The FBM KLCI extended its two-day winning streak to end 0.5% higher on the back of the stronger Ringgit vs. the Greenback following an unexpected rise in June’s trade export data. Meanwhile, the key index also closed 0.7% W.o.W higher, mainly due to increased foreign buying. The lower liners also advanced, led by the FBM Fledging (+0.3%) index amid a mostly positive broader market.

Market breath remained positive as advancers beat losers on a ratio of 444- to-332 stocks. Traded volume was up 5.7% to 2.17 bln share amid bargain hunting activities amongst selected heavyweights.

Key index frontrunners include PPB Group (+28.0 sen), KLCC Property & REITs (+10.0 sen), CIMB Bank (+8.0 sen), and MISC (+8.0 sen), in addition to IOI Corporation, which gained 22.0 sen after the Roundtable of Sustainable Palm Oil (RSPO) organisation removed the suspension of its RSPO certificate. Significant winners on the broader market include United Plantations (+62.0 sen), Nestle (+28.0 sen), Batu Kawan (+24.0 sen), Top Glove (+20.0 sen) and Mesiniaga (+19.0 sen).

In contrast, the biggest decliners on the broader market were Fraser & Neave (- 76.0 sen), Panasonic Manufacturing (- 60.0 sen), Ajinomoto (-30.0 sen), KESM Industries (-28.0 sen) and Unisem (-17.0 sen). Blue chip underperformers, meanwhile, include Petronas Dagangan (- 10.0 sen), Westports Holdings (-8.0 sen) and Kuala Lumpur Kepong (-2.0 sen). Hong Leong-linked blue chip counters, Hong Leong Financial Group (-6.0 sen) and Hong Leong Bank (-2.0 sen) also declined.

Asian key benchmark indices finished mixed as investors adopt a wait-and-see attitude ahead of the U.S. jobs report. The Nikkei closed relatively unchanged after seesawing for most of the day amid the earnings reporting season and strengthening Yen. Meanwhile, the Hang Seng jumped 1.4%, underpinned by gains in properties-related counters such as China Resources Land (+3.9%) and Sun Hung Kai Properties (+3.1%), on top of anticipation for additional stimulus from the People’s Bank of China (PBOC) to mitigate the slowdown in economic growth. On the contrary, the Shanghai Composite Index dropped 0.2%. ASEAN indices, meanwhile, finished mostly on a positive note.

U.S. stockmarkets finished strongly last Friday after stellar employment data beat analysts’ expectations, stoking optimism for an interest rate hike in the near future. The Dow surged 1.0% as 90.0% of the blue chip gauge rallied, while the S&P 500 rose 0.9% to record a fresh new high, backed by gains in financials and technology-related stocks. The Nasdaq also jumped 1.1%, marking a record high at 5,221.1 points.

European equities extended its winning streak to three straight sessions, bolstered by the Bank of England’s stimulus measures as well as the upbeat U.S. jobs report, which saw an additional 255,000 new jobs added into the U.S. market. The FTSE advanced 0.8% despite the weaker Euro on the back of gains by large-cap corporations such as Hikma Pharmaceuticals (+7.9%) and Paddy Power Betfair (+3.6%). Meanwhile, the DAX and CAC added 1.4% and 1.5% respectively.

THE DAY AHEAD

We think the market conditions remain mildly positive amid the continuing uptick in many global equity markets over the past few sessions and this will continue to drive Malaysian equity indices higher over the near term as well. This could help to tip the key index to retest the 1,670 level, but a convincing breach above the level may prove to be more difficult as we think there will be quick profit taking activities that will limit the key index’s upsides, in our view. In the meantime, the 1,650 level remains as the main near term support level.

There is also renewed interest among the lower liners and broader market stocks despite the general lack of fresh leads as retail investors cast aside the still cautious environment to undertake trading activities. This will help to lift market breadth further, but we again expect quick profit taking activities to also limit their upsides.

