Tip-Toeing Higher

• Tracking the gains on Wall Street overnight, the FBM KLCI (+0.7%) recovered all its previous session’s losses after lingering in the positive territory for the entire trading session. The lower liners also marched mostly higher as the FBM Small Cap and FBM Fledgling added 0.5% and 0.1% respectively, while only the healthcare sector (-0.3%) underperformed the positive broader market.

• Market breadth was fair as advancers and decliners were both even at 435 stocks each. Traded volumes, however, added 14.2% to 3.45 bln shares on rotational play amongst the lower liners.

• Charttoppers on Thursday were Nestle (+RM1.00), Petronas Gas (+48.0 sen), KLK (+36.0 sen), MISC (+20.0 sen) and Tenaga (+20.0 sen). Notable advancers on the broader market include Dutch Lady (+68.0 sen), BAT (+48.0 sen), KESM Industries (+26.0 sen), Genting Plantations (+25.0 sen) and Carlsberg (+20.0 sen).

• In contrast, Time dotCom (-23.0 sen), SAM Engineering & Equipment (-22.0 sen), Heineken (-12.0 sen), Analabs (-11.0 sen) and Supermax (-11.0 sen) were the broader market biggest losers. Meanwhile, Top Glove (-10.0 sen), Hong Leong Bank (-6.0 sen), Dialog (-5.0 sen), Petronas Dagangan (-4.0 sen) and PPB Group (-4.0 sen) were the big board’s biggest decliners.

• Asia benchmark indices closed mostly lower as the Nikkei (-1.3%) snapped a three-day winning streak after the Japanese Yen appreciated against the Greenback. The Shanghai Composite declined 0.4% after the inflation rate in December 2018 rose 1.9% - the slowest in six months, but the Hang Seng Index gained 0.2% after enduring a choppy trading session. ASEAN stockmarkets, meanwhile, closed mixed yesterday.

• U.S. stockmarkets advanced for the fifth straight session after recovering all their intraday losses as the Dow added 0.5% to claw its way out from the correction territory after U.S. Federal Reserve Chairman Jerome Powell reiterated his stance on a less hawkish interest rates hike. Likewise, the S&P 500 rose 0.5% with only the consumer sector (-0.2%) underperforming, while the Nasdaq closed 0.4% higher.

• Earlier, major European indices edged mostly higher as the FTSE and DAX added 0.5% and 0.3% respectively after recovering all their intraday losses as investors continue to monitor for leads in relation to the recently concluded trade talks between the U.S. and China. The CAC, however, slipped 0.2% after lingering in the negative territory for the entire trading session.

The Day Ahead

• Despite yesterday’s volatility where the key index lost steam in the afternoon session and only secured the credible gains on a last minute haul on selective index heavyweights, we think there could be further near term gains as the Malaysian stocks sought to end the week on a positive tone. Its efforts will be supported by the sustained gains in most global indices overnight that should also buoy Malaysian stocks.

• On the whole, the near term market outlook appears encouraging for now amid a potential easing of the trade tensions between the U.S. and China. At the same time, the Fed is said to be letting up on its interest rate increases in 2019 that could provide cheer to the equity markets, if the economic outlook sours.

• Nevertheless, we think that volatility could remain a feature over the near term on Bursa Malaysia as we think there could be quick profit taking actions as some market players could opt to lock in their gains ahead of the weekend. Therefore, we see the FBM KLCI finding resistances at around the 1,681-1,685 levels over the near term, while the supports are pegged at the 1,670 and 1,665 levels.

• Most of the lower liners and broader market shares were on a purple patch over the past few sessions, but the upsides seem to be tapering yesterday, which suggest that profit taking is setting in. We think that the profit taking activities could prolong ahead of the weekend. As such, we expect the lower liners to endure increased volatility, albeit we think there could still be some mild upsides.

Company Update

• AWC Bhd’s Singaporean unit, Stream Environment (S) Pte Ltd (SEPL) was awarded a sub-contract worth S$8.6 mln (RM26.0 mln) to undertake works on pneumatic waste and linen chute system as well as foodwaste treatment system in Singapore.

