outperformed.

• Market breadth remained negative as decliners outnumbered advancers on a ratio of 484-to-323 stocks. Traded volumes, however, rose 24.8% to 2.04 bln shares on signs of bargain hunting activities.

• Key decliners on the local bourse were Nestle (-30.0 sen), followed by Hong Leong Bank (-16.0 sen), IOI Corporation (- 14.0 sen), IHH (-13.0 sen) and Petronas Dagangan (-10.0 sen). Consumerproducts stocks like Panasonic (-48.0 sen) and Dutch Lady (-36.0 sen) retreated, while other notable decliners on the broader market were MPI (-26.0 sen) and Batu Kawan (-18.0 sen).

• Significant advancers on the broader market were BAT (+58.0 sen), UMW Holdings (+30.0 sen), Shangri-La (+24.0 sen) and Harrisons Holdings (+17.0 sen). Securemetric jumped 28.5 sen on its debut in Bursa Malaysia. Meanwhile, Hong Leong Financial Group (+38.0 sen), KLCC (+5.0 sen), Sime Darby Plantation (+4.0 sen), Press Metal (+3.0 sen) and KLK (+2.0 sen) topped the FBM KLCI winners list.

• Asian benchmark trended mostly higher after recovering all their intraday losses as the Shanghai Composite added 0.9%, while the Hang Seng Index finished 0.6% higher on expectations over the positiveprogress of the U.S.-China trade talks. The Nikkei, however, sank 2.1% to close below the 22,000 psychological level, taking cue from the slump on Wall Street overnight. ASEAN equities, meanwhile, closed mixed yesterday.

• U.S. stockmarkets closed mostly lower as optimism over the U.S.-China trade talks was offset by the sliding crude oil prices. The Dow and S&P 500 shed 0.4% and 0.2% respectively after erasing all their intraday gains, while the Nasdaq finished just 0.01% higher.

• Earlier, major European equities – the FTSE (+0.01%), CAC (+0.9%) and DAX (+1.3%), all rebounded after the U.K and the European Union agreed to draft terms on Brexit. Gains on the FTSE, however, was capped by the weakness in energy giants like BP plc (-2.6%) and Royal Dutch Shell (-2.2%) after U.S. President Donald Trump blast OPEC’s plan to cut production in 2019.

THE DAY AHEAD

• Even after the recent market pullback, there are still few signs of a revival as yet, with the market once again approaching the oversold territory. Investor confidence and sentiment are also taking a beating in tandem with the prevailing market uncertainty that emanates from the combination of potentially slower economic growth, heightened trade disputes, increasing odds of higher interest rates and falling oil prices.

• While Malaysian stocks have not been able to shake off the current malaise, we think the market could be angling for a rebound and we think the downside pressure could be dissipating. However, the thinning investor participation could keep a lid on the potential rebound as fresh buying is still absent, in view of thelack of positive leads. Nevertheless, we think that the downside pressure should start to ease and this could allow stocks on Bursa Malaysia to find a near term base. On the downside, there is support at the 1,680 and 1,670 levels, while the resistance is at the 1,690-1,700 levels.

• The lower liners are also headed nowhere amid the increasingly thin market following. This is likely to see most stocks in the FBM Small Cap, Fledgling and ACE Market continuing to drift for the time being.

COMPANY UPDATE

• Teo Seng Capital Bhd’s 3Q2018 net profit surged 521.4% Y.o.Y to RM7.0 mln, mainly boosted by the recovery in the average egg selling prices, coupled with the lower feed cost. Revenue for the quarter rose 14.6% Y.o.Y to RM125.3 mln.

• For 9M2018, cumulative net profit stood at RM13.2 mln vs. a net loss of RM11.0 mln recorded in the previous corresponding period. Revenue for the period gained 12.1% Y.o.Y to RM343.1 mln.

Comments

• The reported results came above expectations, making up to 93.8% of our previous estimated net profit estimate of RM14.0 mln. Meanwhile, the reported revenue came slightly below our expectations, amounting to 71.5% of our full-year forecast of RM479.7 mln. The sharp improvement in its bottom line was due to higher ASP of chicken eggs.

• With the reported earnings coming above our expectations, we raised our earnings forecast by 36.6% and 15.5% to RM19.1 mln and RM22.4 mln for 2018 and 2019respectively, reflecting the sharp rebound in average selling prices of chicken eggs.

• Consequently, we maintain our BUY recommendation Teo Seng with a higher target price of RM1.05 (from RM0.90). We ascribed a target PER of 14.0x (unchanged) to its revised 2019 EPS of 7.4 sen. The ascribed target PER is at a 25.0% discount to its peers average of 18.7x due to its smaller market capitalisation.

COMPANY BRIEF

• Scientex Bhd and Daibochi Bhd have announced that their shares are suspended from trading on 14th November 2018 sparking expectations of a merger announcement. (The Edge Daily)

• Four top executives of IHH Healthcare Bhd, including Managing Director and Chief Executive Officer (CEO), Dr Tan See Leng, have joined the board of the group's newly-controlled Indian healthcare group Fortis Healthcare Ltd.

