M+ Online Research Articles

Mplus Market Pulse - 29 Nov 2016

MalaccaSecurities
Publish date: Tue, 29 Nov 2016, 10:27 AM
An official blog in I3investor to publish research reports provided by Malacca Securities research team.

All materials published here are prepared by Malacca Securities. For latest offers on Malacca Securities trading products and news, please refer to: https://www.mplusonline.com.my

Malacca Securities Sdn Bhd

Hotline: 1300 22 1233 / 06-336 5178 (office hours: 8.30am - 5.30pm)
Tel : +606 - 337 1533 (General)
Fax : +606 - 337 1577
Email: support@mplusonline.com.my
  • Despite opening in the negative territory, the FBM KLCI (+0.1%) settled in the green zone at Monday’s close, backed by bargain-hunting activities among the plantations heavyweights as they continue to benefit from stronger palm oil prices. The lower liners, however, tanked – led by the losses in the FBM Small Cap index (-1.1%) amid an equally negative broader market.
  • Market breadth was subdued as underperformers overshadowed the advancers on a ratio of 594-to-224 stocks. However, traded volumes expanded 3.4% to 1.32 bln shares amid the sustained selling-pressure among the lower liners.
  • Main Board movers were Maxis (+19.0 sen) and Genting (+9.0 sen), followed by plantation-linked counters like PPB Group (+18.0 sen), Genting Malaysia (+10.0 sen) and Hap Seng (+6.0 sen), intandem with the stronger crude palm oil prices. Kim Hin (+28.0 sen) Scientex (+12.0 sen), The Store (+12.0 sen), MKH Bhd (+10.0 sen) and JHM Consolidation (+9.0 sen) were amongst the broader market constituents that rallied.
  • On the other side, Aeon Credit Service (- 40.0 sen), DKSH Holdings (-21.0 sen), Lafarge Malaysia (-21.0 sen), and Petron Malaysia Refining & Marketing (-17.0 sen) were splashed in red. Padini fell 16.0 sen after its 1QFY17 net profit shed 10.1% Y.o.Y to RM28.6 mln. Meanwhile, key index underperformers were BAT (- 38.0), Kuala Lumpur Kepong (-12.0 sen), Petronas Dagangan (-12.0 sen), MISC Bhd (-7.0 sen) and Tenaga (-6.0 sen).
  • Key regional indices ended broadly higher, with the exception of Japanese equities. The Nikkei fell 0.1%, breaking a six-day winning streak on the back of profit taking activities. The Hang Seng Index finished higher by 0.5%, ahead of the official launch of the stock trading link between the Hong Kong and Shenzhen exchanges, while the Shanghai Composite Index also rose 0.5%, largely buoyed by gains in the industrials and telecommunication services sectors. Most of the ASEAN stockmarkets rallied at Monday’s close.
  • U.S. equities finished on soft footing overnight on renewed doubts of a successful OPEC output cut. The Dow eased 0.3% to just close just above the 19,000.0 psychological level, dragged down by losses in the healthcare and energy sector. Meanwhile, the S&P 500 (- 0.5%) declined and the Nasdaq (-0.6%) traded lower, despite paring off earlier losses in the eleventh hour.
  • European equities declined amid fresh political uncertainties in Italy that nullified a rally in crude oil prices after Iran signalled its willingness to cooperate with the OPEC members to tackle the crude oil rout. The FTSE fell 0.6% - led by the contraction in Next (-2.7%) and Royal Bank of Scotland (-2.6%), while the CAC and the DAX dipped 0.9% and 1.1% respectively.

The Day Ahead

  • The 1,630 level has proven to a stubborn resistance the past few times the level was tested and we expect it to remain steadfast in view continuing uncertain direction of the Ringgit and the heightened possibility of an interest rate hike in the U.S. that could continue to draw funds from emerging equity markets.
  • Therefore, we think the broadly negative environment on Bursa Malaysia will sustain over the near term with most market players adopting a risk-off approach in view of the lack of positive catalysts, particularly on the lower liners and broader market shares. We also think bouts of quick profit taking activities could dampen the key index constituent’s near term upsides.
  • This means that the key index will continue to linger within the 1,620 and 1,630 levels over the near term.

COMPANY UPDATES

  • AWC Bhd’s 1QFY17 net profit jumped more than four-fold to RM5.4 mln, from RM1.3 mln in the previous corresponding quarter – mainly due to the renewal of the integrated facilities management (IFM) concession contract from the government, the commencement of several projects and the consolidation of results from the recently acquired plumbing and rainwater harvesting business. Revenue also rose 77.5% Y.o.Y to RM67.1 mln vs. RM37.8 mln in 1QFY16.
     
