Positive End To The Week

• The FBM KLCI (+0.3%) recovered all its intraday losses as the key index extended its gains yesterday alongside the mostly positive performance across regional peers. The lower liners – the FBM Small Cap (+1.6%) and FBM Fledgling (+1.1%) and FBM ACE (+0.4%), all recovered their previous session’s losses, while the Plantation sector (-0.2%) underperformed the positive broader market.

• Market breadth turned positive as advancers outnumbered decliners on a ratio of 2-to-1 stocks. Traded volumes, however, fell 10.1% to 1.99 bln shares as investors remain cautious over the recent market volatility.

• More than half of the key index constituents advanced, led by Malaysia Airport Holdings (+21.0 sen), followed by Hartalega (+15.0 sen), Hong Leong Financial Group (+10.0 sen), Nestle (+10.0 sen) and CIMB (+9.0 sen). Significant advancers on the broader market were Ajinomoto (+74.0 sen), BAT (+58.0 sen), KESM Industries (+26.0 sen), Lii Hen (+25.0 sen) and Dufu Technology (+21.0 sen).

• Daibochi fell 29.0 sen after receiving a takeover offer from Scientex, while other notable declines on the broader market include Fraser & Neave (-60.0 sen), Batu Kawan (-30.0 sen), Kian Joo (-9.0 sen) and Malaysian Sugar Mills (-9.0 sen). Key losers on the big board were PPB Group (- 10.0 sen), Tenaga (-8.0 sen), KLK (-6.0 sen), MISC (-4.0 sen) and Press Metal (- 4.0 sen).

• Asian benchmark closed mostly higher yesterday on optimism over a trade deal between U.S. and China. The Shanghai Composite jumped 1.4% higher, while the Hang Seng Index surged 1.8% to close above the 26,000 psychological level. The Nikkei (-0.2%), however, underperformed its peers, dragged down by the weakness in its financial sector. ASEAN equities, meanwhile, closed mostly higher yesterday.

• U.S. stockmarkets rebounded overnight as the Dow (+0.8%) snapped a four-day losing streak, boosted by U.S. move to put the next batches of tariffs on hold. On the broader market, the S&P 500 (+1.1%) halted a five-day decline, anchored by gains in the technology sector (+2.5%), while the Nasdaq closed 1.7% higher.

• Earlier, major European equities ended mostly lower as the CAC and DAX extended their losses by 0.5% and 0.7% respectively after the Euro Currency appreciated against the Greenback. The FTSE (+0.1%), however, outperformed after enduring a choppy trading session after U.K. Prime Minister Theresa May stood pat on her stance on the Brexit deal.

The Day Ahead

• The latest development on the U.S-China trade deal is welcomed as it signals the willingness of the two countries to negotiate a deal after they both baulked on compromising earlier. The truce will also help to shore-up the near term market sentiments, although an agreement is still not imminent as yet.

• With many global indices tipping higher overnight on the above development, we also see the positivity sustaining on Bursa Malaysia that will allow the key index to end the week on a brighter note. We expect bargain hunting activities to come to the fore, but there will still be bouts of quick profit taking activities that could curtail some of the gains as the weekend approaches. Hence, we think the upsides could be capped at around the 1,700 points level for now, which is also a significant hurdle to clear. The other resistance is at 1,710. On the downside, there is support at the 1,680- 1,690 levels.

• We also see the broader market making headway amid the improved near term market sentiments, but we also think the upsides may be curtailed by quick profit taking activities as market players lock-in their profits ahead of the weekend.

Company Update

• Suria Capital Holdings Bhd’s 3Q2018 net profit soared 356.8% Y.o.Y to RM15.5 mln, mainly due to the improved progressive recognition from the property development segment, coupled with a lower effective tax rate as the previous corresponding quarter saw recognition of deferred tax amounting to RM5.9 mln. Revenue for the quarter added 5.5% Y.o.Y to RM91.5 mln.

• For 9M2018, cumulative net profit rose 44.0% Y.o.Y to RM45.0 mln. Revenue for the period gained 44.5% Y.o.Y to RM315.0 mln. The reported earnings came above our expectations, making up to 84.2% of our 2018 net profit estimate of RM53.5 mln. The reported revenue also came above our expectations, amounting to 82.4% of our full-year forecast of RM382.1 mln.

Comments

• The better-than-expected revenue was due to higher contribution from the port operations segment, whilst the outperformed earnings were due to lower effective tax rate.

• Following the better-than-expected results, we tweaked our earnings forecast higher for 2018 and 2019 by 11.5% and 19.7% to RM59.6 mln and RM68.3 mln respectively, to account for the higher contribution from the ports operation segment, coupled with lower effective tax rate at 24% (from 27%). Consequently, we maintain our BUY recommendation on Suria with a higher target price of RM2.20 (from RM2.00).

