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Author: MalaccaSecurities   |   Latest post: Tue, 29 Sep 2020, 11:57 AM

 

Mplus Market Pulse - 25 Jun 2019

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Still Looking Toppish, Pullback To Persist

  • The FBM KLCI halted its winning streak on Monday due to profit-taking activities as investors took to the sidelines ahead of key economic indicators from the U.S. and Eurozone. All the lower liners – the FBM Small Cap (-0.3%), the FBM Fledgling (-0.2%) and the FBM Ace (- 0.7%) retreated while on the broader market, only the Financial Services, Energy and Transportation and Logistics sectors outperformed their counterparts.
  • Market breadth turned negative as losers overtook the winners on a ratio of 518-to-294 stocks, while traded volumes continued to thin by 18.8% to 1.81 bln shares as investors adopt a wait-andsee approach ahead of the much anticipated U.S.-China meeting on Friday.
  • Nestle led the Main Board underperformers, alongside Nestle (-40.0 sen), Genting (-12.0 sen), PPB Group (-10.0 sen), Tenaga Nasional (- 10.0 sen) and Sime Darby Plantation (- 9.0 sen). Other decliners were Panasonic Manufacturing (-34.0 sen), KLCC (-32.0 sen), Time Dotcom (-32.0 sen), Gamuda (-26.0 sen) and Carlsberg (-20.0 sen).
  • In contrast, broader market frontrunners were BAT (+RM1.10), Bursa Malaysia (+27.0 sen), Yinson (+20.0 sen) and Negeri Sembilan Oil Palms (+13.0 sen). Litrak also jumped 70.0 sen following the proposed takeover of its toll concessionaires by the government. Meanwhile, banking heavyweights that ended higher include CIMB (+5.0 sen), Hong Leong Financial Group (+4.0 sen) and RHB Bank (+3.0 sen), alongside Hap Seng Consolidated (+5.0 sen) and Petronas Dagangan (+4.0 sen).
  • Key regional benchmark bourses tickedhigher, lifted by gains in energy stocks on supply concerns, in-tandem with mounting U.S.-Iran tensions. The Nikkei (+0.1%) clawed back earlier losses as investors took a breather from last Friday’s selldown, while the Hang Seng index and the Shanghai Composite ended up by 0.1% and 0.2% respectively. Elsewhere, ASEAN stockmarkets were mostly lower on Monday’s close.
  • Wall Street tumbled on extended profittaking amid a weaker dollar and higher gold prices. The S&P 500 (-0.2%) declined for the second consecutive session, alongside its tech-heavy peer the Nasdaq (-0.3%). The Dow (+0.03%), however, hugged the flat line at 26,727.5 points.
  • Continuously weak business sentiment pushed the DAX (-0.5%) deeper into the red, alongside the CAC (-0.1%), although the FTSE held on to its gains despite seesawing in-and-out of the negative territory ahead of the release of key retail data.

THE DAY AHEAD

  • Expectedly, the rally took a breather yesterday amid fresh geopolitical concerns and the recent steep gains that left stocks perching on the overbought level. With conditions still toppish, we see further near term retracement as profit taking activities looks set to continue.
  • Market players will likely be on a holding mode ahead of the G20 summit in the upcoming weekend to see if there is any progress in the U.S-China trade negotiations. Back home, there are also still few noteworthy leads for market players to follow and this will negate the some of the recent gains and place a cautious outlook in the near term. Nevertheless, a pullback is deemed healthy as it would allow some of the recent gains to be digested as valuations are already toppish. We see supports at the 1,670-1,672 levels, followed by the 1,660 level. The resistances are at 1,680 and 1,690 respectively.
  • The lower liners and broader market shares are still experiencing low following amid the lack of buying catalyst to provide any near term buying impetus. At the same time, there remains considerable wariness as the medium term outlook is still clouded by threats to corporate earnings growth in view of the more challenging economic undertone.

COMPANY UPDATE

  • Comfort Gloves Bhd’s (CGB) posted a 14.5% Y.o.Y increase in its 1QFY20 net profit to RM8.4 mln, compared to RM7.3 mln last year, on the back of higher sales volume. Revenue was also 12.5% Y.o.Y higher to RM120.0 mln, from RM106.6 mln in the last corresponding year.
  • The latest reported earnings were in-line with our previous forecast, coming in at 28.0% of our full-year net profit, while revenue accounted for 27.7% of our estimate.

