• 
• The FBM KLCI extended its losses for the second straight time on the back of losses amongst Petronas linked and plantation heavyweights. Concurrently, all of the lower liners and sub-indices on the broader market shares also ended in the red.
• Market breadth was negative as losers outnumbered gainers on a ratio of 565- to-271 stocks. Traded volumes, however, increased by 7.8% to 1.65 bln shares.
• Petronas Gas (-50.0 sen) led the heavyweight losers on the FBM KLCI, followed by KLK (-48.0 sen), Petronas Chemicals (-19.0 sen), PPB (-26.0 sen) and Ambank (-19.0 sen). On the broader market, the other major decliners were Panasonic Manufacturing (-68.0 sen), Kossan (-16.0 sen), MBM Resources (- 15.0 sen) and SOP (-17.0 sen).
• On the other side of the trade, the key winners include PIE (+14.0 sen), Karex (+8.0 sen), Mercury Industries (+12.0 sen), Hong Leong Industries (+16.0 sen) and JMR (+7.0 sen). Meanwhile, some of the index-linked heavyweight gainers were BAT (+RM1.28) Axiata (+7.0 sen), UMW (+5.0 sen), IOI Corporation (+6.0 sen) and Public Bank (+4.0 sen).
• On the regional markets, the Shanghai Composite and Hang Seng Index ended in the negative territory, alongside with most ASEAN indices. The Nikkei Index (+1.4%), however, closed higher, led by gains in Panasonic Corp. and TEPCO Inc.
• U.S. stockmarkets extended their rebound for the second consecutive sessions as gains was boosted by the rebound in oil prices – the S&P 500 and the Dow rose 1.1% & 1.3% respectively. Separately, the U.S. orders for durable goods in January came in at its highest in 10 months.
• Most European equities also ended higher as the FTSE rose 2.5%, led by gains in the financial sector, while the DAX and CAC increased 1.8% and 2.2% respectively. Meanwhile, data from the ECB showed that corporate lending in the Eurozone has increased by 0.6% in January.

THE DAY AHEAD

• Taken as a whole, sentiment on the domestic stockmarket remains largely indifferent on the back on the gyrating global markets and absence of fresh catalyst. Therefore, we expect the local market to continue taking cue from overseas markets for the time being and with U.S. stockmarkets posting a strong rebound overnight, we expect stocks on Bursa Malaysia to end the week on a positive note. The near term resistance remains at 1,680, while the main support is at 1,650 level.
• The lower liners and broader market stocks, meanwhile, could also see a pickup in buying activity as retail players take advantage of the market’s near term stability to bargain hunt on selected stocks.

COMPANY UPDATE

• Engtex Group Bhd’s 4Q2015 net profit plunged 77.8% Y.o.Y, to RM1.0 mln on softer demand for certain metal-related trading products coupled with the slower contribution from the property development segment. Revenue for the quarter, however, added 2.6% Y.o.Y to RM292.3 mln.
• For 2015, cumulative net profit fell 7.6% Y.o.Y to RM40.3 mln. Revenue for the year declined marginally lower, by 1.5% Y.o.Y, to RM1.16 bln. The results came in below our estimates as its net profit and revenue only accounted to 77.3% and 92.9% of our full year forecast of RM52.2 mln and RM1.25 bln respectively. The variance in the net earnings was also due to the higher effective corporate tax rate of 32.0% vs. the estimated 27.5%.

