• 
• The FBM KLCI extended its positive run for the fifth straight session owing to the gains in financial and O&G heavyweights. The lower liners, however, moved towards the opposite direction as the FBM Small Cap and Fledging sub-indices fell by 1.3% each, while FBM Ace declined 2.8%. The weaker performance of the lower liners was mainly due to the continuing profit taking activities after their recent gains.
• Consequently, market breadth was overwhelmingly negative as losers outstripped gainers on a ratio of 669-to- 268 stocks. Traded volumes increased by 3.7% to 2.77 bln shares aided by the huge trading activities in Kim Teck Cheong Consolidated, which surged 113.3% on its debut
• Petronas Chemicals (+18.0 sen) led the heavyweights gainers on the FBM KLCI, followed by Sime Darby (+9.0 sen), Maybank (+7.0 sen), Genting (+9.0 sen), Ambank (+6.0 sen) and Sapura Kencana Petroleum (+7.0 sen). On the broader market, other key advancers were Nestle (+RM1.68), GCB (+30.0 sen), KESM (+18.0 sen), APB (+9.0 sen) and F&N (+44.0 sen).
• In contrast, some of the other major losers of the day include Johor Tin (-56.0 sen), Kossan (-48.0 sen), Top Glove (- 36.0 sen) and Hartalega (-34.0 sen). TomyPak fell 7.9% or 23.0 sen despite registering a strong 3Q2015 results. On the key index, there were seven index-linked heavyweight decliners – RHB Capital (-7.0 sen), MISC (-4.0 sen), KLCC (-1.0 sen), Axiata (-2.0 sen), KLK (-2.0 sen), while Westports and Astro fell 5.0 sen each.
• After recording an almost 20.0% gain in less than two months, the Nikkei fell by 0.4% to snap its four days of gains, while the Hang Seng also dropped by the same quantum (-0.4%). The Shanghai Composite, however, managed to buck the market trend by closing 0.9% higher. ASEAN indices, meanwhile, closed mixed.
• U.S. stockmarkets ended mostly unchanged overnight amid the muted trading environment – its fifth lowest volume session of the year, ahead of the Thanksgiving holiday. Separately, U.S. orders for long-lasting or durable goods has risen in October – its first increase in three months, while the number of U.S. unemployment benefits application fell to 260,000 (-12,000) for the week before Thanksgiving.
• Over in Europe, most of its equity markets, however, rebounded as the ECB is mulling for more stimulus plans for the Eurozone economy. The FTSE rose 1.0%, led by gains in housing stocks, while the CAC and DAX jumped 1.5% and 2.2% respectively.

THE DAY AHEAD

• Despite clearing the 1,680 level yesterday, it remains to be seen if the market is able to stay above the level given that the broader market sentiments are turning increasingly cautious, which may not support further upsides. Therefore, there has to be strong follow through support on the index heavyweights over the near term, otherwise the uptrend could stall.
• This also means that the key index could be at the crossroads and needs to clear the 1,680 convincingly for a new trend to emerge that could allow the key index to retest the 1,700 points level. On the downside, the major support is at the psychological 1,650 points level.

COMPANY UPDATE

• Barakah Offshore Petroleum Bhd has bagged a RM12.3 mln contract from Petronas Gas Bhd for the engineering, procurement, construction and commissioning (EPCC) of an export terminal scraper station in Kemaman, Terengganu.
• The project management and EPCC contract involves the construction of a new scraper station for propane and butane pipelines at Teluk Kalong, Kemaman to replace the Tanjung Sulong Export Terminal (TSET) Scrapper Station and also the other facilities within TSET and eventually, the commissioning and introduction of natural gas, propane and butane into the facilities.
• The said contract has a one year tenure period - from 6th November 2015, through 6th December, 2016.