Comment

  • Despite coming in as expected, we lift our net interest expense following higher borrowings and increase revenue projection after including an additional six production lines by end-2019. Subsequently, we raise our FY20-FY21 net profit forecast by 8.2%-9.1% to RM32.5 mln and RM36.5 mln respectively. Revenue was also increased by about 6.0% to RM458.4 mln and RM479.9 mln from FY20-FY21.
  • We upgrade our call on CGB to BUY (from Hold) with an unchanged target price of RM0.95, backed by higher capacity, increasing efficiency and bottomline recovery as the dust settles on the previous FDA issue.
  • Our target price is derived by ascribing to a lower target PER of 17.0x (from 18.0x), which is in-line with the slight pullback in industry valuation and CGB’s four-year mean to CGB’s FY20 EPS of 5.6 sen. The ascribed target PER remains at a discount to the PER of industry bellwethers like Hartalega Holdings Bhd and Top Glove Corporation Bhd due to CGB’s smaller market capitalisation and capacity.
  • Econpile Holdings Bhd was awarded RM67.8 mln in the adjudication proceedings it initiated to recover progress claims for work done from ASM Development (KL) Sdn Bhd, under a RM280.0 mln contract for a mixed project.
  • To recap, the group announced it was seeking RM80.1 mln on 14th March 2019 in progress claims from ASM Development and had issued a notice of determination to the latter. The determination of ASM Development, the employer of the project, came following a notice of default EMSB had issued to it in 25th February 2019.
  • The job, involving foundation and substructure works, was awarded by ASM Development to EMSB in September 2016. When EMSB sought the adjudication proceedings, the contract was about 80.0% completed, with the value of the remaining works estimated at about RM56.0 mln. (The Edge Daily)

Comments

  • With the aforementioned award came in at the tail-end of FY19, we expect the proceeds will only be receive in FY20 that expects to bump Econpile’s earnings to RM105.0 mln (from RM54.3 mln). We reckon that part of the proceeds will be paid as dividends, amounting to 2.5 sen – translating to a decent dividend yield of 3.5%.
  • Consequently, we upgrade Econpile to HOLD (from SELL) with a higher target price of RM0.79 (from RM0.54). Our target price is derived by ascribing a target PER of 10.0x to its FY20 EPS of 7.9 sen.
  • Serba Dinamik Holdings Bhd has signed a Memorandum of Understanding with PKNM Energy Sdn Bhd, which is whollyowned by the state's Perbadanan Kemajuan Negeri Melaka, to explore opportunities in the oil and gas (O&G), energy, engineering and civil works as well as construction and development projects. The cooperation with PKNM Energy will expand Serba Dinamik’s footprint to Melaka and enhance the company’s brand recognition. (The Edge Daily)

Comments

  • We are positive on Serba Dinamik’s venture into Melaka as part of the group’s expansion and diversification plans. As the venture is still at early stage of discussion with no concrete project in hand that could contribute to additional revenue to Serba Dinamik, we made no changes to our earnings forecast and we retain our BUY recommendation on Serba Dinamik with an unchanged target price at RM4.65.
  • Our target price is derived by ascribing an unchanged target PER of 15.0x to its forecast 2020 EPS of 31.0 sen. The ascribed target PER in line with mid-large cap oil & gas peers average of 16.5x.

COMPANY BRIEF

  • Marine & General Bhd has bagged three contract awards from Petronas Carigali Sdn Bhd worth a total of RM20.9 mln. The contracts are for the provision of anchor handling tug & supply vessel. The group said the contracts, worth approximately RM6.98 mln each, will last for six months with an option to extend by another six months. (The Edge Daily)
  • Cahya Mata Sarawak Bhd (CMS) has secured a six-month contract extension for the long-term management and maintenance of state roads in Sarawak, worth RM94 mln. The contract extension is from the Sarawak government. The extension period is from July 1 to Dec 31, based on the same terms of the contract. (The Edge Daily)
  • Fajarbaru Builder Group Bhd has secured a RM297.5 mln contract from Malton Bhd to build two tower blocks on a high-rise residential development along Jalan Kuching. Comprising of 49 levels and 30 levels each, the towers will encompass 572 and 268 units respectively.
  • With the above contract win, Fajarbaru’s total outstanding order book will rise to RM475 mln (including RM67mln of Fajarbaru’s own projects, which are expected to support the earnings of the group for the next three years. (The Star Online)
  • Handal Resources Bhd's joint venture (JV) has bagged a seven-year contract worth RM360 mln from Petronas Carigali Sdn Bhd. Handal said the JV, Borneo Seaoffshore-Handal JV, was awarded the job of providing water injection module supply on mobile offshore unit. Handal said the contract is to commence from March 2020, with an extension option of a further three years. (The Edge Daily)
  • Scomi Group Bhd said Scomi Transit Projects Sdn Bhd (STP) and Prasarana Malaysia Bhd (PMB) have signed an agreement involving the design, manufacture, completion and delivery of seven four-car vehicles for the KL Monorail for RM122 mln. Scomi said the completion of the agreement is conditional upon issuance of an acceptance certificate by PMB after the expiry of a monitoring period. The work (for the seven four-car vehicles) are to be completed within 18 months from the issuance of a notice to proceed by PMB. (The Edge Daily)
  • Sedania Innovator Bhd has inked an exclusive agreement with Belgian firm, NV Turbulent to build and deploy microhydro installations in Malaysian rivers to generate electricity, marking its official venture into the renewable energy market.(The Edge Daily)

Source: Mplus Research - 25 Jun 2019

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