Gradual Upsides To End The Week

• The FBM KLCI (+0.3%) closed higher, lingering in the positive territory owing to buying-interest in Petronas-linked companies and the bullish sentiment on Wall Street overnight. All the lower liners rallied – led by the FBM Small Cap (+0.6%), while the broader market ended mostly higher with the exception of the Transportation and Logistics (-0.2%) sector.

• Market breadth recovered with 456 gainers against 375 decliners, while traded volumes gained 17.7% to 2.44 bln, on extended foreign buying-support.

• Hong Leong-related companies like Hong Leong Financial Group (+38.0 sen) and Hong Leong Bank (+12.0 sen) were among top blue-chip gainers, alongside Petronas Dagangan (+48.0 sen), Nestle (+30.0 sen) and Hartalega (+12.0 sen). Consumer products bellwethers like Dutch Lady (+RM1.08) and Fraser & Neave (+44.0 sen) advanced, followed by Batu Kawan (+36.0 sen), BAT (+18.0 sen) and IJM Plantations (+17.0 sen).

• On the contrary, Tong Herr Resources (- 16.0 sen), Apex Healthcare (-15.0 sen), Allianz Malaysia (-12.0 sen), Shangri-La Hotels (-9.0 sen) and Cahya Mata Sarawak Bhd (-8.0 sen) weighed on the broader market. Meanwhile, Bursa Malaysia decliners include Axiata (-5.0 sen), IHH Healthcare (-4.0 sen), Hap Seng Consolidated (-3.0 sen) and CIMB Bank (- 1.0 sen). Genting Malaysia (-8.0 sen) also declined amid its ongoing legal dispute with Fox Entertainment.

• Asian equities finished broadly higher – led by gains in technology-linked counters. The Nikkei opposed the general uptrend and drifted lower, weighed down by disappointing manufacturing data. The Shanghai Composite index, however, rose 0.4% following upbeat corporate results from the banking sector and optimism from the approval of a new technology board in Shanghai. The Hang Seng Index also gained 0.4%, while the majority of the ASEAN stockmarkets ended higher.

• Wall Street was mostly positive as investors digested fresh corporate earnings and economic releases. The Dow closed marginally in the red, dragged down by ongoing concerns of the unresolved U.S.-China trade uncertainties. Tech-indices like the S&P500 (+0.1) and the Nasdaq (+0.7%), however, powered higher on the back of upbeat earnings results from notable tech players.

• Key European bourses finished mostly higher after the ECB left interest rates unchanged, although gains were capped by expectations of slower growth in the Eurozone and weakness in the banking sector. The FTSE (-0.4%) slipped for the third consecutive session amid the prevailing Brexit uncertainties. The DAX and the CAC, however, rebounded 0.5% and 0.7% respectively – led by strong gains in the tech stocks, following upbeat 2H2019 growth forecasts from chipmaker STMicro.

The Day Ahead

• Yesterday’s anticipated mild recovery places stocks on Bursa Malaysia on a firmer footing and this could also set the tone for a favourable end to the week. Although there remains few catalysts, the absence of negative news could allow stocks to make further headway over the near term, albeit we think that the upsides may be limited by the insipid market following.

• The 1,700 points level remains the key resistance for now where we continue to think it is a major hurdle to clear in the prevailing market environment. As it is, the market’s valuations are already fair with PERs of 16.3x and 15.3x for 2019 and 2020 respectively within its historical averages. This leaves little room for significant upsides, in our view, amid the prognosis of the global economy dropping down a gear that would also lead to slower earnings growth. The supports, meanwhile, are at 1,680 and 1,690 respectively.

• The broader market shares and the lower liners are seeing some recovery yesterday, which should persist over the near term on pockets of bargain hunting activities. However, we think the upsides could be modest as the following is still largely indifferent for now.

MACRO BRIEF

• Malaysia’s Consumer Price Index (CPI) rose 0.2% Y.o.Y in December 2018 to 121.1. The figure, however, was lower than the consensus estimates of a 0.4% Y.o.Y increase. The increase in the overall index was due to the higher price for housing, water, electricity, gas and other fuels (+2.0% Y.o.Y), restaurants and hotels (+1.3% Y.o.Y), alcoholic beverages and tobacco (+1.1% Y.o.Y), education (+1.1% Y.o.Y) and food and non-alcoholic beverages (+0.7% Y.o.Y).

• On a monthly basis, the CPI increased 0.1% M.o.M. CPI for the period of January to December 2018 registered an increase of 1.0% Y.o.Y. The December growth rate marks the lowest inflation growth rate the country has seen since Feb 2015. (The Edge Daily)

COMPANY BRIEF

• Digi.com Bhd’s 4Q2018 net profit rose 4.9% Y.o.Y to RM377.8 mln, boosted by higher postpaid contribution, whilst higher data consumption across its prepaid, postpaid and digital businesses drove up overall internet revenue. Revenue for the quarter added 1.8% Y.o.Y to RM1.67 bln.