• In addition, IHH's group Chief Financial Officer (CFO) Low Soon Teck, Group Head, Strategic Planning and Business Development (merger and acquisition) Dr Chan Boon Kheng and Non-Independent, Non-Executive Director, Bhagat Chintamani Aniruddha were the others appointed as additional directors. The reconstituted board now has a total of seven members. (The Edge Daily)

• Perdana Petroleum Bhd was awarded a contract worth RM16.2 mln from ROC Oil (Sarawak) Sdn Bhd to provide a platform supply vessel and two anchor handling tug supply vessels, from 20th September 2018. (The Star Online)

• KLCCP Stapled Group's 3Q2018 net profitinched higher by 2.1% Y.o.Y to RM181.4 mln, from RM177.7 mln a year ago, helped by the full occupancy in Menara ExxonMobil since April 2017, higher rental rates at its retail properties and stronger occupancy rates in its hotel operations. Revenue also rose 2.6% Y.o.Y to RM349.5 mln from RM340.5 mln in the previous corresponding year. The group has declared a distribution of 8.7 sen, payable on 28th December 2018.

• Cumulative 9M2018 net profit also grew marginally by 1.7% Y.o.Y to RM541.3 mln, from RM532.4 mln, in-tandem with the 2.5% Y.o.Y growth in revenue to RM1.04 bln, from RM1.01 bln last year. (The Edge Daily)

• Malaysia Building Society Bhd’s (MBSB) 3Q2018 net profit increased 21.1% Y.o.Y to RM122.0 mln, from RM100.7 mln in the same quarter last year, mainly due to lower impairment allowances on loans and financing. Revenue, however, fell slightly by 3.7% Y.o.Y to RM786.4 mln, from RM816.9 mln a year earlier.

• For cumulative 9M2018, net profit also leapt 78.9% Y.o.Y to RM524.4 mln, from RM293.1 mln a year ago, despite a 1.9% Y.o.Y fall in revenue to RM2.4 bln, from RM2.44 bln previously.

• Moving forward, the group aims to continue the expansion of the corporate business it undertook prior to the acquisition of AFB — now known as MBSB Bank Bhd, which was completed on 7th February 2018 to reach the desired corporate retail portfolio mix. (The Star Online)

• ELK-Desa Resources Bhd‘s 2QFY19 net profit jumped 44.6% Y.o.Y to RM8.6 mln, from RM6.0 mln a year ago, largely driven by an increase in hire purchase receivables and a significantly lower impairment allowance. Quarterly revenue also grew 24.2% Y.o.Y to RM31.0 mln vs.RM25.0 mln previously. The group declared an interim dividend of 3.5 sen per share, payable on 30th January, 2018.

• Cumulative 1HFY19 net profit spiked 51.6% Y.o.Y to RM16.7 mln, from RM11.0 mln in the previous year, while revenue for the same period grew 18.4% Y.o.Y to RM59.8 mln, from RM50.5 mln in 1HFY18.

• Moving forward, ELK-Desa intends to maintain its momentum in growing its hire purchase portfolio in FY19 without compromising on the quality of its assets. (The Edge Daily)

• Tiger Synergy Bhd is proposing to raise up to RM10.5 mln via a private placement to third-party investors to be identified later, in a bid to strengthen the group's capital position and fund the preliminary expenses of its Alam Impian project in Shah Alam.

• The private placement will involve the issuance of up to 149.9 mln shares, representing not more than 10.0% of its issued shares. As at 29th October 2018, the issued share capital of Tiger was RM157.8 mln comprising 604.3 mln shares. The placement shares will be priced at not more than 10.0% discount to the five-day volume weighted average market price of Tiger shares. (The Edge Daily)

• Sterling Progress Bhd is planning to raise up to RM6.0 mln via a private placement to third-party investors to be identified later. Gross proceeds will be used to finance the purchase of smartphones and laptops for its information, communication and technology segment.

• The proposed private placement will involve the issuance of up to 32.1 mln shares assuming none of its outstanding warrants is exercised, representing not more than 10.0% of its issued shares. Asat 8th November, 2018, Sterling has an issued share capital of RM46.9 mln comprising 321.3 mln shares and 78.8 mln outstanding warrants.

• The placement shares will be priced at not more than 10.0% discount to the five-day volume weighted average market price of Sterling shares. (The Edge Daily)

• Sunway Construction Group Bhd’s (SunCon) outstanding orderbook swells to RM1.35 bln after accepting a new related-party contract worth RM352.1 mln from its major shareholder, Sunway Bhd.

• The project includes the main building and associated external works for the proposed commercial development of Sunway Velocity Two. (The Star Online)

Source: Mplus Research - 14 Nov 2018

Source: Mplus Research - 14 Nov 2018