• The FBM KLCI (+0.1%) inched higher as the key index advanced for the third straight session yesterday. Gains were buoyed by the positive developments in Wall Street overnight coupled with the solid 4Q2017 GDP data that expanded 5.9% Y.o.Y. The lower liners – the FBM Small Cap (+0.8%), FBM Fledgling (+1.3%) and FBM ACE (+1.2%), all advanced, while the broader market closed mixed.

• Market breadth stayed positive as advancers outpaced decliners on a ratio of 580-to-338 stocks. Traded volumes rose 19.5% to 1.93 bln shares amid the positive market sentiment.

• Nestle (+50.0 sen) continues to lead the big board advancers list, followed by Hong Leong Bank (+20.0 sen), Petronas Chemicals (+10.0 sen), Genting Malaysia (+8.0 sen) and CIMB (+6.0 sen). Glove manufacturers like Hartalega (+44.0 sen), Top Glove (+22.0 sen) and Kossan (+20.0 sen) rose, while Southern Steel (+28.0 sen) and Ranhill rose 1.0 sen after reporting strong set of quarterly earnings.

• On the flipside, notable losers on the broader market were BAT (-RM3.28), Panasonic (-38.0 sen), MPI (-36.0 sen), Magni-Tech Industries (-22.0 sen) and Apex Healthcare (-21.0 sen). Amongst the biggest decliners on the FBM KLCI were Petronas Gas (-30.0 sen), Sime Darby Plantation (-18.0 sen), KLK (-6.0 sen), Tenaga (-4.0 sen) and Sime Darby (- 3.0 sen).

• Japanese equities remain pressured yesterday as the Nikkei (-0.4%) extended its losses for the third straight session after the Japanese Yen rallied to 15- month high against the U.S. Dollars. The Hang Seng Index (+2.5%) rallied above the 30,000 psychological level, while the Shanghai Composite (+0.5%) advanced for the third straight session ahead of the Lunar New Year break. ASEAN stockmarkets, meanwhile, closed mostly higher yesterday.

• Despite opening lower at the start of the trading bell, U.S. stockmarkets staged a quick recovery to close higher as the Dow (+1.0%) recorded its fourth consecutive days of gains amid mixed economics data that indicates a stronger-thanexpected inflation data in January 2018 (+2.1% Y.o.Y) whilst retail sales data in the same period (+3.6% Y.o.Y) came below expectations. On the broader market, the S&P 500 climbed 1.3%, while the Nasdaq surged 1.9%.

• European benchmark indices – the FTSE (+0.6%), CAC (+1.1%) and DAX (+1.2%), all recovered their previous session losses encouraged by the strong Eurozone’s industrial production that rose 5.2% Y.o.Y in December 2017. Gains were also underpinned by the stronger commodity prices.

The Day Ahead

• With a half-day session on Bursa Malaysia and many market participants already away ahead of the Chinese New Year break, we see lackluster trading on the Malaysian stockmarket today. However, there should still be upside bias on the key index as we see institutional players bargain hunt selective index heavyweights, taking cue from the positive global equity markets overnight

• Nevertheless, we think the gains will be limited with the fewer market participation and the 1,840 level will be the near term resistance. We do not anticipate the key index making further strides above the 1,840 level over the near term due to shortened trading session. Meanwhile, there is support at 1,830 and 1,820 respectively. ? The will also be limited following on the lower liners and broader market shares with ahead of the Chinese New Year break. MACRO BRIEF

• Malaysia’s economy expanded 5.9% Y.o.Y in 4Q2017 came ahead of economists' forecast of 5.8% Y.o.Y. Growth, however, was slowed down from the 6.2% Y.o.Y in 3Q2017 due to a dip in domestic demand.

• On a seasonally adjusted basis, GDP posted a growth of 0.9% Q.o.Q. For 2017, Malaysia’s economy expanded at a faster pace of 5.9% Y.o.Y compared with 4.2% Y.o.Y in 2016.

• Meanwhile, inflation moderated to 3.5% Y.o.Y in 4Q2017 compared to 3.6% Y.o.Y in 3Q2017, mainly due to lower inflation in the housing, water, electricity and gas besides transport categories. For 2017, inflation averaged at 3.7% Y.o.Y compared with 2.1% Y.o.Y in 2016. (The Star Online)

Company Update

• An associate company of Protasco Bhd has entered into a concession agreement with the federal government for the maintenance of federal roads in Sarawak. DAL HCM Sdn Bhd has been granted the right to undertake routine maintenance, periodic maintenance, emergency works and other activities on part of the federal roads consisting 751 km.

• DAL HCM is a 30%-owned unit of HCM Engineering Sdn Bhd, which in turn is wholly owned by Protasco. The other 70% stake is owned by D.A.L. Keluarga Realty Sdn Bhd. The 10-year concession commences on 1st September 2018. HCM had previously been awarded a 15-year concession by the government in 2003 to maintain 373 km of federal roads in Sarawak’s Sibu, Bintulu and Mukah division. That concession will be expiring in August 2018. (The Edge Daily)

Comments

• We raised our earnings forecast for 2018 and 2019 by 0.2% to RM45.8 mln and 2.8% to RM63.0 mln to reflect the additional earnings from the concession renewal. Consequently, we maintain our BUY recommendation on Protasco with a higher target price of RM1.25 (from RM1.20).