Comments

• We remain upbeat on Engtex’s prospects given the potential pipe laying and replacement projects nationwide, following the water sector restructuring exercise that concluded recently. However, China’s huge steel over-capacity of approximately 300 mln tonnes p.a., could see the oversupply condition persisting over the foreseeable future.
• Despite the reported earnings coming in below our estimates, we leave our earnings forecast unchanged, pending an analyst briefing for further guidance on the group’s prospects. We maintain our HOLD recommendation for now with an unchanged target price at RM1.25 as we ascribe an unchanged target PER of 6.0x to our 2016 forecast earnings of its manufacturing and wholesale & distribution businesses. Its property development segment’s valuation, meanwhile, remain unchanged at 0.6x its BV, based on its relatively small-scale property development projects.
• Oldtown Bhd’s 3QFY16 net profit fell 23.0% Y.o.Y to RM11.1 mln, due to lower contribution from the café chain segment and higher selling and distribution expenses from the manufacturing of beverages segment. Revenue for the quarter declined 3.3% Y.o.Y to RM102.2 mln.
• For 9MFY16, cumulative net profit decreased 9.1% Y.o.Y to RM33.9 mln. Revenue for the period fell 3.9% Y.o.Y to RM288.9 mln. The reported earnings came in above our expectations as it accounts to 85.0% our full year estimated net profit of RM42.5 mln, while the reported revenue came within our expectations, accounting to 72.6% of our FY16 revenue forecast of RM394.8 mln. An interim dividend of 3.0 sen per share, payable on 13th April 2016, was declared.
• Following the weakness in the operation of its café chain stores segment which saw the segment’s pretax profit fall 12.8% Y.o.Y to RM6.5 mln, we think that the aforementioned segment earnings will remain under pressure in the foreseeable future given the weaker consumer sentiment. Nevertheless, sitting on a huge cash pile of RM137.4 mln as of 31st December 2015, we do not rule out any potential merger & acquisition between Oldtown and other café chain businesses as a medium to increase their market share in the food & beverage industry.
• Although the reported earnings came in above our estimates, we leave our earnings estimates unchanged, pending an analyst briefing later. For now, we reiterate our HOLD call on Oldtown with an unchanged target price of RM1.60. Our target price is derived from ascribing a target PER of 16.0x to our FY17 net EPS of 10.1 sen. The targeted PER is based on a discount to the 20x-22x average PER of consumer products market leaders like Nestle and Dutch Lady due to Oldtown’s smaller size.
• Mitrajaya Holdings Bhd’s 4Q2015 net profit added 57.0% Y.o.Y to RM25.3 mln, owing to higher contributions from the construction and South African property development segments, which offset the weaker local property development business. Revenue for the quarter jumped 87.8% Y.o.Y to RM254.9 mln.
• For 2015, cumulative net profit gained 63.0% Y.o.Y to RM87.7 mln. Revenue for the year gained 71.3% Y.o.Y to RM891.0 mln. The reported earnings were above our estimates of RM78.0 mln, while the revenue came within of our full year forecast of RM868.1 mln.
• Separately, Mitrajaya has accepted a contract from PJ Midtown Development Sdn Bhd for a mixed development complex building and external works at Section 13 Petaling Jaya for a contract sum of RM293.0 mln. The contract will commence on 1st April, 2016 for duration of 26 months and is expected to be completed by 31st May, 2018.
• We continue to like Mitrajaya for its strong outstanding orderbook of approximately RM1.81 bln, an exceptionally high cover ratio of 2.4x against 2015’s construction revenue that will anchor the segment earnings over the next two years. We also think that the contribution from local property development projects will improve over the next two years after Wangsa 9 Residency has reached a certain completion stage of construction, while the South Africa property development project, where 80% of the launches were booked on the day of launching, will be recognised progressively by the end of 2016.
• Despite the reported earnings coming in above our estimates, we leave our earnings forecast unchanged as we think that the declining net margins from higher operational costs will persist, owing to the ever-increasing minimum wages, potential foreign workers levy hike and rising electricity tariff going forward. However, we maintain our BUY recommendation on Mitrajaya with an unchanged target price RM1.70. Our target price is derived from ascribing a target PER of 9.0x to its rolled-over fully diluted 2017 construction EPS of 9.4 sen (fully diluted), while the value of its property development units, both local and overseas, are valued at 0.8x of their respective book values.
• Coastal Contracts Bhd has recorded a 4Q2015 net profit and revenue of RM13.3 mln and RM173.6 mln respectively lower than our forecast of RM32.1 mln and RM368.3 mln respectively. The decline in earnings was due to lower vessel delivery for the corresponding quarter (2 units) vs. five units delivered in 4Q2014 and 7 units delivered in 3Q2015.
• For 2015, the company recorded a net profit of RM137.6 mln, which was below our expectations as it only accounts for 75.0% of our forecast of RM183.7 mln. Revenue for the period meanwhile stood at RM1.61 bln, which accounts for 76.5% of our expected RM2.1 bln
• Meanwhile, its near-to-short earnings visibility is backed by its cumulative orderbook size of approximately RM2.80 bln - RM1.20 bln and RM1.60 bln for its OSV and JU GCSU business segments respectively (with approximately two years of earnings visibility).
• Hence, we maintain our HOLD recommendation on Coastal with a revised target price of RM1.65 (vs. RM1.85) owing to the weaker earnings imputed for 2017. Our target price is arrived by assigning a revised target PER of 8.0x, from 7.0x previously, to our 2017 EPS estimate of 20.4 cents per share.
• Concurrently, our orderbook replenishment rate remains at RM300.0 mln for 2016 as there are no OSVs securement in 2H2015. Also, its jack-up rig replenishment rate was unchanged at RM200.0 mln as the compression gas jack up rig is in more demand as opposed to crude oil jack up rig.
• Barakah Offshore Petroleum registered a 4Q2015 net profit of RM14.5 mln after accounting for an income tax credit of RM16.0 mln. Excluding the one off adjustments, the company realised a loss RM1.5 mln vs our expected 4Q2015 net profit of RM4.4 mln. The downbeat performance was due to slower work flows in 2H2015 and capacity/costs are still running at 2014 levels, despite the balance sheet restructuring exercise.
• For 2015, the company recorded a net profit of RM18.8 mln helped by the tax credits and excluding the income tax credit of RM13.2 mln, profit would come in below our expectation of RM14.6 mln (accounting for 74.4% of our forecast). Revenue for the period, however, came in within our expectation as it stood at RM592.6 mln vs. our expectations of RM564.4 mln.
• Although the company has recently secured two contracts, coupled with the optimistic 2016 outlook given from the management, the poor economic environment and prolonged oversupply of crude oil does not bode well for the recovery of the weak O&G market sentiment that is shrouding the entire O&G business supply chain.
• Also, after 2016, it is evident that there is lesser project visibility as most works are reaching the tail end of its work tenure despite the potential one year extension in its Pan Malaysia T&I project.
• Hence, rolling over our earnings estimates to 2017, we would revise our hold recommendation to SELL with a lower target price of RM0.60 (from RM0.80 previously) after ascribing a revised target PER of 15.5x (vs. 13.5x) to our fully diluted 2017 EPS estimate of 3.8 sen. The company, meanwhile, is still
• supported by its unbilled orderbook of RM1.60 bln (with earnings visibility up until 2017) and potential securement of its bread and butter pipeline commissioning contracts for 2016 that could then prompt a recommendation upgrade.

