M+ Online Research Articles

Author: MalaccaSecurities   |   Latest post: Fri, 21 Sep 2018, 10:07 AM


Mplus Market Pulse - 20 Oct 2017

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  • Despite opening higher at the start of the trading bell, the FBM KLCI (-0.3%) retreated for the third straight session, in tandem with the weakness in Asian benchmark indices. The lower liners – the FBM Small Cap (-0.1%), FBM Fledgling (- 0.5%) and FBM ACE (-0.4%) all fell, while the Industrial Products (+0.4%), Technology (+0.2%), Mining (+1.4%) and REITS (+0.2%) sector outperformed the negative broader market.
  • Market breadth remained negative as losers outpaced gainers on a ratio of 544- to-365 stocks. Traded volumes, however, added 9.5% to 3.16 bln shares as profit taking activities escalated.
  • Two-thirds of the key index components fell, led by Petronas Gas (-52.0 sen) followed by BAT (-30.0 sen), DIGI (-12.0 sen), RHB Bank (-11.0 sen) and Hong Leong Financial Group (-10.0 sen). Notable decliners on the broader market include Genting Plantations (-24.0 sen), Shangri-La (-15.0 sen), Magni-Tech Industries (-14.0 sen), APB Resources (- 13.0 sen) and Can-One (-12.0 sen).
  • Consumer products giants like Dutch Lady (+38.0 sen), Panasonic (+36.0 sen) and Nestle (+18.0 sen) advanced, while other significant gainers on the broader market were KESM Industries (+22.0 sen). Meanwhile, KLK (+28.0 sen), Petronas Chemicals (+21.0 sen), KLCC (+7.0 sen), Tenaga (+4.0 sen) and CIMB (+3.0 sen) anchored the big board advancers list.
  • Asian benchmark indices ended mostly lower as the Hang Seng Index slumped 1.9% on selloff in property shares after housing sales by value decreased 2.4% Y.o.Y in September 2017, while the Shanghai Composite ended 0.3% lower after the 3Q2017 GDP data expanded at a slower pace at 6.8% Y.o.Y. The Nikkei (+0.4%) advanced for the thirteenth straight session – the longest winning streak in 30 years on the weaker Japanese Yen against the U.S. Dollar. ASEAN stockmarkets, meanwhile, ended mostly lower.
  • Despite opening sharply lower at the start of the trading bell, U.S. stockmarkets recouped all their intraday losses to eke out marginal gains overnight. The Dow added 0.02% as investors focus on the recent string of better-than-expected corporate earnings and strong labour market. The S&P 500 climbed 0.03%, but the Nasdaq slipped 0.3% on weakness in Apple Inc (-2.4%) after the group was dialing back orders on its new IPhone.
  • European benchmark indices – the FTSE (-0.3%), CAC (-0.3%) and DAX (-0.4%), however, all retreated, tracking the weakness in Asian stockmarkets. The weakness was also compounded with political uncertainty in Spain after the government will move to suspend autonomous rule in the Catalonia region.

The Day Ahead

  • The key index has fallen firmly below the 1,750 level and as a consequent, the near term outlook has turned increasingly precarious with the weak market conditions appearing to be taking a hold. As a result, the general market outlook remains wary and uncertain with the dowside bias poised to continue and the 1,740 support level has now come into play.
  • After the key index’s incessant falls, however, we also think that a rebound is already due, albeit there are still few signs of a respite as yet. Any recovery could be mild at this juncture, in view of the lack of new domestic leads to entice fresh buying. ? On the broader market and among the lower liners, there are also some signs of strain with profit taking appearing to take precedent in the recent days, which we see continuing ahead of the weekend. Therefore, we see the above stocks ending the week on a softer note.

