• 
• Owing to the selective institutional buying interest amongst several O&G and banking blue chips, the FBM KLCI rebounded by 0.6% or 10.21 pts. yesterday. Meanwhile, the lower liners and broader market also ended mostly in the positive territory with the exception of Plantations sub-index which fell by 0.4%.
• Market breadth turned positive as gainers outnumbered losers on a ratio of 549-to-350 stocks. Traded volumes, however, fell by 8.0% with 2.31 bln shares.
• BAT (+34.0 sen) led the heavyweight gainers on the FBM KLCI, followed by KLCC (+10.0 sen), Maybank (+8.0 sen), MISC (+7.0 sen) and IHH (+4.0 sen). On the broader market, some of the major winners were MYEG (+23.0 sen), SHH (+18.0 sen), GAB (+14.0 sen) and Power Root (+13.0 sen).
• In contrast, the key decliners of the day were Aeon Credit (-60.0 sen), POS (-13.0 sen), Pharmaniaga (-25.0 sen), BoxPak (-10.0 sen) and Asia File (-31.0 sen). Meanwhile, Hong Leong Financial Group (-26.0 sen), Hong Leong Bank (-22.0 sen), KLK (-34.0 sen), Westports (-9.0 sen) and IOI Corporation (-8.0 sen) were amongst the main index-linked heavyweight losers on the key index.
• Following the expectations for more stimulus plans from the Mainland Chinese authorities, the Asian regional stock markets rallied as the Hang Seng Index and Nikkei surged 1.3% and 1.8% respectively, while the Shanghai Composite rose 0.3%. ASEAN indices, meanwhile, closed mixed.
• U.S stockmarkets rebounded strongly overnight as the S&P 500 rose 1.1%, while the Dow and Nasdaq advanced 1.0% and 0.9% respectively. Market participants remained optimistic over the November jobs report, which will be released by the end of this week amid the relatively robust construction spending and auto sales data.
• Most European equities, however, were dressed in red as the DAX and CAC slipped 1.1% and 0.9% respectively. The FTSE managed to register its first gain in three sessions owing to the gains in seven-o- the country’s biggest banks after they have all passed the Bank of England’s annual health check.

THE DAY AHEAD

• Although we expected the market to continue drifting yesterday, it was mainly shored up by the selective buying on index linked stocks by institutional funds to help the FBM KLCI keep pace with the positive regional markets. Despite yesterday’s gains, however, we continue to think that the gains could be limited due to the lack of positive catalyst.
• As it is, there are fewer leads with investors just taking advantage of the calmer market conditions to lift up selective stocks ahead of the upcoming FOMC meeting to decide on the interest rate direction. In addition, bouts of mild window dressing activities have also started ahead of the year end. We also think that the plays could extend to the lower liners and broader market, but the quick profit taking strategies will also limit their upsides.
• Under the prevailing environment and with the overnight gaines on Wall Street, we think the near term upsides could persist with the FBM KLCI to target the 1,700 points level after climbing back above the 1,680 level yesterday. On the downside, the supports are seen at the 1,650-1,670 levels.

COMPANY UPDATE

• Protasco Bhd has secured a RM300.5 mln contract from Perbadanan Putrajaya to build 1,100 houses in Putrajaya under the 1Malaysia civil servants housing programme. The average cost of the house would be RM273,000. However, there were no further details on the above project, particularly when the project will commence.

Comments

• With the inclusion of the abovementioned contract, Protasco has secured a total of RM479.5 mln worth of construction contracts year-to-date, exceeding our construction orderbook replenishment assumption rate of RM200.0 mln for 2015.
• Protasco’s outstanding construction orderbook now stands at approximately RM980.5 mln, which will underpin earnings visibility over the next two years. Similar with the 1Malaysia civil servants housing programme (PPA1M) contract to build 1,680 apartment units in Putrajaya secured at end-2013, we estimate that the project could command an EBITDA margin of about 10%-15%.
• We maintain our BUY recommendation on Protasco with an unchanged target price RM2.30, despite its construction orderbook replenishment rate coming in above our estimates as we deem that work and billings from the abovementioned project would only kick-in starting from 2016. Our target price is derived by ascribing an unchanged target PER of 11.0x to its 2016 construction earnings, a target PER of 8.0x to its concession and engineering services’ earnings, while its education and trading earnings remains pegged at target PERs of 6.0x due to their smaller scale businesses. Its property development division’s valuation remains unchanged at 0.6x of its BV.