• For 2018, cumulative net profit grew 4.3% Y.o.Y to RM1.54 bln. Revenue for the year rose 2.9% Y.o.Y to RM6.53 bln. A final dividend per share of 4.8 sen, payable on 29th March 2019 was declared. (The Star Online)

• Aturmaju Resources Bhd’s (ARB) has finalised the business contract with Yes’s Comm. Enterprise Sdn Bhd (YESS) and is expected to contribute an estimated RM20.0 mln to ARB’s topline. The contract was valid on a yearly recurring basis, entailing ARB to provide a marketplace platform to YESS to sell and market their products. (The Star Online)

• KLCC Property Holdings Bhd's 4Q2018 net profit slid 46.9% Y.o.Y to RM183.7 mln. Revenue for the quarter, however, added 4.1% Y.o.Y to RM366.4 mln.

• For 2018, cumulative net profit declined 17.4% Y.o.Y to RM724.9 mln. Revenue for the year, however, gained 2.9% Y.o.Y to RM1.41 bln. A distribution of 10.9 sen per share for the quarter was declared. (The Star Online)

• Tycoon Tan Sri Danny Tan Chee Sing, founder and major shareholder of Tropicana Corp Bhd with a 63.6% stake, has returned to the helm of the property developer as Executive Vice Chairman after a three-and-a-half-year hiatus. Danny has also injected what is left of his land bank into Tropicana. The landbank, amounting to 1.1 mln ac. is located in the Klang Valley and Johor and has a potential gross development value (GDV) of RM24.82 bln. (The Edge Daily)

• MY E.G. Services Bhd (MyEG) will be filing an appeal to the Court of Appeals against the High Court’s judgment to uphold the Malaysia Competition Commission’s (MyCC) decision to slap a penalty of RM9.3 mln on the egovernment services provider for abusing its dominant position.

• MyCC announced that the Kuala Lumpur High Court had, on 22nd January 2019, upheld the commission's decision on 24th June 2016 to penalise MyEG and its wholly-owned subsidiary MYEG Commerce Sdn Bhd for infringing the Competition Act 2010. (The Edge Daily)

• CIMB Group Holdings Bhd plans to enter into the investment banking market in the Philippines, after its wholly-owned unit CIMB Group Sdn Bhd has received the relevant approvals from the Securities and Exchange Commission of the Philippines to establish its investment banking business there.

• CIMB's unit will be operating its investment banking business in the Philippines via a 60.0% shareholding in CIMB Bancom Capital Corp with the remaining 40% stake to be held by local partners — Bancom II Consultants Inc and PLP Group Holdings Inc. (The Edge Daily)

• TMC Life Sciences Bhd’s 1QFY19 net profit rose 11.7% Y.o.Y to RM7.1 mln on higher patient load, higher intensity cases handled and additional consultants recruited. Revenue for the quarter grew 13.0% Y.o.Y to RM47.2 mln. (The Edge Daily)

• Muhibbah Engineering (M) Bhd has bagged two contracts worth RM165.0 mln to supply noise barriers for installation along the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) and the Damansara-Shah Alam Elevated Expressway (DASH). It accepted the award of the contracts from Permodalan Nasional Bhd's (PNB) wholly-owned subsidiary, Turnpike Synergy Sdn Bhd. The contracts are scheduled to commence by the end of this month, with completion expected in 1Q2021. (The Edge Daily)

• The Kuala Lumpur High Court has granted Genting Malaysia Bhd (GENM) leave to commence judicial review proceedings against the Ministry of Finance's (MoF) decision in December 2017 to amend the tax incentive approval it gave in 2014.

• In December 2014, the MoF had granted tax incentives for the Genting Integrated Tourism Plan (GITP), which among others, entitled GENM to claim for income tax exemption equivalent to 100.0% of qualifying capital expenditure incurred for a period of 10 years.

• However, the Ministry decided in 2017 to amend the tax incentive approval given, which effectively prolongs the utilisation period of the tax allowances. (The Edge Daily)

• Caring Pharmacy Group Bhd’s 2QFY19 net profit added 34.3% Y.o.Y to RM5.7 mln on the back of higher margins and stronger sales at its new and existing outlets. Revenue for the quarter grew 12.8% Y.o.Y to RM139.3 mln.

• For 1HFY19, cumulative net profit grew 30.6% Y.o.Y to RM9.8 mln. Revenue for the period expanded 13.5% Y.o.Y to RM282.2 mln. (The Edge Daily)  

Source: Mplus Research - 25 Jan 2019