The FBM KLCI ended up by 0.2% on late buying support from selected heavyweights, ahead of the tabling of the Malaysian Budget 2017. The key index also notched a 0.7% W.o.W gain to close slightly below the 1670.0 psychological level. The FBM Small Cap (+0.1%) was the only lower liner component to advance, while the FBM Fledging and the FBM Ace retreated 0.1% and 0.4% respectively. More than half of the broader market stocks finished on a positive note last Friday.

Market breadth was negative as losers edged the gainers on a ratio of 392-to- 327 stocks. Traded volumes also thinned by 3.7% to 1.44 bln shares as investors stayed on the sidelines, awaiting for fresh catalysts from the Malaysian Budget 2017.

BAT (+RM1.30), Kuala Lumpur Kepong (+44.0 sen) CIMB (+11.0 sen), Maybank (+9.0 sen), and Hap Seng Consolidated (+8.0 sen) led the Main Board higher. Meanwhile, the broader market winners were Calsberg (+50.0 sen), Scientex (+34.0 sen), Fraser & Neave (+32.0 sen), Bursa Malaysia (+28.0 sen) and Kossan Rubber Industries (+19.0 sen).

Meanwhile, the broader market losers were KPJ Healthcare (-16.0 sen) Lafarge Malaysia (-15.0 sen), Ta Ann Holdings (- 15.0 sen), Syarikat Takaful Malaysia (- 13.0 sen) and Genting Plantations (-12.0 sen). Underperformers on the FBM KLCI included Genting-related companies like Genting Malaysia (-8.0 sen) and Genting (-8.0 sen), followed by DIGI (-5.0 sen), Petronas Gas (-4.0 sen) and Tenaga Malaysia (-4.0 sen).

Japanese stockmarkets finished lower after the Nikkei snapped five-straight days of gains to close down by 0.3%, ahead of the release of corporate earnings from major Japanese firms. The Shanghai Composite Index, meanwhile, ended slightly up by 0.2% as gains in property counters offset concerns of the weakening Yuan. The Hang Seng Index was closed for trading as Typhoon Haima hits the city. The majority of the ASEAN stockmarkets, however, were splashed in red last Friday.

U.S. equities flatlined on Friday despite erasing earlier losses – mainly due to growing concerns that the stronger Dollar might dampened corporate earnings. The Dow (-0.1%) ended marginally lower, dragged down by Verizon Communications and International Business Machines Corp (IBM) which closed down 1.9% and 1.3% respectively on lower-than-expected corporate earnings. On the broader market, the S&P 500 (-0.01%) finished almost unchanged, while the Nasdaq bucked the general negative sentiment to close up 0.3%.

Key European indices finished mostly down last Friday as the FTSE retreated 0.1%, dragged down by the healthcare and consumer discretionary sectors. Meanwhile the CAC ended 0.1% lower after paring back earlier losses, although the DAX clawed back a 0.1% gain following a choppy trading session.

THE DAY AHEAD

The FBM KLCI tethers on the 1,670 resistance level and this places it on the crossroads once again as Budget 2017 was generally viewed as neutral for most corporations and providing few sustainable catalysts, in our view.

Consequently, we think the FBM KLCI’s near term movement will continue to be dictated by overseas events and with most key foreign indices also taking an indifferent route, similar conditions are expected to prevail on Bursa Malaysia. If the 1,670 level is breached, the FBM KLCI could range between the above level and 1,680. However, if the 1,670 level fails to hold, then the key index could then trend back into the 1,660 level.

Although we think the general market direction is likely to be rangebound, there could still be some near term interest on selected sectors like contractors, stockbrokers, electrical and electrical companies amid the increased allocations announced in the Budget.

MACRO BRIEF

Malaysia’s inflation data, as measured by the consumer price index (CPI), increased 1.5% Y.o.Y to 115.3 in September 2016. The increase in the index for food, nonalcoholic beverages (+3.0% Y.o.Y), housing, water, electricity, gas and other fuels (+2.1% Y.o.Y) was countered by the decrease in the index of transport group (- 5.5% Y.o.Y), communication (-2.6% Y.o.Y) and clothing and footwear (-0.6% Y.o.Y).

On monthly basis, the CPI also grew 1.5%. For 9M2016, the CPI rose 2.2% Y.o.Y, a slight moderation from its 2.3% Y.o.Y increase recorded in the period of January to August 2016. (The Star Online)

COMPANY UPDATE

Econpile Holdings Bhd's wholly-owned subsidiary, Econpile (M) Sdn Bhd has received a RM43.5 mln letter of award from Ahmad Zaki Sdn Bhd to undertake bored pile works for the Mass Rapid Transit Line 2 project connecting Sungai Buloh, Serdang and Putrajaya. The award for Package V202 contract, which is the construction and completion of viaduct guideway and other associated works from Persiaran Dagang to Jinjang runs for duration of about 24 months. (The Edge Daily)

Comments

Econpile has secured some RM323.5 mln worth of construction contracts todate, accounting to 53.9% of our targeted orderbook replenishment rate of RM600.0 mln for FY17. The award of the new projects brings its total outstanding construction orderbook to approximately RM850.0 mln, implying an orderbook-tocover ratio of 1.8x against FY16 revenue of RM462.1 mln, which will provide earnings visibility over the next 18 months.

Given that the aforementioned contract award is within our construction orderbook replenishment rate, we leave our earnings forecast unchanged and we maintain our BUY recommendation on Econpile with an unchanged target price of RM1.95.

Our target price is derived from ascribing an unchanged target PER of 13.0x to its FY17 EPS of 15.0 sen. The ascribed PER is in line with its peers with similar market capitalisation and the construction industry average.

COMPANY BRIEFS

Multi-Usage Holdings Bhd (MUH) has confirmed that three of its officials have claimed trial in court, in reference to an article published by an online news portal on 19th October 2016 to a charge of failing to circulate a notice for the company’s annual general meeting.

Separately charged, the trio allegedly committed the offence on 29th June 2015 as officers of the company. (The Edge Daily)

Pesona Metro Holdings Bhd’s whollyowned subsidiary, Pesona Metro Sdn Bhd was awarded a RM402.0 mln contract for the construction of a 52- storey apartment block on Jalan Kia Peng, Kuala Lumpur. The 43-months duration project, the Eaton Residences will commence from 1st December 2016. (The Edge Daily)

Sinotop Holdings Bhd, a fabric manufacturer based in China, has announced a proposed corporate exercise and diversification of its core business involving a capital reduction to about RM118.5 mln. The proposed diversification of the group’s existing core business included project management and infrastructure construction related businesses.

The proposed diversification will allow the group to reduce the reliance on existing businesses, which is in a very competitive and challenging landscape, while providing an additional stream of revenue and earnings. The proposed exercise will also assist the group to have a more efficient capital structure. (Bernama)

Source: M+ Online Research - 24 Oct 2016