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• The FBM KLCI snapped a streak of five consecutive days of gains to close 0.1% lower yesterday as the key index gave up all its intraday gains in the first half of the trading session. The lower liners, however, rebounded – the FBM Small Cap (+0.3%), FBM Fledging (+0.4%) and FBM Ace (+0.2%), advanced, while the broader market ended mixed.
• Market breadth was slightly negative as losers edged gainers on a ratio of 439- to-425 stocks. Traded volumes fell by 15.8% to 2.33 bln shares.
• Topping the decliners list on the big board was KLK (-12.0 sen), Petronas Dagangan (-10.0 sen), CIMB (-10.0 sen), Petronas Chemicals (-8.0 sen) and Genting Malaysia (-7.0 sen). The other sognificant losers the day were Nestle (- RM1.48), MPI (-16.0 sen), BLD Plantations (-10.0 sen) and Cahya Mata Sawarak (-10.0 sen). Favelle Favco fell 9.0 sen despite reporting a strong set of quarterly earnings.
• On the other side of the trade, Ajinomoto (+40.0 sen), Goldis (+38.0 sen), Chee Wah (+26.0 sen), Top Glove (+21.0 sen) and EITA Resources (+18.0 sen) were amongst the biggest advancers in the broader market. Anchoring the gainers on the key index were banking heavyweights like Hong Leong Financial Group (+8.0 sen), Maybank (+7.0 sen), and RHB Capital (+4.0 sen), while UMW and BAT rose 8.0 sen and 6.0 sen respectively.
• Japanese stockmarkets rebounded as the Nikkei added 0.5% to close marginally below the 20,000 psychological level. The Hang Seng, however, closed marginally lower, while the Shanghai Composite snapped a streak of three consecutive winning sessions to close 0.3% lower on profit taking in technology companies. ASEAN indices, meanwhile, closed mixed.
• Wall Street was closed in conjunction with the Thanksgiving public holiday. Elsewhere, European benchmark indices advanced for the second straight session. The FTSE (+0.9%), CAC (+1.1%) and DAX (+1.4%) all rose, buoyed by expectations that the European Central Bank could introduce further stimulus measures to shore up the region ailing economy next week.

THE DAY AHEAD

• We continue to think that the FBM KLCI remains at the crossroads after yesterday’s indifferent performance. Its inability to hold on to its intraday gains is also a sign that most investors are still cautious over the market’s direction and its ability to hold above the 1,680 level. As it is, the ongoing results reporting season is coming to a close and there are also fewer positive catalyst to lift the market.
• Under the prevailing environment, the key index might instead veer sideways as it looks to consolidate its position around the 1,680 level. This also means that the FBM KLCI might move within a tight band of over the near term in the absence of significant selling pressure or renewed buying interest amid the continuing market cautiousness. Above the 1,680 points level, the major hurdle is the 1,700 points level, while the 1,650 level is still the main support.
• On the broader market, we also think that conditions will remain mixed ahead of the weekend as many traders will opt to close out their short-term positions. Similarly, retail investors will also lock-in some of their profits to close out the week.

COMPANY UPDATE

• Kimlun Corp Bhd’s 3Q2015 net profit surged 123.7% Y.o.Y to RM19.6 mln, mainly due to the execution of better margin construction projects, lower raw material cost and fuel prices. Revenue for the quarter, however, contracted 17.1% Y.o.Y to RM241.1 mln.
• For 9M2015, cumulative net profit climbed 39.3% Y.o.Y to RM49.3 mln. Revenue for the period, however, fell 11.6% Y.o.Y to RM821.7 mln.
• The reported earnings were above our expectations and already accounts to 101.5% of our previous full year estimated net profit of RM48.6 mln for 2015. Meanwhile, the reported 9M2015 revenue came within our expectation as it accounts to 74.0% of our full year revenue of RM1.11 bln.