• The sub-contract, awarded by SDK Consortium, forms part of SDK’s proposed development of six blocks of seven-storey health campuses comprising acute hospital, specialist outpatient clinics, community hospital, nursing home and four basement levels in Woodlands. SEPL’s work is expected to be completed by 13th January 2021. Comments  We are positive on the new STREAM contract, which is expected to drive bottomline growth as STREAM projects usually command more lucrative doubledigit margins. Even so, the contract is within our forecast orderbook replenishment target and thus, we leave our forecast unchanged.

• We maintain our BUY recommendation on AWC Bhd with a target price of RM1.10, by ascribing an unchanged target PER of 10.0x to its FY19 EPS of 10.7 sen as we continue to see long-term earnings accretion from its sizable outstanding orderbook of about RM920.5 mln and strong balance sheet (net cash position). Our target PER remain at a discount to its closest peer, UEM Edgenta Bhd, in-view of AWC’s smaller market capitalisation.

COMPANY BRIEF

• Malaysia Airports Holdings Bhd (MAHB) missed its passenger volume target last year partly due to the shift of airlines seat capacity by some of the local carriers, albeit the anticipated higher passenger movements related to the 14th General Election (GE14) did materialise.

• The airport operator saw 2.5% more passengers passing through the 39 airports in the country that it operates last year, to reach 99.0 mln, compared to its 2018 target of 6.5%. Consequently, the group has set a lower passenger growth target of 4.9%, with international and domestic passenger traffic growing at 2.4% and 7.6% respectively or 2019. (The Edge Daily)

• Atlan Holdings Bhd’s 3QFY19 net profit grew more than seven-fold to RM13.7 mln, from RM1.6 mln last year, driven by higher revenue and better margins. Revenue for the quarter also rose 15.8% Y.o.Y to RM215.4 mln, from RM186.1 mln in the previous corresponding period. The group declared a dividend of 10.0 sen per share, bringing the total dividend in 9MFY19 to 20.0 sen.

• Cumulatively, 9MFY19 net profit jumped 50.4% Y.o.Y to RM34.1 mln, from RM22.7 mln a year ago, despite weaker cumulative revenue of RM555.9 mln (- 7.8% Y.o.Y), from RM602.7 mln in 9MFY18.

• Moving forward, the group is planning to focus on expanding its market presence, strengthening operational efficiencies and monitoring its key cost drivers closely. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) has obtained RM144.0 mln financing for its second large-scale solar (LSS) project in Malaysia. Its special purpose vehicle (SPV), TNB Bukit Selambau Solar Sdn Bhd (TBSS), alongside MUFG Bank (Malaysia) Bhd has recently achieved financial close for financing the project located at Bukit Selambau, Kuala Muda, Kedah. The project is scheduled to be completed in the 4Q2020. (The Star Online)

• Loss-making company Industronics Bhd, whose share price halved last year, wants to place out a big block of shares that is equivalent to 30.0% of its existing paidup capital to raise nearly RM2.8 mln for working capital. The group has allocated about RM2.0 mln to expand its system integration business which is currently primarily involved in the provision of light information display systems for airports, with remaining portion of the proceeds for necessary expenses, and additional inventory purchases under the luxury timepiece trading business.

• The first tranche of private placement, which is 10.0% of the paid-up capital, will be priced at 9.0 sen per share to third- party investors. Meanwhile, the remaining shares will be placed out later at no less than 8.95 sen per share. (The Edge Daily)

• Eversendai Corp Bhd has clinched projects totalled approximately RM406.0 mln in Singapore, India and Qatar. In Singapore, the contract involves building a new hi-tech data processing and computing facility for Sato Kogyo (S) Pte Ltd. The company will also be providing services in connection to the design, supply, fabrication, painting and construction of structural steel diagrid and floor beams for APCRDA Office Building (HOD Towers 3 & 4) at Amarawati, Vijayawada, Andhra Pradesh in India.

• Meanwhile, the project in Qatar includes engineering, connection design, fabrication, painting supply and installation of structural steel works for Lusail Expressway Al Wahda Arch in Qatar. (The Star Online)  

Source: Mplus Research - 11 Jan 2019