COMPANY BRIEFS

• UEM Sunrise Bhd and WCT Holdings Bhd had signed a conditional subscription and shareholders agreement, to undertake a RM3.0 bln mixed-property project (measuring 608.6 ac.) in Serendah, Selangor.
• Under the agreement, UEM Sunrise proposed to buy a 50.0% stake in the expanded share capital of Jubiliant Courtyard Sdn Bhd (JCSB) for RM214.9 mln. Land owner JCSB is currently a wholly-owned subsidiary of WCT. Upon completion of the stake buy, UEM Sunrise and WCT will own 50.0% each in JCSB.
• The contribution of this project is expected to come in from 2018 onwards and the project is slated for completion in 10 years. (The Edge Daily)
• PRG Holdings Bhd’s Executive Director, Datuk Seri Yeoh Soo Ann has stepped down from his post effective 30th November 2015. The resignation came after he ceased to be a substantial shareholder in the company.
• According to the group, Yeoh had sold his entire stakeholding of 25.5 mln shares on 30th November 2015, a 17.6% stake in PRG, for an undisclosed amount. Yeoh however still owns 7.9 mln warrants in PRG. (The Edge Daily)
• Pos Malaysia Bhd and Konsortium Logistik Bhd (KLB) have entered into a partnership to provide a vehicle shipping service between Peninsular Malaysia and East Malaysia.
• The service, which will be provided via KLB's vehicle carrier vessel, MV Zara Sofia, will operate between two and three shipments per month, with a frequency target of 28 shipments per year.
• MV Zarah Sofia has a load capacity of 2,500 vehicles. Meanwhile, a target above 1,300 capacity per shipment will already be profitable for the business.
• The price of shipment per unit ranges between RM1,500 and RM1,600 between Peninsular Malaysia and East Malaysia, and vice versa. (The Edge Daily)
• MKH Bhd has partnered with Japanese company PanaHome Corp, which is the housing subsidiary of global electronics giant Panasonic Corp, to undertake design and building construction works in Malaysia.
• The partnership will be effected via their investments into the joint venture company (JVco), PanaHome MKH Malaysia Sdn Bhd, which will be established by the end of December.
• The JVco will focus on conducting building contract works for numerous residential and apartment development projects undertaken by MKH. It will have a paid-up capital of RM9.0 mln. (The Edge Daily)
• EP Manufacturing Bhd has entered into a conditional shareholders' agreement (SA) with Japan's Y-Tec Corp for the establishment of a joint-venture (JV) company to supply automotive parts to Mazda Malaysia Sdn Bhd (Mazda Malaysia).
• The products will be manufactured by Peps-JV (Kedah) Sdn Bhd, another wholly-owned subsidiary of the company, which will hold a 60.0% equity stake in the JV company that is yet to be established, while the remaining 40.0% will be controlled by Y-tec. (The Edge Daily)
• Iris Corp Bhd, which ventured into property development just early this year, was awarded a mixed development contract in Putrajaya that carries an estimated gross development cost (GDC) of RM622.7 mln.
• Iris has received the letter of award, dated Nov 26, from Putrajaya Corp to undertake the proposed development of Perumahan Penjawat Awam 1Malaysia (PPA1M) and a mixed development (commercial and residential buildings) at Presint 19 on a tract measuring 16.2 acres.
• The project will involve the construction of 1,928 units of residential houses under PPA1M, with 508 residential houses and 22 units of commercial buildings for open sale and it is expected to be completed in 30 months. (The Edge Daily)
• Hong Leong Financial Group Bhd’s (HLFG) rights issue, which targets to raise gross proceeds of RM1.10 bln, is oversubscribed by 12.5%. The country's fifth largest bank by total assets had offered a total of 94.8 mln new shares in HLFG at RM11.60 per rights share, on the basis of nine rights shares-for-every 100 existing HLFG shares held by entitled shareholders.
• The rights shares are expected to be listed on the Main Market of Bursa next Monday (7th December 2015). (The Edge Daily)
• Malakoff Corp Bhd has filed a writ of summons and statement of claim against Tanjung Bin Power Plant’s Japanese boiler manufacturers and service operators, IHI Corporation Japan, ISHI Power Sdn Bhd and IHI Power Systems (M) Sdn Bhd for damages worth about RM780.0 mln, due to breaches of duty which have led to various incidents of boiler tube failure and inability to meet certain output requirements.
• The breaches have led to at least 22 different boiler tube failure incidents at the plant.
• IHI Corporation is the manufacturer and supplier of the equipment, parts and components for boilers and the boiler system for the 2,100MW coal-fired plant, while ISHI Power and IHI Power Systems provided services to TBP for, among other things, coal blending, maintenance and operations of the boilers and mills of the plant. (The Edge Daily)
• Muhibbah Engineering (M) Bhd has bagged a RM300.0 mln engineering, procurement, construction and commissioning (EPCC) contract (Package 20A-3) to construct two temporary construction facilities in Pengerang, Johor.
• The EPCC job was for the Petronas Rapid Temporary Village (RTEV) and Petronas Rapid Temporary Management Office, within the RAPID project. The construction is scheduled to commence immediately and is expected to be completed by end-November 2016. (The Edge Daily)
• Felda Global Ventures Holdings Bhd (FGV), which is exploring other possible different mode of investments in PT Eagle High Plantations, has provided more clarity on the matter. FGV said that the investments may comprise potential joint venture, off take agreement or other forms of mutually-agreed collaborations.
• The board envisaged that a conclusive mode of investment in Eagle High would be announced in 2016, without giving a specific time frame. (The Edge Daily)

Source: M+ Online Research - 2 Dec 2015