• We value Suria through a sum-of-parts (SOP) approach as we valued both its port operations and property development segments on a discounted cash flow approach (key assumptions include a WACC of 8.5%, terminal growth rate of 1.5%) to reflect its ability to generate recurring revenues and steady earnings growth over the longer term. Meanwhile, we ascribed a 10.0x (unchanged) target PER to both its logistics and bunkering contract as well as engineering and ferry terminal operations businesses, based on their potential earnings contribution in 2019.

COMPANY BRIEF

• Petron Malaysia Refining & Marketing Bhd's 3Q2018 net profit fell 19.4% Y.o.Y to RM85.5 mln, compared to RM106.1 mln a year ago, due to lower refining margins despite recording stronger revenue amounting to RM3.3 bln (+28.9% Y.o.Y), from RM2.56 bln in the earlier corresponding quarter.

• Consequently, 9M2018 net profit fell 18.2% Y.o.Y to RM250.1 mln, from RM305.6 mln a year ago, while revenue grew 21.5% Y.o.Y to RM9.15 bln, from RM7.53 bln in 9M2017. (The Edge Daily)

• Practice Note 17 (PN17) company, Utusan Melayu (Malaysia) Bhd has announced that its proposed regularisation exercise will not result in a significant change in the business direction or policy of the group.

• Utusan is also planning to sell a leasehold industrial plot located on Jalan Tiga off Jalan Chan Sow Lin for RM18.0 mln to raise working capital for the group. The proposed disposal is expected to reap a net gain of about RM16.9 mln. The land, which has 60 years left to its lease, measures 4,715 sq. m. and has a market value of RM17.8 mln as at 19th March2018. (Bernama)

• Unisem (M) Bhd has announced that all the pre-conditions for the proposed conditional voluntary takeover offer of the group have been met and the Board will soon appoint an independent adviser to advise the directors and shareholders on the fairness and reasonableness of the offer.

• This comes after Unisem received notice from Maybank Investment Bank Bhd on behalf of the offerors that the preconditions including relevant approvals from overseas regulatory authorities had been obtained. (The Edge Daily)

• Tomei Consolidated Bhd is planning to dispose its skincare and cosmetic products distribution business to focus on its principal activities in the gold and jewellery trade. The group’s whollyowned subsidiary, Flawless Skin Care Sdn Bhd is disposing of the "The history of Whoo" and "belif" skincare and cosmetics business as a going concern for RM9.0 mln. (The Edge Daily)

• Parkson Holdings Bhd's Cambodian unit has initiated arbitration proceedings against Hassan (Cambodia) Development Co Ltd (HCDC) for prolonged delays in handing over new store premises in Phnom Penh on 16th November 2018. (The Edge Daily)

• Tune Protect Group Bhd's 3Q2018 net profit declined by 28.3% Y.o.Y to RM9.1 mln vs. RM12.7 mln previously, dragged 000. (Bernama) down by lower net earned premiums of RM9.2 mln, increased management expenses of RM7.6 mln, mainly due to higher employee, marketing and other administrative costs and a decrease in net claims incurred of RM10.1 mln. Nevertheless, quarterly revenue rose slightly to RM141.5 mln, from RM140.1 mln in the same quarter last year.

• Cumulative 9M2018 net profit, however, inched 2.2% Y.o.Y higher to RM38.5 mln, from RM37.7 mln a year ago, while revenue rose 5.4% Y.o.Y to RM425.7 mln, from RM404.1 mln in 9M2017. (Bernama)

• Mah Sing Group Bhd has raised RM145.0 mln via the issuance of unrated senior perpetual securities under the group's RM1.0 bln unrated senior perpetual securities programme that was established in March 2017.

• The proceeds will be used to finance landbanking and joint-ventures, capital expenditure and working capital to accelerate construction of projects that have good take-ups.

• Currently, the group is conducting various stages of exploration and negotiations with land owners/vendors, in-line with the Mah Sing's plan to increase its Greater Kuala Lumpur portfolio within the next two to three years. (The Star Online)

• EcoFirst Consolidated Bhd does not expect any financial and operational impact from the Inland Revenue Board's (IRB) RM1.3 mln of tax claims as the claims have already been fully accounted for in financial statements.

• To recap, EcoFirst, had received a winding-up petition from the IRB for the tax claims on 15th November 2018. The claims were derived from an outstanding sum of RM963, 849.3 plus interest at the rate of 8.0% per year and cost of RM2,000. (Bernama)  

Source: Mplus Research - 16 Nov 2018