• The FBMKLCI rebounded yesterday, led by gains on selective index heavyweights – its first gain for the week. Most of the sub-indices on the broader market also ended in the positive territory with the exception of the Trading/Services sector which fell by 0.1%.
• Market breadth was slightly positive as gainers outnumbered losers on a ratio of 438-to-417 stocks. Traded volumes, meanwhile, rose by 17.9% to 1.91 bln shares.
• BAT (+60.0 sen) led the heavyweight gainers on the big board, followed by Petronas Gas (+20.0 sen), Hong Leong Financial Group (+18.0 sen), KLK (+20.0 sen) and UMW (+11.0 sen). On the broader market, the other major winners were Panasonic (+60.0 sen), Scientex (+36.0 sen), Globetronic (+19.0 sen), Uli Corporation (+16.0 sen) and UPA (+11.0 sen).
• On the negative side, the key losers of the day were Ta Ann (-12.0 sen), MISC (- 12.0 sen), Litrak (-10.0 sen) and SOP (- 13.0 sen). Meanwhile, PPB (-14.0 sen), Petronas Dagangan (-14.0 sen), MISC (- 12.0 sen), Hong Leong Bank (-8.0 sen) and Astro (-3.0 sen) were among the main index-linked heavyweight losers on the FBM KLCI.
• On the regional market, most of the benchmark indices ended in the red as the Nikkei and Hang Seng fell by 0.4% and 0.3% respectively, while the Shanghai Composite Index dropped by 0.8%. ASEAN indices, meanwhile, ended mixed.
• Following the slump in crude oil prices, U.S. stockmarkets erased most of their earlier gains as the S&P 500 and the Dow recorded their worst declines in two weeks. Meanwhile, nearly all of the S&P 500 sectors closed in the negative territory – with the energy (-3.2%), materials (-2.4%) and financial (-1.8%) stocks emerging as the main losers.
• Likewise, the FTSE dropped by 1.3% - its third loss in four sessions, while the DAX and CAC fell by 1.6% and 1.4% respectively. The bulk of the losses on the broader market were attributable by the decline in basic materials and mining stocks.

THE DAY AHEAD

• Although the key index posted a gain yesterday, it was much weaker-than-expected as quick profit taking activities limited the upsides. With the overseas markets posting weaker performances overnight, we think that stocks on Bursa Malaysia will succumb to further near term weakness, sustaining the indifferent trend as fresh buying interest is fizzling out amid the lack of fresh catalyst. At the same, the pullback in oil prices will also see profit taking on oilf and gas stocks over the near term.
• We also think the profit taking activities will extend to the lower liners and broader market and expect market breadth to turn negative over the near term.
• On the downside, the 1,650 level remains the key support, while the 1,680 level is the near term resistance level, before the 1,700 points level comes into play.

COMPANY UPDATE

• Mitrajaya Holdings Bhd has been appointed as the builder for the 1Malaysia Civil Servant Housing Development (PPA1M) by Putrajaya Homes Sdn Bhd, worth RM157.3 mln.
• The contract involves the construction of 800 units of PPA1M public apartments, inclusive of two blocks of multi-level car park and common facilities at Precint 17, Putrajaya. The contract is for duration of 36 months and is expected to be completed by Feb 22, 2019.

Comments

• The abovementioned project marks the first construction contract secured by Mitrajaya in 2016, accounting to 22.4% our targeted orderbook replenishment rate of RM700.0 mln. Similar with the previous PPA1M project secured in 2015, we estimate that the project could command a pretax margin of about 11%-12%. With the inclusion of the above contract, Mitrajaya’s outstanding orderbook now stands at approximately RM1.40 bln, which will provide earnings visibility over the next two years.
• With the contract falling within our targeted orderbook replenishment rate, we leave our earnings forecast unchanged and we reiterate our BUY recommendation on Mitrajaya, but with a lower target price of RM1.70 (from RM1.75), following the disposal of its 51% stake in Optimax.
• Our target price is derived from a sum-of-part basis by ascribing a targeted PER of 11.0x to its fully diluted 2016 construction earnings, while the value of its property development units, both local and overseas, are valued at 0.8x of their book value after accounting for the full conversion of Warrants-C and Warrants-D.