Comments

• Kimlun’s outstanding construction orderbook of approximately RM940.0 mln will underpin its segment earnings over the next 18 months. YTD, Kimlun has already secured a total of RM662.0 mln (94.6% of targeted orderbook replenishment) worth of construction projects, while its outstanding manufacturing orderbook of approximately RM200.0 mln will sustain its segment earnings over the next 18 months. Meanwhile, the group’s unbilled property sales of RM41.0 mln, from The Hyve will provide earnings visibility over the next 18 months.
• Given that the 9M2015’s reported earnings topped our forecast, we raised our 2015 and 2016 net profit forecast by 31.1% and 6.5% to RM63.6 mln and RM53.5 mln respectively.
• We maintain our BUY recommendation on Kimlun with a revised target price of RM1.80 (from RM1.75). Our target price is derived from ascribing an unchanged target PER of 11.0x to its 2016 construction earnings, PER of 6.0x to its manufacturing business, while its property development segment’s valuation remain unchanged at 0.6x its BV due to its relatively small-scale property development projects.

COMPANY BRIEFS

• AirAsia Bhd sank into the red with a 3Q2015 net loss of RM405.7 mln, dragged down by a foreign exchange losses on borrowings and losses of associates and jointly-controlled entities as well as one-off costs related to the sale and leaseback of aircraft. Revenue for the quarter, however, was up 15.0% Y.o.Y at RM1.52 bln, on the back of a 19.0% growth in the number of passengers carried to 6.29 mln.
• For 9M2015, the group recorded a cumulative net loss of RM13.4 mln vs. a net profit of RM512.3 mln in 9M2014. Revenue for the period grew 5.3% Y.o.Y to RM4.14 bln. (The Edge Daily)
• Felda Global Ventures Holdings Bhd (FGV) saw its 3Q2015 net loss widened more than 3.0x to RM33.9 mln on lower contribution from its palm oil plantation and trading, marketing and logistics segments. Revenue for the quarter, however, increased 13.8% Y.o.Y to RM4.51 bln.
• For 9M2015, cumulative net profit declined by 94.5% Y.o.Y to RM15.7 mln. Revenue for the period stood at RM11.41 bln vs. RM11.34 bln in 9M2014. An interim dividend of 2.0 sen per share was declared, payable on 28th December 2015.
• On its prospects, FGV noted that the overall business environment remains challenging due to the slowdown in the Chinese economy, uncertain global financial markets and volatile forex rates.
• UEM Sunrise Bhd's 3Q2015 net profit fell 33.2% Y.o.Y to RM47.7 mln on lower property development revenue, higher finance cost, and lower contribution from associates and joint ventures. Revenue for the quarter declined 25.1% Y.o.Y to RM353.1 mln due to decline in development revenue.
• For 9M2015, cumulative net profit declined almost 11.0% Y.o.Y to RM184.8 mln. Revenue for the period declined 13.6% Y.o.Y to RM1.14 bln.
• As at 30 September 2015, the company’s unrecognised revenue has risen to RM4.10 bln from RM2.80 bln a year ago.
• IHH Healthcare Bhd's 3Q2015 net profit dropped 19.3% Y.o.Y to RM118.5 mln, due to unrealised forex losses - the translation of its non-Turkish Lira denominated borrowings by Acibadem Holdings during the quarter. Revenue for the quarter, however, increased 15.7% Y.o.Y higher to RM2.06 bln, underpinned by organic growth at its existing hospitals and the ramping up of three newer hospitals, namely the Acibadem Atakent Hospital in Turkey, Pantai Hospital Manjung and Gleneagles Kota Kinabalu in Malaysia.
• For 9M2015, cumulative net profit inched up 0.6% Y.o.Y to RM518.1 mln. Revenue for the period gained 13.9% Y.o.Y to RM6.16 bln.
• Sime Darby Bhd recorded a 34.0% Y.o.Y drop in its 1QFY16 net profit to RM328.4 mln on lower revenue from its mining equipment and automotive units. Revenue for the quarter, however, stood at RM10.17 bln vs. RM10.12 bln in 1QFY15. Sime Darby also said that its property and port operations’ revenue fell, while the plantation top line rose during 1QFY16. Meanwhile, the world's largest listed palm oil producer is mulling a cash call exercise to trim its gearing ratio to 40.0% from about 60.0% currently.
