Despite the positive sentiments on the regional stockmarkets, the FBM KLCI ended marginally down on the back of mild profit-taking activities in bankingheavyweights. The lower liners, however, bucked the general negative tone to close on a stronger footing, while the broader market finished mostly lower.

Market breadth continued to thin as losers outweigh gainers on a ratio of 432- to-332 stocks. Traded volumes fell 10.2% to 1.31 bln shares, ahead of the U.S. Presidential Election and the FOMC meeting.

Banking-heavyweights which dominated the decliners’ list on Tuesday include Hong Leong Bank (-8.0 sen), AmBank (- 6.0 sen) and CIMB (-5.0 sen), followed by Astro Malaysia and Genting Malaysia, which was lower by 6.0 sen each. BAT, meanwhile, fell 90.0 sen. The big losers on the broader market were Panasonic Manufacturing (-50.0 sen), Genting Plantations (-40.0 sen), PPB Group (-24.0 sen) and Calsberg (-22.0 sen).

Significant broader market gainers included Dutch Lady (+30.0 sen) Malaysia Packaging (+30.0 sen), KESM Industries (+22.0 sen), George Kent (+17.0 sen), and Prestariang (+14.0 sen). Meanwhile, the Main Board winners were Axiata (+15.0 sen), Public Bank (+14.0 sen), Tenaga (+6.0 sen), Genting Malaysia (+4.0 sen) and Hong Leong Financial Group (+2.0 sen).

Key regional benchmark indices held steady after better-than-expected manufacturing data from China, as well as the Bank of Japan’s decision to leave its monetary policies largely unchanged. Japan’s Nikkei finished up 0.1% on a weaker Yen against the Greenback, while the Shanghai Composite Index rose 0.7%. The Hang Seng Index also advanced 0.9% - closing slightly above the 23,140.0 level after lingering in the positive territory for the entire session. ASEAN equities, meanwhile, finished mixed.

U.S. benchmark indices declined to its lowest level since July amid the start of the Federal Reserve’s two-day meeting as well as anxieties on the outcome of the U.S. Presidential election. The Dow lost 0.6% after eight out-of-nine sectors were splashed in red, while the S&P 500 and the Nasdaq slipped 0.7% each.

European equities slumped for the sevenstraight session on cautious sentiments ahead of the upcoming election for the U.S. Presidential, offset the upbeat factory data from China and higher-thanexpected earnings from energy giants like Royal Dutch Shell. The FTSE declined 0.5%, while the CAC and the DAX fell 0.9% and 1.3% respectively.

THE DAY AHEAD

There remains no change to our intermediate market view with the FBM KLCI poised for further sideway trend over the near term as market players await for the outcome of the FOMC meeting to decide on the interest rate direction. Although a hike is not expected in the upcoming meeting, market players will gauge the Federal Reserve’s statement to assess the possibility of a rate hike in the December meeting. Markets could also stay sideways for longer ahead of the U.S. Presidential elections next week.

Consequently, we expect the thin trades to prevail on Bursa Malaysia as most investors are likely to stay on the sidelines until there is a clearer market direction. The key index could linger over the near term within the 1,660 and 1,670 levels with a mild downside bias following the overnight weakness on overseas indices.

The lower liners and broader market shares are also expected to see reduced following as retail players remain wary over the market’s direction.

COMPANY UPDATE

Mitrajaya Holdings Bhd’s wholly owned subsidiary, Pembinaan Mitrajaya Sdn Bhd has accepted an award for superstructure works for Tower 3 at a mixed office block development at PJ Sentral, Petaling Jaya from from MRCB Builders Sdn Bhd. The RM74.3mln contract will commence on 9th December 2016 for duration of 14 months and is expected to be completed by 9th February 2018. (The Edge Daily)

Comments

The abovementioned project brings its construction orderbook replenishment to RM577.0 mln YTD, accounting to 82.4% our targeted orderbook replenishment rate of RM700.0 mln. Similar with previous construction projects, we estimate that the project could command a pretax margin of about 11%-12%. Mitrajaya’s outstanding orderbook stands at approximately RM1.25 bln (implying an orderbook cover ratio of 1.6x of 2015 construction revenue), will provide earnings visibility over the next two years.

With the contract falling within our targeted orderbook replenishment rate, we leave our earnings forecast unchanged and we reiterate our BUY recommendation on Mitrajaya with an unchanged target price of RM1.65. The target price is arrived by ascribing a target PER of 11.0x to its 2017 (fully diluted) construction EPS of 10.9 sen, while the value of its property development units, both local and overseas, are valued at 0.8x their respective book values.