COMPANY BRIEF

• CIMB Group Holdings Bhd’s 4Q2015 net profit soared 312.2% Y.o.Y to RM825.7 mln on higher operating income and lower provisions. Revenue for the quarter gained 10.1% Y.o.Y to RM4.04 bln.
• For 2015, cumulative net profit decreased 8.3% Y.o.Y to RM2.85 bln. Revenue for the year, however, climbed 8.8% Y.o.Y to RM15.40 bln. (The Edge Daily)
• OSK Property Bhd plans to launch some RM1.0 bln worth of properties across Pahang, Penang and Kedah in 2016, comprising of the Timur Bay project in Kuantan, Pahang, service apartments in Butterworth, Penang and new phases of its Bandar Puteri Jaya township in Sungai Petani, Kedah. (The Edge Daily)
• UOA Development Bhd’s 4Q2015 net profit rose 25.6% Y.o.Y to RM111.1 mln on higher revenue from the progressive recognition of its ongoing development projects. Revenue for the quarter improved 53.3% Y.o.Y to RM511.6 mln.
• For 2015, cumulative net profit added 31.9% Y.o.Y to RM417.0 mln. Revenue for the year increased 52.5% Y.o.Y to RM1.64 bln. A first and final single-tier dividend of 15.0 sen per share was proposed. (The Edge Daily)
• Bonia Corporation Bhd’s 2QFY16 net profit dipped 45.8% Y.o.Y to RM7.5 mln on decreased revenue and gross profit margin. Revenue for the quarter fell 1.5% Y.o.Y to RM178.5 mln.
• For 1HFY16, cumulative net profit declined 38.9% Y.o.Y to RM16.4 mln. Revenue for the period decreased 2.5% Y.o.Y to RM343.2 mln. (The Edge Daily)
• Scomi Group Bhd’s 3QFY16 fell 38.5% Y.o.Y to RM5.7 mln, mainly due to lower drilling activities in Malaysia, Indonesia, Myanmar and West Africa and higher financing cost. Revenue for the quarter declined 22.8% Y.o.Y to RM374.0 mln.
• For 9MFY16, cumulative net profit decreased 23.0% Y.o.Y to RM20.5 mln. Revenue for the period shrunk 19.9% Y.o.Y to RM1.09 bln. (The Edge Daily)
• IHH Healthcare Bhd’s 4Q2015 net profit surged 73.8% Y.o.Y to RM415.8 mln due to revaluation gains on its investment properties, investment tax allowance and exchange gains on non-Turkish Lira denominated loans. Revenue for the quarter rose 18.0% to RM2.29 bln, from RM1.94 bln.
• For 2015, cumulative net profit added 23.8% Y.o.Y to RM933.9 mln. Revenue for the year climbed 15.1% Y.o.Y to RM8.46 bln. (The Edge Daily)
• 7-Eleven Malaysia Holdings Bhd’s 4Q2015 net profit fell 22.2% Y.o.Y to RM13.9 mln on higher selling and distribution expenses from new store expansion. Revenue for the quarter, however, gained 3.9% Y.o.Y to RM499.7 mln.
• For 2015, cumulative net profit dropped 11.5% Y.o.Y to RM55.8 mln. Revenue for the year gained 6.0% Y.o.Y to RM2.00 bln. (The Edge Daily)
• UMW Holdings Bhd’s 4Q2015 net loss stood at RM286.0 mln vs. a net profit of RM77.5 mln in the previous corresponding quarter, dragged down by the oil & gas (O&G) segment's losses and a weakening Ringgit. Revenue for the quarter, however, increased 13.0% Y.o.Y to RM4.16 bln.
• For 2015, cumulative net loss stood at RM38.9 mln vs. a net profit of RM652.0 mln in the previous year. Revenue for the year declined 3.4% Y.o.Y to RM4.42 bln. (The Edge Daily)
• Sunway Construction Group Bhd’s (SunCon) 1QFY16 net profit stood at RM29.4 mln, largely contributed by its ongoing local construction projects and supplies of precast concrete products in Singapore. Revenue for the quarter stood at RM470.3 mln. No comparative figures were presented from the previous corresponding periods as the company was only listed in July 2015. (The Edge Daily)
