• Following the unexpected U.S. election outcome where Donald Trump emerged as the winner, the FBM KLCI (-1.0%) took a beating yesterday to erase all of its previous two session gains, in tandem with the weakness in key regional indices. The lower liners – the FBM Small Cap (-1.5%), FBM Fledgling (-1.7%) and FBM ACE (-0.9%) all tanked, while the broader market were splashed in red as a Trump presidency was seen as nationalistic and protectionist.

• Expectedly, market breadth was negative as losers overwhelmed gainers on a ratio of 5-to-1 stocks. Traded volumes, however, jumped 100.9% to 2.51 bln shares as investors trim their holdings amid the downbeat equities market.

• On the FBM KLCI, 26 of the 30 key components traded lower, dragged down by BAT (-44.0 sen), followed by KLK (- 26.0 sen), Genting (-21.0 sen), Axiata (- 14.0 sen) and Public Bank (-12.0 sen). Amongst the biggest losers on the broader market were Ducth Lady (-60.0 sen), TAHPS Group (-35.0 sen), Aeon Credit (-34.0 sen), Chin Teck Plantations (-30.0 sen), Dutch Lady (-30.0 sen) and United Plantations (-28.0 sen).

• In contrast, Far East Holdings (+24.0 sen), Ekovest (+10.0 sen), Hong Leong Industries (+5.0 sen), Muhibbah (+5.0 sen) and Tong Herr Resources (+5.0 sen) were among the notable gainers on the broader market. Meanwhile, Petronas Dagangan (+4.0 sen) and Hap Seng (+2.0 sen) were the only two advancers on the big board.

• Asia benchmark indices slumped as the Nikkei tanked 5.4% after the Trump presidency brings uncertainties in the U.S’ trade policies, immigration and potentially heightening geopolitical tensions. The Hang Seng Index fell 2.2%, while the Shanghai Composite slipped 0.6% after the inflation rate data (+2.1% Y.o.Y) in October came in line with economists’ expectations to help cushion the selldown. ASEAN stockmarkets, meanwhile, ended in the negative territory.

• U.S. stockmarkets rose for the third straight session, bucking the trend in Asia, as markets view Donald Trump’s victory as a potential catalyst for lower corporate and personal income taxes in due course. The Dow jumped 1.4%, while the S&P 500 climbed 1.1%, buoyed by gains in healthcare and financial stocks amid the lighter regulatory burden coupled with business-friendly policies that could be implemented by Presidentelect Trump.

• European stockmarkets reversed all the intraday losses - the FTSE (+1.0%), CAC (+1.5%) and DAX (+1.6%) all rallied after investors welcome Donald Trump presidency victory speech, which could bolster economic growth and corporate earnings by expanding fiscal policies and reducing taxes.

The Day Ahead

• After yesterday’s knee-jerk reaction to Donald Trump’s ascension to the Presidency, coupled with the generally positive reaction to his victory, we expect stocks on Bursa Malaysia to also stage a relieve rally over the near term as yesterday’s selldown is seen as overdone. This could see the key index jumping back above the 1,650 level and move closer to the 1,660 level again.

• Although we think there is a relieve rally is store, the general market environment is likely to remain tentative after yesterday’s steep losses and many market players are still wary with a high degree of uncertainties over the Trump presidency, particularly on his international trade policies after his less-than-sanguine rhetoric during his campaign.

• We also think the lower liners and broader market shares could endure a mixed trading environment amid the sustained cautiousness among retail players.

Company Update

• Protasco Bhd will be launching affordable homes at its De Centrum City township in Kajang by 2Q2017 as the group capitalises on the strong demand for affordable homes amid the subdued Malaysian property market. The gross development value (GDV) of the project is estimated at RM600.0 mln.

• The group is aiming to launch the affordable housing portion in two phases, with each phase valued at RM300.0 mln, on an 8.0 ac. piece of land within the De Centrum township.

Comments

• We think that the aforementioned move bodes well for Protasco to mitigate the sluggish demand for mid-high end properties which saw the pre-launch of Rimbawan project rake-in a take-up rate of 30%. The current demand for properties is skewed towards affordable housing schemes, on the back of rising household debt.