COMPANY BRIEFS

• Bursa Malaysia Securities has queried flight education and training service provider, AFPT Bhd after the recent sharp fall in price and high volume of the shares. It has fallen from 21.5 sen on 18th February 2016 on heavy trade and fell to a low of 12.0 sen yesterday.
• Bursa Securities has also advised investors to take note of the company’s reply to the unusual market activity query when making their investment decision. (The Star Online)
• Chip maker Unisem (M) Bhd’s 4Q2015 net profit surged 185.1% Y.o.Y to RM60.4 mln, boosted by higher demand for its products and forex gains. Revenue for the period rose 23.3% Y.o.Y to RM352.0 mln.
• For 2015, cumulative net profit soared 127.3% Y.o.Y to RM155.5 mln. Revenue for the year increased 21.4% Y.o.Y to RM1.26 bln. (The Star Online)
• MSM Malaysia Holdings Bhd’s 4Q2015 net profit fell 11.0% Y.o.Y to RM66.7 mln, mainly due to higher taxation and zakat paid. Revenue for the quarter, however, climbed 5.7% Y.o.Y to RM664.0 mln.
• For 2015, cumulative net profit added 9.2% Y.o.Y to RM280.8 mln. Revenue for the year rose 0.9% Y.o.Y to RM2.30 bln. (The Star Online)
• UMW Oil & Gas Bhd has slipped into a net loss at RM409.1 mln in 4Q2015 vs. a net profit of RM71.9 mln in the previous corresponding quarter, owing to an asset value write-down and goodwill written off amounting to RM337.5 mln.
• For 2015, cumulative net losses stood at RM362.3 mln vs. a net profit of RM252.0 mln in the previous corresponding year. Revenue for the year fell 17.2% Y.o.Y to RM839.5 mln. (The Star Online)
• Hong Leong Bank Bhd’s 2QFY16 net profit fell 37.6% Y.o.Y to RM344.1 mln, owing to the inclusion of a one-off mutual separation scheme (MSS) of RM172.0 mln. Revenue for the quarter, however, rose 4.9% Y.o.Y to RM12.07 bln.
• For 1HFY16, cumulative net profit dipped 22.9% Y.o.Y to RM847.0 mln. Revenue for the period, however, gained 2.9% Y.o.Y to RM2.10 bln. (The Star Online)
• Hong Leong Financial Group Bhd’s (HLFG) 2QFY16 net profit fell 37.8% Y.o.Y to RM263.5 mln, mainly due to lower contribution from its banking and insurance division. Revenue for the quarter, however, rose 2.6% Y.o.Y to RM1.17 bln.
• For 1HFY16, cumulative net profit declined 20.3% Y.o.Y to RM650.3 mln. Revenue for the period, however, improved 3.8% Y.o.Y to RM2.31 bln. (The Edge Daily)
• Hong Leong Capital Bhd's (HLCap) 2QFY16 net profit increased 41.2% Y.o.Y to RM22.3 mln due to higher contribution from its investment banking and stockbroking segment. Revenue for the quarter rose 13.1% to RM72.0 mln.
• For 1HFY16, cumulative net profit gained 11.1% Y.o.Y to RM37.9 mln. Revenue for the period climbed 3.6% to RM131.1 mln. (The Edge Daily)
• Nestle (M) Bhd's 4Q2015 net profit rose 1.5% Y.o.Y to RM99.8 mln on higher sales from both domestic and export sources. Revenue for the quarter gained 8.1% Y.o.Y to RM1.20 bln.
• For 2015, cumulative net profit climbed 7.3% Y.o.Y to RM590.7 mln. Revenue for the year improved marginally by 0.6% Y.o.Y to RM4.84 bln. A dividend of RM1.30 a share, comprising of a final payout of RM1.10 per share plus a special dividend of 20 sen per share for the quarter, payable on 2nd June 2016, was declared. (The Edge Daily)
