The FBM KLCI (-0.1%) endured a volatile trading session, seesawing between gains and losses before extending its losses for the third consecutive session yesterday. The lower liners – the FBM Small Cap (-0.4%), FBM Fledgling (-0.1%) and FBM Ace (-2.1%) all remained in the red, while the Industrial (+0.3%), Construction (+0.3%) and Mining (+0.8%) sub-sectors outperformed in the negative broader market.

Market sentiments remained negative as losers outnumbered gainers on a ratio of 2-to-1 stocks. Traded volumes slipped 10.0% to 1.74 bln shares as investors remained on the sidelines amid the negative market sentiment.

BAT (-22.0 sen) topped the big board decliners list, followed by Hong Leong Financial Group (-16.0 sen), Maybank (- 9.0 sen) and Petronas Dagangan (-4.0 sen). Axiata slipped 18.0 sen after reporting a soft set of quarterly earnings. Significant decliners on the broader market include KESM Industries (-34.0 sen), Dutch Lady (-20.0 sen), Air Asia (- 18.0 sen), Malaysia Airport Holdings (- 18.0 sen) and Felda Global (-17.0 sen).

In contrast, Panasonic Malaysia (+46.0 sen), Khind Holdings (+25.0 sen), Kawan Food (+18.0 sen), UOA REIT (+13.0 sen) and Carlsberg (+12.0 sen) led the broader market advancers list. Among the biggest gainers on the FBM KLCI include Sime Darby (+9.0 sen), KLK (+8.0 sen), PPB Group (+8.0 sen), KLCC (+7.0 sen) and AmBank (+5.0 sen).

Asia benchmark indices ended mostly lower yesterday as the Nikkei fell 0.3% on thin trade ahead of the U.S. Federal Reserve Chairwoman’s speech on the interest rates outlook. The Shanghai Composite (-0.6%) extended its losses as the property sector (-2.2%) took a beating, but the Hang Seng Index rose 0.03% after enduring a choppy trading session. ASEAN indices, meanwhile, ended mostly lower.

U.S. stockmarkets extended their losses overnight as the Dow fell 0.2% after the strong economic data from Durable Goods Orders in July (+4.4% M.o.M) and the latest jobless claims data that fell to 261,000, signal higher prospects of an interest rate hike in the coming months. On the broader market, both the S&P 500 and Nasdaq closed 0.1% lower each.

Earlier, European benchmark indices - the FTSE (-0.3%), CAC (-0.7%) and DAX (-0.9%), all ended lower despite trimming most of their intraday losses. Notable decliners were mining and automotive stocks such as Glencore PLC (-2.6%), Anglo Americna PLC (-1.1%), Volkswagen AG (-2.0%) and BMW AG (-1.8%).

THE DAY AHEAD

Although the FBM KLCI found support at the 1,680 level at the close of yesterday’s trade, the support may give way amid the weaker market sentiments. As it is, the consolidation spell on Bursa Malaysia is still unfolding as there remain few fresh catalysts and the toppish stock valuations are limiting the upsides. Overseas stockmarkets are also on a sideway trend, thus providing little impetus for the local market as well.

If the 1,680 level gives way, the next support level is at 1,670 level, while the 1,700 points level remains the key resistance for now.

There is also no change to the near term outlook of the lower liners and broader market shares as we expect the insipid market environment to also prevail amid the lack of leads.

COMPANY UPDATE

Econpile Holdings Bhd’s 4QFY16 net profit added 22.1% Y.o.Y to RM17.0 mln, on the back of billings from the stronger orderbook,coupled with the higher recognition from ongoing foundation work on property development projects, which yields better margins vs. piling works for infrastructure projects. Revenue for the quarter climbed 23.6% Y.o.Y to RM128.4 mln.

For FY16, cumulative net profit improved 41.6% Y.o.Y to RM66.0 mln. Revenue for the year increased 7.7% Y.o.Y to RM462.1 mln. Both the reported earnings and revenue came in slightly above our expectations, accounting to 103.0% and 104.1% of our FY16 estimated net profit and revenue of RM64.0 mln and RM443.9 mln respectively.