• UEM Sunrise Bhd's 4Q2015 net profit sank 73.4% Y.o.Y to RM72.4 mln due to lower sales. Revenue for the quarter shed 54.7% Y.o.Y to RM607.1 mln.
• For 2015, cumulative net profit declined 46.4% Y.o.Y to RM257.2 mln. Revenue for the year fell 34.3% Y.o.Y to RM1.75 bln. A final dividend of 1.6 sen per share was proposed. (The Edge Daily)
• YTL Corp Bhd's 2QFY16 net profit contracted 26.9% Y.o.Y to RM234.9 mln, mainly due to weaker performance in its management services and others segment and lower profit in its property investment and development segment. Revenue for the quarter fell 6.6% Y.o.Y to RM3.94 bln.
• For 1HFY16, cumulative net profit decreased 18.6% Y.o.Y to RM437.5 mln. Revenue for the period declined 3.7% Y.o.Y to RM8.39 bln. (The Edge Daily)
• Malayan Banking Bhd’s 4Q2015 net profit fell 14.4% Y.o.Y to RM1.65 bln. Revenue for the quarter, however, climbed 14.4% Y.o.Y to RM11.05 bln.
• For 2015, cumulative net profit improved 1.8% Y.o.Y to RM6.83 bln. Revenue for the year increased 13.5% Y.o.Y to RM40.55 bln. A dividend of 30 sen a share was announced. (The Star Online)
• IJM Corporation Bhd’s 3QFY16 net profit jumped 85.8% Y.o.Y to RM256.1, boosted by higher contributions from the group’s construction, plantation and infrastructure divisions and a one-off gain from the sale of its stake in Swarna Tollway Private Ltd. Revenue for the quarter increased 7.5% Y.o.Y to RM1.45 bln.
• For 9MFY16, cumulative net profit jumped 95.8% Y.o.Y to RM749.4 mln. Revenue for the period, however, slipped 1.1% Y.o.Y to RM3.96 bln. (The Star Online)
• DRB-Hicom Bhd’s 3QFY16 net loss stood at RM185.3 mln vs. a net profit of RM9.5 in the previous corresponding quarter, attributable to the various headwinds in the automotive operations. Revenue for the quarter fell 5.5% Y.o.Y to RM3.34 bln.
• For 9MFY16, cumulative net loss stood at RM201.1 mln vs. a net profit of RM210.4 mln in the previous corresponding period. Revenue for the period declined 9.0% Y.o.Y to RM9.45 bln. (The Star Online)
• Taliworks Corp Bhd is realigning its strategy to focus on mature operational cash-generating utilities and infrastructure businesses. This follows its disposal of its entire China investments, including concessions to operate five wastewater treatment plants and a waste transfer facility for US$54.6 mln (RM230.4 mln).
• The company has also proposed to acquire a 35.0% equity stake in SWM Environment Holdings Sdn Bhd for RM245.0 mln, which has a 22-year concession to provide solid waste collection services in the states of Negri Sembilan, Malacca and Johor and public cleansing management services within the specified cleansing zones. SWM Environment Holdings’ unit SWM Environment Sdn Bhd has signed a 22-year concession agreement with the Solid
• Waste and Public Cleansing Management Corp and the Government in September 2011. It manages 4,500 to 5,000 tonnes of waste daily in Malaysia.
• The above exercises would also allow Taliworks to half its group borrowings, improving gearing levels to 0.4x. These are on top of realising a one-off disposal gain of RM48.8 mln and enjoying earnings accretion going forward by replacing developing assets with mature and cash-flow generating assets. (The Star Online)

Source: M+ Online Research - 26 Feb 2016