• We arrive our target price on a sum-ofparts basis by ascribing an unchanged target PER of 11.0x to its 2018 construction earnings as well as a target PER of 8.0x (unchanged) to its 2018 concession and engineering services’ earnings. Its education and trading units valuations remain pegged at target PERs of 6.0x respectively due to their smaller scale businesses, while its property development division’s valuation is from ascribing an unchanged 0.6x to its BV.

Company Briefs

• Luxchem Corp Bhd posted a lower 4Q2017 net profit of RM9.5 mln (-29.8% Y.o.Y), from RM13.5 mln last year, although revenue was higher at RM197.2 mln against RM186.4 mln in the same quarter last year. The lower bottomline was a result of higher raw materials prices as well as administrative expenses. Even so, the group has proposed an interim dividend of 1.5 sen per share bringing the fullyear payout to four sen a share.

• Cumulative full year net profit also dropped to RM40.7 mln (-6.3% Y.o.Y), from RM43.5 mln a year earlier. Revenue, however gained 15.0% Y.o.Y to RM806.7 mln, from RM701.6 mln a year earlier. (The Edge Daily)

• Carlsberg Brewery Malaysia Bhd recorded a 6.0% Y.o.Y gain in its 4Q2017 net profit to RM50.0 mln, compared with RM47.1 mln a year ago – helped by the continued recovery of its associate's business in Sri Lanka, despite a marginally lower revenue at RM429.9 mln (-1.0% Y.o.Y), from RM434.6 mln previously. In-conjunction with the earnings announcement, the group has also announced a 77.0 sen dividend, comprising a final dividend of 66.0 sen and a special dividend of 11.0 sen per share.

• Consequently, 2017 net profit also expanded 8.0% Y.o.Y to RM221.2 mln, from RM205.0 mln in 2016, in-tandem with a 5.0% Y.o.Y growth in revenue to RM1.77 bln, from RM1.68 bln a year ago. (The Edge Daily)

• Serba Dinamik Holdings Bhd was awarded a total of seven new contracts, worth a combined estimate of RM830.9 mln. The contracts include two engineering, procurement, construction and commissioning (EPCC) contracts and four operations and maintenance (O&M) contracts.

• Meanwhile, the seventh contract is on an O&M basis where Serba Dinamik provides genset operation and maintenance services at Chevron Indonesia's Kalimantan operation. The contract commenced on 4th December last year and is due for completion on 3th November, 2019. (The Star Online)

• Supermax Corp Bhd’s 2QFY18 net profit surged 59.0% Y.o.Y to RM35.9 mln, from RM22.6 mln a year ago, driven by stronger revenue, higher production capacity and improved operational efficiency.

• Revenue for the quarter expanded 42.0% Y.o.Y to RM335.9 mln, from RM236.7 mln last year. Subsequently, the glove maker has declared a singletier interim dividend of 3.0 sen per share, payable on 28th March 2018.

• Cumulative 1HFY18 net profit jumped 52.0% Y.o.Y to RM63.8 mln, from RM42.1 mln, while revenue rose 28.0% Y.o.Y to RM647.9 mln, from RM505.7 mln in the previous corresponding year. (The Star Online)

• Yinson Holdings Bhd is issuing RM1.5 bln worth of Mudharabah bonds to refinance its outstanding financing facilities and sukuk facilities as well as to finance its working capital, equity contribution and capital expenditure for new projects. The sukuk Mudharabah programme which would have a perpetual tenure with the first issuance to be made within 60 business days from the lodgement date. (The Edge Daily)

• TRIplc Bhd’s shareholders have given the green light to its proposed restructuring and transfer of listing exercise following its court convened meeting and extraordinary general meeting yesterday. The exercise will see the group becoming a subsidiary of Pimpinan Ehsan Bhd (PEB) and subsequently sold to Puncak Niaga Holdings Bhd. (The Edge Daily)

• Hibiscus Petroleum Bhd's oil production will more than double to 9,000 barrels per day, compared to the current 4,000 barrels upon completion of the purchase of a 50.0% equity stake in North Sabah oilfield from Royal Dutch Shell Plc. It is on schedule to complete the acquisition by end-March. (The Edge Daily) ? Kumpulan Perangsang Selangor Bhd (KPS) is diversifying into the electronic manufacturing services (EMS) segment, following the acquisition of a Penang-based fullyintegrated EMS player, CPI (Penang) Sdn Bhd, for RM250.0 mln. The group has signed a conditional share sale agreement (SSA) for the 100.0% equity stake from HK Resources Sdn Bhd and TCS Resources Sdn Bhd.

• The proposed acquisition will be made in cash, funded from internal funds and bank borrowings. The RM250.0 mln price tag values CPI at an enterprise value to earnings before interest, tax, depreciation and amortisation ratio of 6.5x. The acquisition also comes with a minimum profit guarantee of RM25.0 mln for FY18 and RM26.0 mln for FY19. (The Edge Daily)

• Dialog Group Bhd’s 2QFY18 net profit increased 26.7% Y.o.Y to RM115.8 mln, against RM91.4 mln a year earlier, boosted by its Malaysian operations and higher contributions from its jointventures and associates. Quarterly revenue, however came in flat at RM857.4 mln, from RM856.8 mln previously.

• The group also said that its associate company, Pengerang LNG (Two) Sdn Bhd had achieve its commercial operation and received the first commercial Liquefied Natural Gas (LNG) cargo at its newly commissioned regasification terminal at the Pengerang Deepwater Terminal last November. (The Edge Daily)  

Source: Mplus Research - 15 Feb 2018