• RGB International Bhd’s 4Q2015 net profit rose 42.4% Y.o.Y to RM4.3 mln, on higher electronic gaming machine sales. Revenue for the quarter added 15.1% Y.o.Y to RM64.7 mln.
• For 2015, cumulative net profit increased 12.6% Y.o.Y to RM20.9 mln. Revenue for the year rose 8.6% Y.o.Y to RM233.0 mln. (The Edge Daily)
• Lay Hong Bhd’s 3QFY16 net profit fell 34.2% Y.o.Y to RM4.2 mln due to lower egg prices and sales volume, following the implementation of the goods and services tax. Revenue for the quarter decreased 7.8% Y.o.Y to RM163.4 mln.
• For 9MFY16, cumulative net profit gained 8.0% Y.o.Y to RM15.3 mln. Revenue for the period, however, declined 3.5% Y.o.Y to RM482.7 mln. (The Edge Daily)
• Tanjung Offshore Bhd’s 4Q2015 net loss stood at RM26.4 mln vs. a net profit of RM0.7 mln in the previous corresponding quarter, on lower revenue and higher operating expenses. Revenue for the quarter declined 3.1% Y.o.Y to RM18.8 mln.
• For 2015, cumulative net loss stood at RM76.3 mln vs. a net profit of RM1.1 mln in the previous corresponding year. Revenue for the year dipped 43.5% Y.o.Y to RM60.7 mln. (The Edge Daily)
• Tan Chong Motor Holdings Bhd, the distributor of Nissan and Renault vehicles, saw its 4Q2015 net profit dipped 40.3% Y.o.Y to RM5.2 mln due to a declining Ringgit against the U.S. Dollar and intense competition. Revenue for the quarter, however, rose 19.5% Y.o.Y to RM1.51 bln.
• For 2015, cumulative net profit fell 29.3% Y.o.Y to RM74.9 mln. Revenue for the year, however, gained 20.1% Y.o.Y to RM5.72 bln. (The Edge Daily)
• Fiamma Holdings Bhd's 1QFY16 net profit declined 66.9% Y.o.Y to RM2.6 mln, dragged down by lower contribution from the property development segment. Revenue for the quarter decreased 18.4% Y.o.Y to RM62.7 mln. (The Edge Daily)
• Kian Joo Can Factory Bhd’s 4Q2015 net profit shrunk 34.2% Y.o.Y to RM23.5 mln due to foreign exchange losses, goodwill write-off as well as higher operating and finance costs. Revenue for the quarter, however, rose 30.5% Y.o.Y to RM460.3 mln.
• For 2015, cumulative net profit rose 8.6% Y.o.Y to RM131.3 mln. Revenue for the year gained 20.3% Y.o.Y to RM1.60 bln. (The Edge Daily)
• MMC Corp Bhd's 4Q2015 net profit fell 24.7% Y.o.Y to RM150.0 mln, owing to the lower contribution from Malakoff Corporation Bhd after reducing its stake to 37.6% (from 51%) in the latter. Revenue for the quarter sank 58.5% to RM955.7 mln.
• For 2015, cumulative net profit surged 232.7% Y.o.Y to RM1.64 bln. Revenue for the year, however, fell 42.4% Y.o.Y to RM5.05 bln. (The Edge Daily)
• Gas Malaysia Bhd’s 4Q2015 net profit decreased 56.0% Y.o.Y to RM10.3 mln, weighed down by additional billing for price differential between market prices and regulated prices for liquefied natural gas volume supplied from its gas supplier. Revenue for the quarter, however, jumped 49.9% Y.o.Y to RM1.17 bln.
• For 2015, cumulative net profit fell 36.7% Y.o.Y to RM106.2 mln. Revenue for the year, however, added 30.7% Y.o.Y to RM3.62 bln. A final dividend of 4.8 sen for 2015 was announced. (The Edge Daily)

Source: M+ Online Research - 24 Feb 2016