Comments

• The aforementioned contract securement falls well within our orderbook replenishment rate of RM300.0 mln, which is similar to the management’s target for 2015. Meanwhile, the company has so far secured up to RM165.0 mln worth of contracts YTD and is well poised to secure more of its bread and butter projects and potential contract extension from its existing clients, given its expertise in the pre-commissioning works, in our view.
• Also, the company is still actively bidding for more pre-qualification projects with a bid size of RM720.0 mln for both local and overseas project - with a stronger focus on downstream projects in Pengerang, Johor, which will support its 2015 orderbook replenishment target.
• Hence, we maintain our HOLD recommendation on Barakah with a target price of RM0.88 as its near term prospects remains well backed by its relatively strong current orderbook of RM1.74 bln (with earnings visibility up until 2017-2018). Our target price was derived by ascribing a target PER of 11.0x to its fully diluted 2016 EPS of 8.0 sen.
• Mitrajaya Holdings Bhd’s 3Q2015 net profit jumped 96.9% Y.o.Y to RM25.8 mln, mainly due to higher contribution from the construction and South Africa investment segments, which offset the weakee performance of the property development segment. Revenue for the quarter rose 58.9% Y.o.Y to RM231.3 mln.
• For 9M2015, cumulative net profit climbed 65.6% Y.o.Y to RM62.3 mln. Revenue for the period gained 65.5% Y.o.Y to RM384.4 mln. The reported earnings are broadly within our estimates as the net profit and revenue accounts to 80.4% and 73.3% of our full year forecast respectively.

Comments

• With the reported earnings coming in largely within our estimates, we leave our earnings forecast unchanged. We also maintain our BUY recommendation on Mitrajaya with an unchanged target price RM1.75. Our target price is derived by ascribing a targeted PER of 11.0x to its fully diluted 2016 construction earnings and a PER of 9.0x to its fully diluted healthcare earnings, while the value of its property development units, both local and overseas, are valued at 0.8x of their book values.
• We continue to like Mitrajaya as one of the small-medium sized construction player in Malaysia, backed by an outstanding orderbook of approximately RM1.39 bln and an exceptionally high construction cover ratio of 2.7x against 2014’s construction revenue to anchor the segment earnings over the next two years. The group’s unbilled sales of approximately RM200.0 mln from property development projects will also provide earnings visibility over the next two years, while the unbilled sales of Rand 40.0 mln from the South Africa investment will be recognised progressively by the end of 2015.
• In a separate announcement, Mitrajaya was awarded a construction contract relating to the Refinery and Petrochemical Integrated Development (RAPID) project worth RM186.4 mln. The contract entails the procurement, construction and commissioning of civil and infrastructure works at Utilities Area 1 and Petchem Commons Area for interconnecting, storm water drainage and utilities for the RAPID project. The duration of the projects are 32 months and 22 months respectively from contract award date. (The Edge Daily)
• With the incorporation of the aforementioned project, Mitrajaya has secured a total of RM468.5 mln worth of contracts in 2015, accounting to 66.9% of our targeted orderbook replenishment rate of RM700.0 mln. We estimate that the project could command a pretax margin of about 11%-12%, which is similar to the group’s previous infrastructure construction contracts.
• Oldtown Bhd’s 2QFY16 net profit rose 18.7% Y.o.Y to RM13.4 mln, mainly due to higher export sales generated from the manufacturing of beverages segment, which offset the weaker results from the operation of its café outlets. Revenue for the quarter, however, fell 1.8% Y.o.Y to RM92.6 mln.
• For 1HFY16, cumulative net profit was relatively flat at RM22.8 mln. Revenue for the period, however, declined 4.2% Y.o.Y to RM186.7 mln. The reported earnings came within our expectations as it accounts to 55.6% our full year estimated net profit, while the reported revenue accounts to 47.3% of our estimated FY16 revenue.

