In tandem with the dampened regional and global sentiments, the FBMKLCI (- 0.1%) begun the week on a soft footing, dragged down by selected telco and plantation heavyweights. The lower liners ended mostly higher, however, while the broader market closed mixed.

Market breath turned negative as decliners outweigh the gainers on a ratio of 484-to-324 stocks. Traded volume shed 13.2% to 1.64 bln shares amid uncertainties ahead of the first U.S. Presidential candidate debate.

Half of the key index constituents fell – led by Axiata (-14.0 sen) and Genting (- 7.0 sen), while Genting Malaysia, PPB Group,as well as Sime Darby declined 12.0 sen each. Malaysia Airports Holdings (-17.0 sen), KESM Industries (- 16.0 sen), Manulife Holdings (-16.0 sen), and Panasonic Manufacturing Malaysia (- 16.0 sen) led the broader market lower, while DKSH Holdings (-12.0 sen) ended in the red to extend its losing streak for a fifth straight day.

On the other side of the trade, FCW Holdings (+26.0 sen), Malaysian Pacific Industries (+21.0 sen), UMW Holdings (+21.0 sen) and Carlsberg Brewery Malaysia (+16.0 sen) advanced. Meanwhile, Globetronics Technology rose 25.0 sen, on expectations of record shipments of sensors in 2017. Banking heavyweights like Hong Leong Bank (+28.0 sen), Public Bank (+24.0 sen) and CIMB Group Holdings (+9.0 sen) were the Main Board outperformers, followed by BAT (+8.0 sen) and Petronas Gas (+8.0 sen).

Japanese equities finished in the red for the second straight session as financials and technology-related counters continue to be beaten down, following the lackluster performance of the U.S. and European stockmarkets last Friday. The Nikkei tanked 1.3% to close slightly above the 16,500.0 level, while the Shanghai Composite Index lost 1.8% ahead of China’s long holiday next week. The Hang Seng Index also declined 1.6% - led by AAC Technologies Holdings (-4.7%) and China Resources Land (-3.9%). The majority of the ASEAN stockmarkets were subdued at Monday’s close.

Wall Street finished lower as the Federal Reserve’s decision to stand put on the interest rate direction dampened the earnings prospects of U.S. lenders. The Dow retraced 0.9% to 18,094.8 points – led by losses in the financials and discretionary stocks. On the broader market, both the S&P 500 and the Nasdaq slipped into the red after falling by 0.9%.

European equities slid, dragged down by energy stocks despite the recovery in crude oil prices ahead of the Organisation of the Petroleum Exporting Countries (OPEC) meeting. The FTSE was down 1.3% alongside a weaker Pound Sterling. Meanwhile, Germany’s DAX (-2.2%) closed sharply lower after Deutshe Bank AG (-7.2%) fell to its record low on worries over its weakening financial health. The CAC meanwhile, also ended 1.8% lower.

THE DAY AHEAD

Despite the steep falls on regional stockmarkets, the FBM KLCI has held up well yesterday amid the institutional support on selected index linked stocks to allow the key index to close with just superficial losses. However, we see the key index’s consolidation spell maintaining over the near term amid the continuing profit taking activities after key global stocks indices closed further in the red overnight.

At the same time, there are also few noteworthy leads, both domestic and foreign, to entice investors to hold on to their short-term positions and the profit taking activities will send the market lower over the near term. On the downside, the key index may head towards the 1,660 support level, with the 1,670 level remaining the key near term resistance level.

COMPANY UPDATE

Econpile Holdings Bhd has acquired the entire two ordinary shares of RM1.00 each in Tropical Broadway Sdn. Bhd. (TBSB) at par for cash consideration of RM2.00. The authorised share capital of TBSB is RM400,000.00 divided into 400,000 ordinary shares of RM1.00 each of which two ordinary shares of RM1.00 each have been issued and fully paid-up. TBSB is currently dormant and its intended business activity is property development.

Comments

We view the acquisition as neutral, given that TBSB is currently dormant. Although the general property market in Malaysia is expected to remain subdue in the foreseeable future, the diversification into the property development sector will complement its core business as a piling and foundation specialist to generate a stream of recurring income for the group.

As TBSB is currently dormant, we leave our earnings forecast unchanged for now. We, however, upgrade Econpile to BUY (from Hold) with a higher target price of RM1.85 (from RM1.60). The higher target price is derived from ascribing a higher target PER of 13.0x (from 11.0x) to its FY17 EPS of 14.3 sen. The higher targeted PER is in tandem with the increase in the general construction sector PER of 13.0x-16.0x.