Company Update

  • Mitrajaya Holdings Bhd has secured a contract to undertake main building works for a 363-unit condominium at Precinct 15, Putrajaya, for a contract price of RM132.5 mln. Mitrajaya accepted a letter of award from Asima Architects Sdn Bhd for the job, which is expected to be completed in 30 months - by February 2021. (The Edge Daily)


  • The abovementioned project brings its construction orderbook replenishment to RM1.13 bln YTD, surpassing our targeted orderbook replenishment rate of RM1.00 bln. Mitrajaya’s outstanding orderbook stands at approximately RM2.00 bln (implying an orderbook cover ratio of 2.4x of 2016 construction revenue) and will provide earnings visibility over the next 2- 3 years.
  • Despite the bigger-than-expected orderbook replenishment rate, we leave our earnings forecast unchanged as we see the billing of the aforementioned contract will only kick-in from 2018 onwards. Therefore, we maintain our BUY recommendation on Mitrajaya with an unchanged target price of RM1.40. Our target price is derived from ascribing an unchanged target PER of 11.0x to its 2018 (fully diluted) construction earnings, while the value of its property development units, both local and overseas, are valued at 0.8x their respective book values.

Company Brief

  • Bintai Kinden Corp Bhd is collaborating with Vista Springs Development Sdn Bhd to jointly develop a 4.5-ac. piece of freehold land in Melaka, with an estimated gross development value (GDV) of RM350.0 mln. The proposed development will be a combination of hospitality, residential and/or commercial properties. (The Star Online)
  • Trive Property Group Bhd is currently in the midst of negotiations to be the turnkey contractor to build affordable housing projects for Syarikat Perumahan Negara Bhd (SPNB) worth RM1.1 bln in GDV.
  • Consequently, the group has inked a Memorandum of Understanding (MoU) with Tenaga Meriah Sdn Bhd on 20th October 2017 to facilitate the negotiations. The latter has secured a letter of intent from SPNB to form a joint-venture (JV) company. (The Star Online)
  • Hubline Bhd is in the midst of an initial discussion with a large oil and gas/chemical company for the provision of logistics services, although the terms of the MoU have not been finalised. This comes as a reply to Bursa Malaysia’s unusual market activity (UMA) query yesterday, which it attributed to the negotiations and a slew of recent boardroom changes. (The Edge Daily)
  • PUC Bhd is partnering with point-ofsale (POS) services provider, Bersian Technology (M) Sdn Bhd to implement a cross-marketing collaboration. Bersian has clienteles in the retail and e-commerce sector, with over 3,000 licensed merchant outlets using its POS services. (The Edge Daily) 
  • Vivocom Intl Holdings Bhd is collaborating with MACfeam Sdn Bhd via a 60:40 JV to tender for contracts in the East Coast Rail Line (ECRL) project in Terengganu and Pahang. The JV company will tender for contracts in the engineering, procurement, construction commissioning (EPCC) segment. (The Edge Daily)
  • Grand-Flo Bhd is disposing its 12.3% equity stake in Thailand-based Simat Technologies Public Company Ltd for THB132.0 mln (about RM16.7 mln) and another 80.0% stake in Kopacklabels (Pg) Sdn Bhd (KPSB) for RM700,000.
  • Proceeds from the sale will be used for working capital and new business investments. (The Edge Daily)
  • Mah Sing Group Bhd has aborted a proposed deal to acquire five parcels of adjoining freehold land fronting Titiwangsa Lake, totalling some 3.6 acres in total for RM60.0 mln due to non-fulfilment of the conditions precedent (CP) within the CP period.
  • However, the group said it still has 34 on-going projects which are spread out across various stages of development cycle providing growth and earnings visibility for at least the next eight years. (The Star Online)
  • Bina Darulaman Bhd's 3Q2017 net profit plunged 67.2% Y.o.Y to RM1.9 mln, from RM5.8 mln in the previous corresponding year, dragged down by lower contributions from its road and quarry division. Quarterly revenue also declined 37.8% Y.o.Y to RM54.2 mln, from RM87.2 mln in 3Q2016.
  • For the cumulative 9M2017, net profit tanked 75.6% Y.o.Y to RM2.6 mln, from RM10.7 mln last year, despite only a 2.8% Y.o.Y drop in revenue to RM197.0 mln, from RM202.7 mln in 9M2016. (The Edge Daily)
  • Palette Multimedia Bhd made a turnaround in its earnings with a 1QFY18 net profit of RM3.0 mln, from a net loss of RM0.5 mln last year, boosted by higher contributions from its recent Russian venture. Revenue for the quarter jumped 34-fold to a record high of RM7.8 mln, of which 99.97% was contributed by its Russian venture, from a 1QFY17 revenue of RM0.2 last year. (The Edge Daily)  

Source: Mplus Research - 20 Oct 2017

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