• There is no change to our earnings estimates as the results were broadly within our estimates and pending a company briefing later, we reiterate our HOLD call on Oldtown with an unchanged target price of RM1.55. Our target price is derived from ascribing a target PER of 16x to our FY17 net EPS of 9.7 sen. The targeted PER is based on a discount to the 20x-22x PER average of consumer products market leaders like Nestle and Dutch Lady due to Oldtown’s smaller size.
• Prospects wise, Oldtown looks to add to its existing 242 café outlets and is on track to add 10 new café outlets in FY16. Oldtown also aims to launch its “Kids and Family” program to penetrate the kids and family market segment.
• Also, the group aims to re-launch its operations in China in 3QFY16 as the country’s huge population offers high potential growth. In order to grow its market share and maintain its brand presence, the group will also continue its aggressive product marketing through multiple media channels.
• Coastal Contracts Bhd’s 3Q2015 net profit decreased by 56.2% % Y.o.Y to RM124.5 mln. The decline in earnings was due to lower margins derived from the different vessel sales mix as well as provisions for inventories written down to net realisable value. Revenue for the quarter, however, surged to RM921.2 mln vs. RM232.4 mln registered in 3Q2014, mostly attributable to the successful delivery of its first jack-up drilling rig in 3Q2015.
• For 9M2015, cumulative net profit fell by 17.9% Y.o.Y to RM124.5 mln. Revenue for the period, meanwhile, slightly doubled to RM1.44 bln.
• Although the company’s 3Q2015 revenue has exceeded our full year forecast (RM1.35 bln) owing to the sale of its first jack up rig, its cumulative net profit, however, fell short of our expectations as it only accounts for approximately 51.3% of our previous 2015 estimates of RM242.9 mln. In light of the recent weakness in its earnings and margins, we have reduced our 2016 earnings forecast by nearly 20.0% as we do not foresee any steep recovery in the immediate future given the difficult operating environment
• Still, its near-to-short earnings visibility is well backed by its sizeable and enviable cumulative orderbook size of RM2.90 bln - RM1.30 bln and RM1.60 bln for its OSV and JU GCSU business segments respectively (with approximately two years of earnings visibility).
• Although we have lowered our 2016 EPS forecast, we still maintain our HOLD recommendation on Coastal with an unchanged target price of RM2.20 as the shortfall in earnings was compensated by the improvement in the overall sector PER average.
• Our TP is arrived by assigning a revised target PER of 6.5x (from 5.5x) to our revised fully diluted 2016 EPS estimate of 33.6 sen per share (vs. our earlier estimated 40.4 sen per share). Concurrently, our orderbook replenishment rate remains at RM500.0 mln for 2015 and 2016 respectively. Also, its jack-up rig replenishment rate was unchanged at RM200.0 mln as the compression gas jack up rig is in more in demand as opposed to crude oil jack-up rig.