COMPANY UPDATE

Protasco Bhd has bagged a contract worth RM315.8 mln for the construction of a stretch in the Sungai Besi-Ulu Kelang Expressway (SUKE). Protasco’s subsidiary, HCM Engineering Sdn Bhd, will undertake the contract jointly with Hatimuda Sdn Bhd on a 40:60 basis. The work is expected to be completed within a 30-month period ending 28th February 2019.

Comments

The above mentioned project marks the first construction project secured by Protasco in 2016. Similar with the previous construction contracts secured, we expect the project to command an EBITDA margin of 11%-13%. Protasco’s outstanding construction orderbook now stands at approximately RM800.0 mln, which will underpin earnings visibility over the next two years.

With the construction contract coming in within our targeted orderbook replenishment of RM300.0 mln for 2016, we maintain our BUY recommendation on Protasco with an unchanged target price RM2.40. Our target price is derived from 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 remain pegged at target PERs of 6.0x respectively due to their smaller scale businesses. Its property development division’s valuation remains unchanged at 0.6x of its BV over the next two years.

COMPANY BRIEFS

Ranhill Holdings Bhd 2Q2016 net profit soared 446.6% Y.o.Y to RM37.8 mln, due to a one-off premium paid on the redemption of the Islamic Medium Term Notes (MTNs) amounting to RM13.3 mln and the recognition of negative goodwill of RM20.1 mln arising from its investment in Ranhill Water Technology (Cayman) Ltd (RWTC). Revenue for the quarter added 3.6% Y.o.Y to RM357.0 mln.

For 1H2016, cumulative net profit stood at RM44.7 mln on the back of a revenue of RM701.8 mln. No comparative figures for the preceding corresponding period as the group was only listed in December 2015. (The Star Online)

The suspension of IOI Corp Bhd's Roundtable on Sustainable Palm Oil (RSPO) certification since 1st April 2016 will be lifted on 8th August. The RSPO Secretariat has reported that IOI Group has met the conditions set out by the RSPO in its letter to IOI Group dated 14th March 2016 and the actions that the group has taken and implemented since then. (The Edge Daily)

MMC Corp Bhd is acquiring a 49.0% stake in Penang Port Sdn Bhd (PPSB), the operator of Penang Port, from Seaport Terminal (Johore) Sdn Bhd for RM200.0 mln cash. MMC Corp has entered into an agreement with Seaport Terminal to acquire 36.0 mln shares in PPSB. It will fund the acquisition via internal funds and/or bank borrowings. (The Edge Daily)

REV Asia Bhd (formerly known as Catcha Media Bhd) plans to buy two popular Chinese social news and content websites from Netnion Technology Sdn Bhd for a maximum purchase consideration of RM5.0 mln. This will mark REV Asia's first step into the online Chinese audience segment, presenting it with an opportunity to dominate the Chinese social news and content vertical. (The Edge Daily)

Unisem (M) Bhd's 2Q2016 net profit rose 19.9% Y.o.Y to RM37.6 mln, driven by higher sales and better margins. Revenue for the quarter added 7.4% Y.o.Y to RM320.9 mln.

For 1H2016, cumulative net profit grew 31.7% Y.o.Y to RM72.3 mln. Revenue for the period climbed 10.3% Y.o.Y to RM638.7 mln. An interim dividend of 3.5 sen per share, payable on 5th September 2016 was declared. (The Edge Daily)

SLP Resources Bhd's 2Q2016 net profit slipped 5.4% Y.o.Y to RM6.1 mln, largely due to lower domestic sales. Revenue for the quarter fell marginally by 0.7% Y.o.Y to RM42.2 mln.

For 1H2016, cumulative net profit grew 2.7% Y.o.Y to RM11.2 mln. Revenue for the period increased 3.4% Y.o.Y to RM86.8 mln. A first single-tier interim dividend of 1.5 sen per share, payable on 5th October 2016, was declared. (The Edge Daily)

Source: M+ Online Research - 8 Aug 2016