Mild Rebound Expected

• The FBM KLCI ended lower after opening in the red, weighed down by sharp sellingpressure in Genting-related companies following the fallout between Genting Malaysia, Walt Disney and 21st Century Fox in relation to Genting’s new theme park. All the lower liners were downwardpressured as well, alongside the whole broader market.

• Market breadth was subdued as losers more than tripled the winners, while traded volumes spiked 24.8% to 2.18 bln bln shares, amid a broad selldown in the local stockmarket.

• Genting-related counters like Genting Malaysia (-60.0 sen) and Genting (-52.0 sen) led the blue-chip gauge losers, followed by Nestle (-RM3.10), Petronas Dagangan (-58.0 sen) and Kuala Lumpur Kepong (-24.0 sen). Broader market laggards, meanwhile, include BAT (- RM1.24), KESM Industries (-38.0 sen), United Plantations (-32.0 sen), QL Resources (-31.0 sen) and Supermax (- 27.0 sen).

• On the other hand, Dutch Lady (+30.0 sen), Time Dotcom (+27.0 sen), Toyo Ink (+13.0 sen), Yinson Holdings (+11.0 sen) and MB World (+10.0 sen) outperformed other broader market constituents. Advancing heavyweights, meanwhile, include Hong Leong Bank, Petronas Gas and RHB Bank, which all ended 6.0 sen higher on Tuesday, together with Axiata (+5.0 sen) and PPB Group (+4.0 sen).

• Asian stockmarkets struggled for fresh trading catalysts ahead of a pivotal meeting between President Donald Trump and President Xi Jinping. The Nikkei was up 0.6%, on expectations of bumper sales for retailers amid the holiday shopping season. The Hang Seng index (-0.2%), however, closed slightly lower after paring earlier gains due to losses in energy and property stocks, while the Shanghai Composite flatlined. ASEAN stockmarkets, meanwhile, finished mostly higher yesterday.

• Wall Street logged gains at Tuesday’s close, largely due to gains in defensive sectors and expectations of dovish monetary policies next year. The Dow (+0.4%), the S&P500 (+0.3%) and Nasdaq all closed in the green.

• U.K. equities declined as the FTSE erased 0.3%, weighed down by losses in commodity prices and worries of harder protectionist stance from the U.S. after the latter reportedly hinted at higher tariffs next year. The DAX and the CAC also retreated by 0.4% and 0.2% respectively.

The Day Ahead

• Malaysian equities took a beating yesterday amid the selldown in Genting related stocks after it took its dispute with its foreign theme park partner to the U.S. courts that also affected the sentiments on the broader market.

• After yesterday’s sharp falls, however, we think it may have been overdone in what appears to be a knee jerk reaction and we see some measure of recovery over the near term. Still we think that the recovery may be mild as many market players are wary on the current market condition and could be largely on a defensive mode. Therefore, we think that the rebound will still be tempered by selling into strength and quick profit taking activities. On the upside, the resistances are at 1,690 and 1,700 respectively, while the supports are at 1,680 and 1,660 respectively.

• The lower liners and many broader market shares are also finding it difficult to escape the ongoing slump and with the overall market conditions staying on the cautious side, the indifferent trend looks to extend for now as there remain few signs of a reversal as yet.

Company Update

• Chin Well Holdings Bhd posted a 28.3% Y.o.Y jump in 1QFY19 net profit to RM17.9 mln, from RM14.0 mln earlier – helped by improved turnover, lower administrative expenses and selling and distribution expenses. Revenue also gained 8.8% Y.o.Y to RM150.0 mln, from RM137.9 mln last year.

• Segmentally, net profit from the wire products segment more than doubled to RM1.7 mln vs. RM0.6 mln a year ago, boosted by higher unrealised forex gain, while fasteners sales rose 17.0% Y.o.Y to RM15.9 mln, from RM13.6 mln in the same quarter last year.

Comments

• As Chin Well’s reported earnings and revenue were broadly within our estimates, making up about 29.1% of our full-year forecast net profit of RM62.0 mln, and 26.6% of our projected revenue of RM661.1 mln, we leave our forecast unchanged.

• We maintain our HOLD recommendation on Chin Well with an unchanged target price of RM1.90 by ascribing an unchanged target PER of 9.0x to its FY19 EPS of 21.1sen. The target PER is at a small premium to PER of its closest peer, Tong Herr Resources Bhd premised on Chin Well’s higher margins and the positive growth outlook in the fasteners landscape in Europe.

• Protasco Bhd’s 3Q2018 net loss stood at RM0.8 mln vs. a net profit of RM10.3 mln in the previous corresponding quarter, dragged down by the weakness in five ofits six business segments. Revenue for the quarter slipped 22.0% Y.o.Y to RM234.9 mln.

• For 9M2018, cumulative net loss stood at RM3.9 mln vs. a net profit of RM21.5 mln recorded in the previous corresponding period. Revenue for the period declined 2.9% Y.o.Y to RM634.5 mln. The reported earnings fell short of our previous 2018 net earnings forecast of RM20.2 mln, whilst the reported revenue came within our expectations, amounting to 76.3% of our full year estimate of RM831.4 mln.