• Given that the project development is part of De Centrum project that will span over the next 10 years until 2026, we made no changes to our earnings forecast and we maintain our BUY recommendation on Protasco with an unchanged target price RM2.10.

• Our target price is derived from ascribin 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

• WCT Holdings Bhd has clinched an RM896.41 mln contract for the construction of the MRT Sungai BulohSerdang-Putrajaya Line 2 (MRT2) from Mass Rapid Transit Corp Sdn Bhd (MRT Corp). The contract, named V204, involves the construction of a viaduct guideway and other associated works from Bandar Malaysia's south portal to Kampung Muhibbah in Kuala Lumpur. (The Star Online)

• IOI Properties Group Bhd is tendering for a 1.09 ha. Tract of land in Singapore's Central Boulevard worth U$2.57 bln (RM7.7 bln). The bid was submitted to the Urban Redevelopment Authority, which is acting as agent on behalf of the Singapore Government. (The Edge Daily)

• RHB Bank Bhd has introduced a Mobile Merchant Point of Sale (MPOS) wireless device that will allow small and medium enterprises (SMEs) fast, simple and seamless connectivity to the e-retail ecosystem.

• The company is the first financial institution in Malaysia to offer a total connectivity solution for SMEs which will result in cost reduction and greater efficiency businesses. (The Edge Daily)

• SP Setia Bhd has secured a tender to purchase a 1,675-ac. piece of land at Seberang Perai Utara, Penang worth RM620.0 mln. The land will be turned into an eco-themed mixed development township that has a potential gross development value of RM9.6 bln, spanning over 15 to 20 years.

• The development is SP Setia's maiden entry into mainland Penang and is located within the Butterworth-Sungai Petani growth corridor, with good accessibility from North-South Highway via the Bertam interchange. The land is about 18 km from Butterworth and 32km from Penang Bridge. (The Star Online)

• StemLife Bhd's 1QFY17 net profit fell 26.8% Y.o.Y to RM1.0 mln, from RM1.4 mln a year ago as the previous corresponding period’s earnings including extraordinary gains from the reversal of over-provision in prior year's tax and settlement of a legal suit, despite a 24.9% Y.o.Y gain in revenue from RM4.8 mln in 1QFY16, to RM5.9 mln. (The Edge Daily)

• Perisai Petroleum Teknologi Bhd have received two lawsuits for a total of U$278,114 (about RM1.2 mln) have been filed against its 51.0%-owned subsidiary, SJR Marine (L) Ltd by its joint-venture (JV) partner, Emas Offshore (M) Sdn Bhd, who owns the remaining 49% stake in SJR Marine.

• Emas Offshore is seeking U$131,189 for project management services that the former had allegedly provided to SJR Marine.

• In the second suit, Emas Offshore claims it is owed some U$146,925 for charterparty agreements between the company and SJR Marine.

• According to earlier reports, SJR Marine had, in October, defaulted on its financing facility of U$20.5 mln owed to OCBC Al-Amin Bank Bhd.
• Further, Perisai and Emas Offshore had received an indicative offer of financing from a financial institution on 30th September, 2016 whereby up to US$20.0 mln was earmarked for its PN17 note repayment. (The Edge Daily)

• Boustead Heavy Industries Corp Bhd’s (BHIC) 3Q2016 net profit almost quadrupled to RM14.9 mln against RM3.9 mln last year, amid the group's ongoing transformation initiative to tighten operational efficiencies, coupled with a strong focus on its core businesses and competencies. Quarterly revenue also grew 11.1% Y.o.Y to RM64.3 mln, from RM57.9 mln in 3Q2015.

• The group’s cumulative 9M2016 net profit, however, declined marginally by 2.0% Y.o.Y to RM21.1 mln compared with RM21.5 mln in the previous corresponding year, while revenue was flattish at RM197.1 mln, from RM196.4 mln a year earlier. The weaker bottom line was mainly due to higher share of losses from its associate companies. (The Star Online)  

Source: Mplus Research - 10 Nov 2016