COMPANY BRIEFS

Sunway Construction Group Bhd (SunCon) has clinched three contracts worth RM209.0 mln from MMC Gamuda KVMRT (PDP SSP) Sdn Bhd and sister company Sunway Iskandar Sdn Bhd.

MMC Gamuda has awarded a RM52.5 mln contract for advance works construction of the viaduct guideway between Kampung Muhibbah and Serdang Raya. The works would be completed by September 2017.

The other two in-house projects from Sunway Iskandar, which is also owned by SunCon’s parent company Sunway Bhd, are for building a commercial development in Medini Iskandar Malaysia, Johor.

The first contract is valued at RM100.0 mln for building 88 office shop lots, a management office block, while the other project is for the facilities in Medini Zon F24 valued at RM56.5 mln. The projects would be completed by 30th October 2017 and 30th April 2018 respectively. (The Star Online)

UEM Edgenta Bhd is set to become the country’s biggest facilities management provider servicing the private healthcare and hospital segments through its proposed acquisition of Asia Integrated Facility Solutions Pte Ltd for S$185.9 mln (RM565.2 mln) in cash.

Asia Integrated Facility Solutions’ indirectly owned UEMS Pte Ltd is the number one facilities management firm catering to those segments in the country. Its clients in Malaysia include Prince Court Medical Centre, Pantai Hospital Kuala Lumpur, Gleneagles Penang and Assunta Hospital.

Overall, UEMS serves over 60 public and private hospitals, and 26,000 beds in Malaysia, Singapore and Taiwan. Upon the completion of the proposed acquisition, UEM Edgenta’s gearing will increase from 0.2x to 0.6x. The proposed purchase was expected to be completed in 4Q2016, subject to its shareholders’ approval at an EGM to be convened. (The Star Online)

Pestech International Bhd’s joint venture (JV) with Fuji Electric Asia Pacific Pte Ltd has bagged a RM89.5 mln contract from Sarawak Energy Bhd to develop a substation in Bintulu. The non-incorporated consortium between its subsidiary Pestech Sdn Bhd and Fuji, called Pestech-Fuji JV, had accepted the letter of award on 23rd September 2016. The project is expected to commence in October 2016 and is to be completed within 21 months. (The Edge Daily)

The High Court of Malaya has allowed the petition filed by the independent directors to wind up special purpose acquisition company (SPAC) CLIQ Energy Bhd. The court has ordered the appointment of Onn Kien Hoe and Mok Yuen Lok of Crowe Horwath Advisory Sdn Bhd as CLIQ's liquidators. (The Edge Daily)

KNM Group Bhd is proposing to issue bonds in Thailand of up to US$80.0 mln equivalent in Thai baht guaranteed by Credit Guarantee and Investment Facility, a trust fund of the Asian Development Bank. The issuance is to raise the funds required for Asia Bio-Fuels Ltd (ABL) Group’s Phase 2 of bio-ethanol plant. This follows KNM’s acquisition of the above company in May this year.

ABL Group owns a combined 72.0% equity interest in Impress Ethanol Co Ltd (IEL) and a 49.0% equity interest in Impress Farming Co Ltd. The construction of IEL's Phase 1 bio-ethanol plant with a production capacity of 200,000 litres of ethanol per day is ongoing.

Meanwhile, the construction of Phase 2 of the bio-ethanol plant for an additional 200,000 litres of ethanol per day is expected to commence by 1H2017. (The Edge Daily)

Voir Holdings Bhd's wholly-owned subsidiary, Million Twilight Sdn Bhd has accepted a subcontract offer from Wira Syukur (M) Sdn Bhd to complete 1,000 units of apartments in Kota Bharu for RM24.6 mln. The project is under the Programme Perumahan Rakyat and the contract is slated to start from 1st October 2016 to complete by 30th September 2017. (The Edge Daily)

Bina Puri Holdings Bhd has bagged a plant building project at Petroliam Nasional Bhd's (Petronas) Refinery and Petrochemical Integrated Development (Rapid) in Pengerang, Johor. The 11-month contract, which includes non-plant construction, is worth RM18.0 mln. With this, said Bina Puri, the group's outstanding book order stands at RM2.02 bln. (The Edge Daily)

Source: M+ Online Research - 27 Sep 2016