Comments

As the reported earnings came marginally above our expectations, we leave our earnings forecast unchanged, pending an analyst briefing and we maintain our BUY recommendation on Econpile with an unchanged target price of RM1.60. Our target price is derived from ascribing an unchanged target PER of 11.0x to its FY17 EPS of 14.4 sen, which is in line with its peers with similar market capitalisation.

At current price of RM1.45, we think there are further upsides as the company is trading at prospective PERs of 10.1x and 9.9x for FY17 and FY18 respectively, which are below the construction industry average of 11.0x-13.0x.

COMPANY UPDATE

Oldtown Bhd’s 1QFY17 net profit jumped 46.3% Y.o.Y to RM13.9 mln, from RM9.5 mln in the previous corresponding period, mainly attributed to higher export sales generated from the manufacturing of beverages segment, which offsets the weaker performance from the operation of its café chain segment. Quarterly revenue was 9.4% Y.o.Y higher at RM102.9 mln, against RM94.1 mln last year.

The reported earnings came within our expectations as it accounts to 25.1% our full-year estimated net profit of RM55.3 mln, while the reported revenue amounts to 24.9% of our estimated FY17 revenue of RM413.9 mln.

Comments

With the results coming in within our estimates, we leave our earnings estimates unchanged. We also maintain our HOLD recommendation on Oldtown with an unchanged target price of RM1.95 sen. Our target price is derived from ascribing a unchanged target PER of 16.0x to our FY17 EPS of 12.3 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 market capitalisation.

Following the completion of Oldtown’s Channel Rationalisation Plans last quarter, its export sales improved, mainly due to stronger sales performance by online retailers and a solid rebound in the China market. Also, the group has successful re-launched its operations into the Indonesia and Philippines fast-moving consumer goods (FMCG) market, which could boost the earnings from the export market further.

We think that the manufacturing and beverages segment will continue to support the group’s earnings, amid the slowdown in the local café chain operations. Moving forward, Oldtown aims to grow its market share and maintain its brand presence with aggressive product marketing through multiple media channels and regular promotions.

COMPANY BRIEFS

Genting Bhd’s 2Q2016 net profit surged by more than four times to RM294.7 mln, from RM67.9 mln a year ago – mainly due to lower net fair value loss on derivative financial instruments and lower impairment losses, while revenue inched 1.4% Y.o.Y higher to RM4.23 bln, from RM4.17 bln for 2Q2015.

For 1H2016, however, net profit plunged 38.1% Y.o.Y to RM425.6 mln, from RM688.0 mln in 1H2015, dragged down by lower EBITDA and lower gain on disposal of available-for-sale financial assets, despite higher revenue at RM8.93 bln vs. RM8.54 bln in the previous corresponding year. (The Edge Daily)

Guocoland (Malaysia) Bhd saw its 4QFY16 net profit declined to RM94.4 mln, against RM171.4 mln a year ago, mainly attributed to a hike in operating expenses, higher finance charges and a loss of RM5.5 mln from a discontinued business. Revenue for the quarter however, grew 10.7% Y.o.Y to RM65.3 mln, from RM59.0 mln in the same period last year.

For FY16, Guocoland’s net profit plummeted 35.6% Y.o.Y to RM121.6 mln, from RM188.8 mln a year ago, due to the aforementioned reasons, even as revenue soared 61.3% Y.o.Y to RM315.6 mln, from RM195.6 mln in FY15. The group declared a final single-tier dividend of two sen. (The Edge Daily)

Malaysian Resources Corp Bhd (MRCB) registered a 24.3% Y.o.Y decline in its 2Q2016 net profit to RM45.5 mln, from RM60.1 mln as 2Q2015’s earnings included gains from the disposal of several assets. Accordingly, revenue fell to RM389.2 mln vs RM530.3 mln in 2Q2015.

Cumulative 1H2016 net profit fell 26.7% Y.o.Y to RM49.9 mln from last year’s RM298.0 mln, while revenue shed 11.7% Y.o.Y to RM825.2 mln, from RM934.5 mln in 1H2015.