COMPANY BRIEFS

• CIMB Group Holdings Bhd’s 3Q2015 net income slid 9.7% Y.o.Y to RM803.9 mln due to a decline in wholesale banking as a result of the weaker treasury and markets and investment banking operations. Operating income for 3Q2015 grew by 8.8% to RM3.84 bln on the back of a 10.8% increase in net interest income and a 4.1% growth in non-interest income. Revenue for the quarter grew 8.8% Y.o.Y to RM3.84 bln.
• For 9MFY15, cumulative net profit was 30.4% lower Y.o.Y at RM2.02 bln, due to higher corporate loan provisions from Indonesia. Operating income, however, grew 8.4% Y.o.Y to RM11.35, underpinned by a 12.8% improvement in non-interest income and 6.6% growth in net interest income. Revenue for the period increased 8.4% Y.o.Y to RM11.35 bln. (The Edge Daily)
• Kulim (Malaysia) Bhd posted a 4.9x Y.o.Y jump in its 3Q2015 net profit to RM86.9 mln, mainly due to foreign exchange (forex) gains and improvement in business revenue, which was up 54.0% Y.o.Y to RM407.0 mln.
• For 9M2015, cumulative net profit came stood at RM1.45 bln, which is 9.4x higher from the RM154.3 mln recorded in 9M2014. Revenue for the period rose 46.0% Y.o.Y to RM1.19 bln. (The Edge Daily)
• Malaysia Steel Works (KL) Bhd (Masteel) has recently presented to the senior management at Railway Assets Corp (RAC) the company's town planning scheme for a piece of land in Kempas, Johor, to build a proposed commuter train depot and other assets as required by the Transport Ministry. The presentation is a follow-up to its joint venture (JV) with KUB Malaysia Bhd to pursue a rail transit network project in Iskandar Malaysia.
• Meanwhile, the steel company posted a 3Q2015 net loss of RM24.1 mln vs. a net loss of RM6.09 mln in 3Q2014. Revenue for the period declined by 16.8% Y.o.Y to RM301.4 mln.
• For 9M2015, cumulative net loss stood at RM49.0 mln as compared to a net profit of RM11.3 mln from a year earlier. Revenue for the period was down 18.0% Y.o.Y to RM869.0 mln.
• Masteel expects to turn around in 2016 as its newly-commissioned rolling mill in Bukit Raja is anticipated to contribute additional revenue of up to RM200.0 mln per annum. (The Edge Daily)
• Tomypak Holdings Bhd’s 3Q2015 net profit surged 2.7x Y.o.Y to RM6.0 mln, mainly due to a better sales mix, gain on foreign exchange and continuous improvement in production efficiency. Revenue for the quarter rose 8.1% to RM55.8 mln. An interim dividend of 3.0 sen per share was declared, to be paid on Dec 29.
• For 9M2015, cumulative net profit jumped almost four-fold to RM17.2 mln from a year ago. Revenue for the period, however, came in 0.8% lower at RM157.7 mln.
• Going forward, Tomypak is optimistic that demand for the group's products from the food and beverage sector will grow and the group will increase the production capacity to meet the expected growth in sales revenue. (The Edge Daily)
• MSM Malaysia Holdings Bhd posted a 33.2% Y.o.Y jump in its 3Q2015 net profit to RM63.9 mln on the back of lower raw sugar price. Revenue for the quarter, however, declined 2.4% to RM546.5 mln mostly attributable to the lower tonnage sold for the domestic and export markets segments by 21.0% and 15.0% respectively.
• For 9M2015, cumulative net profit grew 17.6% to RM214.0 mln. Revenue for the period, however, was 0.6% lower at RM1.64 bln vs. RM1.65 bln from a year ago. It has declared a first interim dividend of 12.0 sen per share, which is payable on 29th December 2015. (The Edge Daily)
• MMC Corp Bhd’s 3Q2015 net profit halved to RM47.8 mln from RM104.8 mln in 3Q2014. Revenue for the quarter fell by 61.0% Y.o.Y to RM674.5 mln.
• For 9M2015, however, cumulative net profit surged 4.0x to RM1.49 bln, largely due to an exceptional gain of RM1.34 bln from Malakoff Corp Bhd’s listing. Revenue for the period was down 36.7% Y.o.Y to RM4.09 bln, due to the deconsolidation of Malakoff's results, absence of substantial sale of land in respect of the overall development of Senai Airport City and lower work progress recorded from Klang Valley Mass Rapid Transit (KVMRT) Sungai Buloh-Kajang (SBK) Line project following the completion of tunnelling works in April 2015. (The Edge Daily)
• AirAsia X Bhd (AAX) saw its 3Q2015 net loss widened 36.7% Y.o.Y to RM288.2 mln due to higher foreign exchange (forex) losses on its U.S. Dollar borrowings. Nevertheless, it recorded a lower operating loss of RM31.1 mln in 3Q2015 vs. RM132.6 mln from a year ago on higher revenue and lower fuel costs. Revenue for the quarter rose 13.5% Y.o.Y to RM793.0 mln, due to higher charter flights revenue, aircraft operating lease income and cargo revenue.
• For 9M2015, cumulative net loss rose 60.0% Y.o.Y to RM561.8 mln. Revenue for the period gained 4.2% Y.o.Y to RM2.21 bln. (The Edge Daily)
• Genting Plantations Bhd posted a 45.6% Y.o.Y fall in its 3Q2015 net profit to RM37.7 mln due to softer selling prices of palm products and slower property sales. Revenue for the quarter dropped 13.5% Y.o.Y to RM320.4 mln
• For 9M2015, cumulative net profit dropped 45.6% Y.o.Y to RM130.4 mln. Revenue for the quarter fell by 10.7% Y.o.Y to RM950.5 mln. (The Edge Daily)
• TDM Bhd’s Chief Executive Officer (CEO), Badrul Hisham Mahari will leave his post effective 1st January, 2016 due to his medical condition. The company has already found a suitable replacement, but the name was not disclosed.
• The company will make the appropriate announcement on the appointment of the new CEO in due course. (The Edge Daily)
• Wintoni Group Bhd is unable to submit its 3Q2015 financial statement, which is due on next Monday (30th November 2015) due to a loss of data following a recent break-in of its office and the company required more time to seek third party opinion on its 3Q2015's financial statement.
• If the company fails to issue the outstanding 3Q2015 financial statement within five market days after the expiry of the deadline, Bursa Securities shall suspend the trading of its shares with effect from 8th December 2015. (The Edge Daily)

Source: M+ Online Research - 26 Nov 2015