Comments

• With the reported earnings coming below our estimates, we slashed our earnings forecast as we expect Protasco to remain in the red with a net loss of RM3.3 in 2018, before returning into profitability with an expected net profit of RM25.0 mln (down from RM25.7 mln previously) for 2019. Our lower earnings assumption reflects the slower execution in both the construction and maintenance segments, coupled with margins compression due to higher overhead costs.

• Following the recent weakness on its share price, however, we upgrade Protasco to BUY (from Hold), but with a lower target price at RM0.52 (from RM0.62). We expect Protasco’s earnings recovery in 2019 to be anchored mainly from its bread and butter businesses – construction and maintenance segments that possess solid unbilled orderbooks.

• AWC Bhd’s 1QFY19 net profit registered a 19.9% Y.o.Y jump to RM2.1 mln, as opposed to RM1.8 mln a year ago, largely underpinned by improved contribution from the IFM and Engineering segments, as well as lower operating costs. Revenue, however, grew slightly by 3.5% Y.o.Y to RM68.5 mln, from RM66.2 mln in the same quarter last year. AWC has also declared final single-tier dividend of 0.5 sen per share, payable on 28th December, 2018.

Comments

• The reported earnings and revenue were in-line with our estimates, accounting to 21.4% and 24.2% of our previous full-year projected net profit and revenue of RM28.3 mln and RM282.7 mln respectively. Moving forward, we expect higher earnings, in-tandem with the recognition of profit guarantee from Trackwork (approximately RM6.0 mln per year).

• Although the reported results were within our expectations, we adjusted our forecast net profit for FY19-FY20 by 2.0%-3.0% after accounting for slight changes in depreciation and net interest costs.

• We maintain our BUY recommendation on AWC with a higher target price of RM1.25 (from RM1.20), by ascribing an unchanged target PER of 12.0x to its FY19's EPS of 10.2 sen as we remain positive on AWC’s long-term earnings accretion from recurring IFM projects and strong orderbook. Our target PER remain at a discount to its closest peer, UEM Edgenta Bhd, mainly due to the AWC’s smaller market capitalisation.

COMPANY BRIEF

• MISC Bhd has secured two contracts to supply two of its liquified natural gas (LNG) carriers to LNG Shipping S.p.A for US$133.0 mln (RM558.0 mln). The vessels will be chartered for a period of five years. The charter for LNG Portovenere is expected to commence in December 2018 whereas the charter for LNG Lerici is expected to commence by January 2019. (The Star Online)

• RHB Bank Bhd's 3Q2018 net profit rose 18.3% Y.o.Y to RM578.7 mln, mainly on higher income and lower allowances for credit losses on loans. Revenue for the quarter increased 8.3% Y.o.Y to RM3.20 bln.

• For 9M2018, cumulative net profit added 16.7% Y.o.Y to RM1.74 bln. Revenue gained 6.7% Y.o.Y to RM9.38 bln. (The Star Online)

• IHH Healthcare Bhd’s 3Q2018 net loss stood at RM104.1 mln against a net profit of RM82.1 mln in the previous corresponding quarter, mainly due to the recognition of foreign exchange (forex) losses of RM752.5 mln on subsidiary Acibadem Holdings' non-Turkish lira denominated borrowings. Revenue for the quarter, however, rose marginally by 1.4% Y.o.Y to RM2.84 bln.

• For 9M2018, cumulative net profit plunged 86.4% Y.o.Y to RM118.3 mln. Revenue for the period, however, gained 1.2% Y.o.Y to RM8.36 bln. (Bernama)

• PPB Group Bhd’s 3Q2018 net profit fell 5.6% Y.o.Y to RM359.8 mln on lower earnings from its grains and agribusiness, and consumer products segments. Revenue for the quarter, however, rose 5.6% Y.o.Y to RM1.14 bln.

• For 9M2018, cumulative net profit gained 5.0% Y.o.Y to RM853.8 mln. Revenue for the period increased 6.5% Y.o.Y to RM3.36 bln. (The Edge Daily)

• Petronas Dagangan Bhd’s 3Q2018 net profit sank 64.5% Y.o.Y to RM270.3 mln as the previous corresponding quarter had recognised a subsidiary disposal gain of RM424.6 mln. Revenue for the quarter, however, rose 13.8% Y.o.Y to RM7.82 bln.  For 9M2018, cumulative net profit declined 36.3% Y.o.Y to RM803.2 mln. Revenue for the period, however, grew 9.4% Y.o.Y to RM22.17 bln. An interim dividend of 16.0 sen per share, payable on 26th December 2018, was declared. (The Edge Daily)

• Serba Dinamik Holdings Bhd’s 3Q2018 net profit increased 22.3% Y.o.Y to RM83.2 mln in tandem with its strong top line growth. Revenue for the quarter expanded 17.9% Y.o.Y to RM770.2 mln.

• For 9M2018, cumulative net profit added 21.4% Y.o.Y to RM278.6 mln. Revenue for the period grew 20.3% Y.o.Y to RM2.31 bln. A second interim single-tier tax-exempt dividend of 1.65 sen per share, payable on 27th December 2018, was declared. (The Edge Daily)

• Hibiscus Petroleum Bhd’s 1QFY19 net profit surged 827.6% Y.o.Y to RM100.0 mln, helped by contribution from two producing assets - Anasuria in the UK and North Sabah in Malaysia. Revenue for the quarter soared 518.1% Y.o.Y to RM360.0 mln. (The Edge Daily)  

Source: Mplus Research - 28 Nov 2018