Todate, the group’s property development projects has a gross development value (GDV) of RM50.0 bln and its external construction orderbook is RM6.6 bln. (The Star Online)

Gadang Holdings Bhd has proposed a share split for every RM1.00 Gadang share into two shares of 50.0 sen each. The company also plans to issue up to 129.3 mln bonus shares, on the basis of one bonus share-for every-four subdivided shares held.

The company will also undertake a bonus issue of up to 129.3 mln warrant, on the basis of one warrant-for-every four subdivided shares. The corporate exercise is expected to be completed by end-2016. (The Edge Daily)

Uzma Bhd's 2Q2016 net profit took a significant hit as it plunged 94.0% Y.o.Y to RM563,000, from RM9.3 mln a year earlier – mainly on the back of lower margins, higher finance costs and lower share of profit in joint-ventures. Revenue also declined 34.7% Y.o.Y to RM91.5 mln, against RM140.1 mln.

The group’s cumulative 1H2016 net profit, however, improved to RM21.5 mln (+24.4% Y.o.Y) from RM17.3 mln a year ago, despite revenue falling 27.0% Y.o.Y to RM210.7 mln, in comparison to RM288.6 mln in the previous corresponding year. (The Edge Daily)

7-Eleven Malaysia Holdings Bhd posted a 40.3% Y.o.Y increase in its 2Q2016 net profit to RM15.1 mln from RM10.7 mln a year ago – due to higher revenue, which was up 4.9% Y.o.Y to RM505.7 mln, better margin and cost efficiency strategies.

For 1H2016, 7-Eleven's net profit expanded 23.4% Y.o.Y to RM31.0 mln, in comparison to 1H2015’s RM25.1 mln net profit, alongside revenue which was 4.5% Y.o.Y higher at RM1.03 bln from RM987.3 mln. (The Star Online)

MMC Corp Bhd’s net profit in 2Q2016 dived 90.7% Y.o.Y to RM125.0 mln, from RM1.35 bln last year, as 2Q2015’s earnings included a gain of RM1.34 bln from the listing of Malakoff Corp, while revenue took a 34.0% Y.o.Y hit to stand at RM950.3 mln, from RM1.44 bln.

Its 1H2016 net profit slumped 87.8% Y.o.Y to RM176.4 mln, from RM1.44 bln previously. Revenue also fell by 44.9% Y.o.Y to RM1.88 bln, from RM3.42 bln in 1H2015.

Moving forward, the group expect its ports and logistics division to grow on the back of improved performances of all three ports — Pelabuhan Tanjung Pelepas Sdn Bhd, Johor Port and Northport. (The Edge Daily)

Eastern & Oriental Bhd‘s (E&O) 1QFY17 net profit weakened 86.1% to RM3.2 mln, from RM23.3 mln – as there was a disposal gain of RM20.3 mln recognised last year. Revenue surged 137.1% Y.o.Y to RM163.3 mln, compared to RM68.9 mln in 1QFY16.

Despite the challenging property market, E&O’s unbilled sales of RM1.03 bln is expected to anchor earnings for the next two financial years. (The Star Online)

Censof Holdings Bhd‘s 1QFY17 net profit jump more than 42-fold to RM35.7 mln, from RM838,000, boosted by a significant contribution from the National Single Window (NSW) segment and share of result of an associate company. Revenue for the quarter, meanwhile. jumped 83.6% Y.o.Y to RM62.5 mln, from RM34.1 mln. (The Edge Daily)

Tropicana Corp Bhd's 2Q2016 net profit gained 43.8% Y.o.Y to RM33.3 mln from RM23.2 mln previously, attributed to improved contribution from its property projects and lower finance costs, while quarterly revenue rose 14.6% Y.o.Y to RM358.1 mln, from RM312.3 mln.

Cumulative 1H2016 net profit stood at RM48.5 mln, representing a 14.3% Y.o.Y increase, from RM42.4 mln a year earlier. However, revenue fell 8.3% Y.o.Y to RM645.0 mln, from RM703.3 mln 1H2015. (The Star Online)

Source: M+ Online Research - 26 Aug 2016