COMPANY BRIEFS

The Road Transport Department (JPJ) has appointed HeiTech Padu Bhd as the provider of maintenance services for its online transaction system, mySikap for a contract value of RM79.8 mln over a two year period. The contract is for the period from November 2016 to December 2018, while any further renewal or extension would be at the Government’s discretion.

Transactions handled by mySikap include vehicle registrations, licence and road tax renewals, change of vehicle ownership and summons payments. Half of HeiTech Padu’s revenue came from the public sector, with the JPJ mainframe upgrade project being one of the main contributors. (The Star Online)

George Kent (M) Bhd has received a letter of award (LOA) from the Public Works Department (JKR) to design and build a 150-bed Hospital in Tanjung Karang, Selangor for RM277.2 mln. The hospital will be constructed on a 6.9 ha. site facing the main trunk road between Tanjung Karang and Kuala Selangor. It will take 48 months to build and is scheduled for completion by November 2020. (Bernama)

Sapura Resources Bhd's indirect wholly owned subsidiary, AeroManager Sdn Bhd has been granted the Air Operator Certificate (AOC) licence by the Department of Civil Aviation Malaysia (DCA) and the Air Service Permit by the Malaysian Aviation Commission (MAVCOM), effective 1st November 2016. This enables AeroManager to perform unscheduled commercial air transport services. (The Edge Daily)

DiGi.Com Bhd's wholly-owned subsidiary, Digi Telecommunications Sdn Bhd has accepted the offer in respect to the spectrum assignments for 2x5MHz of 900MHz and 2x20MHz of 1,800MHz spectrum bands for a period of 15 years, effective 1st July 2017.

The payment for the one-time fee component totaling about RM598.6 mln was made within the deadline set by the Malaysian Communications and Multimedia Commission on 1st November 2016. DiGi has decided to fund the one-time fee component mainly through its existing borrowing facilities and to maintain healthy net debt-to EBITDA ratio of below 1.0x. (The Edge Daily)

Tan Sri Lim Siew Choon, the Executive Chairman of Malton Bhd, has surfaced as the single largest shareholder of WCT Holdings Bhd after acquiring a 19.7% stake from the private vehicle of WCT Holdings' co-founder and Managing Director, Peter Taing Kim Hwa.

The shares changed hands in several blocks at RM2.50 per piece, represents a 75 sen, or 42.9% premium to its closing price of RM1.75 on 1st November 2016. Following the stake sale, Taing, who is one of the four co-founders of WCT Holdings, has ceased to be substantial shareholders of the construction outfit and property developer. (The Edge Daily)

Sarawak Oil Palms Bhd (SOP) has fixed the issue price for its two-for-seven renounceable rights issue at RM2.80 per share, which could raise up to RM357.8 mln for the company. The issue price represents a discount of 20.5%, or 72 sen to the theoretical ex-rights price of SOP shares of RM3.52, based on the five-day volume weighted average price (VWAP) of SOP shares up to 31st October 2016 of RM3.73 per share.

The renounceable rights issue is to part finance its acquisition of Shin Yang Oil Palm (Sarawak) Sdn Bhd for RM873.0 mln. (The Edge Daily)

Cycle & Carriage Bintang Bhd's 3Q2016 net profit fell 38.4% Y.o.Y to RM8.3 mln, due to change in sales mix in favour of lower-priced vehicles. Revenue for the quarter declined 16.8% Y.o.Y to RM380.3 mln.

For 9M2016, its cumulative net profit decreased 10.7% Y.o.Y to RM37.5 mln. Revenue the period slipped 5.9% Y.o.Y to RM1.12 bln. (The Edge Daily)

Japan-based Taisei Lamick Co Ltd raised its takeover offer price for Malaysia Packaging Industry Bhd (Maypak) to RM1,00 from 65 sen a share. The revised offer letter would remain open for acceptance until 5.00pm on 15th November 2016. As a result of the increased offer, Maypak’s shares hit limit up, rising as much as 30 sen or 46.3% yesterday. (The Edge Daily)

ManagePay Systems Bhd has aborted its plan to acquire a 51.0% stake in SignCharge Sdn Bhd for RM1.0 mln, thus forfeiting its option to purchase 10.0% of SignCharge China. ManagePay has entered into a mutual termination agreement with SignCharge's vendors, namely See Che Chi and Beijing SignCharge Technologies Co Ltd, wherein the parties have agreed to mutually terminate the sale and purchase agreement dated 16th May 2014.

The mutual termination is mainly due to See’s inability to fulfill the conditions precedent of the agreement. As settlement for the mutual termination, See has paid ManagePay RM0.5 mln. (The Edge Daily)

Source: M+ Online Research - 2 Nov 2016