• Malayan Banking Bhd (Maybank) posted an 18.0% Y.o.Y rise in its 3Q2015 net profit to RM1.90 bln, owing to the higher net interest and Islamic banking income. The growth in earnings was also supported by higher net insurance premium despite significantly higher bad loan allowance. Revenue for the quarter grew 27.4% Y.o.Y to RM11.38 bln.
• For 9M2015, cumulative net profit climbed 8.1% Y.o.Y to RM5.18 bln. Revenue for the period increased by 13.3% Y.o.Y to RM29.50 bln. Meanwhile, its bad loan allowance rose to RM667.9 mln from RM70.5 mln mainly due to higher net collective allowance of RM341.1 mln and lower bad debts and financing recovered of RM196.4 mln.
• Telekom Malaysia Bhd’s (TM) 3Q2015 net profit fell by 12.0% Y.o.Y to RM166.9 mln. The decline in earnings was due to forex losses from borrowings and consolidation of operational losses from Packet One Networks (Malaysia) Sdn Bhd. Revenue for the quarter, however, rose 10.6% Y.o.Y to RM2.92 bln.
• For 9M2015, cumulative net profit dipped 17.2% Y.o.Y to RM507.9 mln. Revenue for the period, meanwhile, grew 5.7% Y.o.Y of RM8.54 bln. (The Edge Daily)
• YTL Corp Bhd's 1QFY16 net profit dipped 6.3% Y.o.Y to RM202.6 mln, mostly attributable to the lower revenue contributions from its IT and e-commerce related businesses as well as its cement manufacturing and trading, property investment and development and utilities segments. Meanwhile, its hotels business segment slipped into a pretax loss of RM12.0 mln. Revenue for the quarter dropped 0.8% Y.o.Y to RM4.44 bln. (The Edge Daily)
• Pharmaniaga Bhd saw its 3Q2015 net profit jump 33.5% Y.o.Y to RM20.0 mln, mainly due to the ongoing cost optimisation measures which helped to reduce operating expenses. Revenue for the quarter rose 4.4% Y.o.Y to RM524.4 mln due to improved contributions from the group's Indonesian operations.
• For 9M2015, cumulative net profit rose 19.0% Y.o.Y to RM68.0 mln. Revenue for the period inched up 0.7% Y.o.Y to RM1.51 bln. The company has declared a third interim dividend of 9.0 sen per share, which is payable on 21st December, 2015. (The Edge Daily)
• Iris Corp Bhd has secured a contract worth approximately RM92.7 mln from the Government of Solomon Islands to establish the information and management system of electronic passport and border control.
• The company had entered into a build-own-transfer (BOT) agreement for a term of 20 years commencing from the date of the contract with the Government of Solomon Islands for the aforementioned establishment.
• Under the BOT project financing model, Iris will build and own the information systems, software and hardware during the term only. After the expiration of the term, ownership of the system will be transferred to the Government of Solomon Islands. (The Edge Daily)
• Genting Bhd's 3Q2015 net profit climbed 2.4% Y.o.Y to RM361.1 mln. The improvement in earnings was underpinned by higher adjusted EBITDA and higher net forex gains. Revenue for the quarter grew 3.6% Y.o.Y to RM4.65 bln underpinned by the better performance from its power segment.
• For 9M2015, cumulative net profit fell by 14.2% Y.o.Y to RM1.05 bln. Revenue for the period also fell 3.0% Y.o.Y to RM13.18 bln.
• Meanwhile, its 49.1%-owned subsidiary, Genting Malaysia Bhd’s 3Q2015 net profit jumped 22.6% Y.o.Y to RM326.3 mln. Revenue for the quarter, however, fell by 9.0% Y.o.Y to RM2.03 bln.
• The better net income was due to the absence of impairment losses, lower pre-operating expenses offset by deferred expenses written off and higher depreciation and amortisation charges, while the lower revenue was attributed to the 60.0% drop in turnover generated from its UK based businesses.
• For 9M2015, cumulative net profit gained 4.6% Y.o.Y to RM919.3 mln. Revenue for the period slipped 1.1% Y.o.Y to RM6.10 bln. Both of the groups did not declare any dividends for the quarter under review. (The Edge Daily)

Source: M+ Online Research - 27 Nov 2015