  • AWC’s reported earnings came within our expectations as it accounts to 25.6% of our full-year estimated net profit of RM21.2 mln, while the reported revenue amounts to 23.7% of our estimated FY17 revenue of RM283.1 mln.

Comments

  • The group will continue to capitalise on the existing 10-year IFM and Critical Asset Refurbishment Program (CARP) contracts worth RM695.0 mln. We also expect the earnings from the new contracts secured by its environment and plumbing segment to materialise in the coming quarters. In addition, we think that the near completion of the Xiamen University and Capital 21 contracts, which was previously delayed, will free up AWC’s resources and providing the group ample capacity to undertake new projects, moving forward.
  • As the results came in within our estimates, we reiterate our BUY recommendation on AWC with a higher target price of RM1.10 (from RM1.05). We revised our earnings estimates on the basis of stronger earnings contribution from the recognition of new contracts secured and higher margins from the waste management as well as plumbing contracts.
  • Our target price is derived from ascribing an unchanged target PER of 13.0x to its revised FY17 EPS of 8.5 sen, which we think is justified due to its strong earnings growth potential – as reflected in its low PEG of 0.4x for FY17.
  • Engtex Group Bhd’s 3Q2016 net profit rose 3.3% Y.o.Y, to RM11.5 mln, on the back of the higher average selling prices (ASP) of certain manufactured steel products and metal-related trading products, which offsets the softening market demand that saw revenue declining 4.2% Y.o.Y to RM251.7 mln.
  • For 9M2016, cumulative net profit added 19.2% Y.o.Y to RM46.9 mln. Revenue for the period, however, decreased 6.7% Y.o.Y to RM810.3 mln. Both the reported earnings and revenue came in below our estimates as its net profit only amounted to 62.9% of our previous full year net profit forecast of RM74.8 mln, while its revenue amounted to 68.4% of our total revenue forecast of RM1.18 bln for 2016.

Comments

  • As the reported earnings came below our estimates, we trimmed our earnings forecast by 18.7% and 20.4% to RM60.8 mln and RM72.9 mln for 2016 and 2017 respectively to reflect the weaker margins due to normalisation of average selling prices (ASP) after the rally in steel prices faded. Consequently, we downgrade our recommendation on Engtex to a HOLD with a lower target price at RM1.30 (from RM1.50).
  • Our target price is derived from ascribing an unchanged target PER of 6.0x to our revised 2017 forecast earnings of its manufacturing and wholesale and distribution businesses, in line with its historical PER. Its property development segment’s valuation, meanwhile, remains unchanged at 0.6x its BV, based on its relatively small-scale property development projects.
  • Mitrajaya Holdings Bhd’s 3Q2016 net profit gained 4.2% Y.o.Y to RM26.9 mln, mainly due to the improvements in both the construction and domestic property development segments, coupled with the lower depreciation charges that offset the weakness in the South African property segment. Revenue for the quarter added 11.9% Y.o.Y to RM251.4 mln. For 9M2016, cumulative net profit rose 20.3% Y.o.Y to RM75.0 mln. Revenue for the period increased 12.6% Y.o.Y to RM692.5 mln.
  • The reported earnings came in slightly above expectations as it accounts to 78.0% of our full year estimated net profit of RM95.9 mln. The reported revenue, however, came below our forecast, accounting to 71.2% of our full year estimated revenue of RM972.5 mln.

Comments

  • We raised our net profit forecast by 8.0% and 2.4% to RM103.6 mln and RM108.8 mln for 2016 and 2017 respectively after adjusting for a lower effective tax rate at 25.0% (from 27.0%). Consequently, we maintain our BUY recommendation on Mitrajaya with a higher target price of RM1.90 (from RM1.85). 
     
  • Our target price is derived from ascribing an unchanged target PER of 11.0x to its 2017 (fully diluted) construction earnings, while the value of its property development units, both local and overseas, are valued at 0.8x their respective book values. At the target price of RM1.90, Mitrajaya will be trading at prospective PERs of 12.3x and 11.7x in 2016 and 2017 respectively, which is close to the construction industry average of 11.0x-13.0x.
     
  • Barakah Offshore Petroluem Bhd’s 3Q2016 net profit stood at RM2.0 mln vs. a net loss RM15.4 mln, owing to the higher contribution from the installation and construction services segment, coupled with the cost rationalisation exercise and procurement optimisation. Revenue for the quarter rose 50.8% Y.o.Y to RM167.2 mln.
  • For 9M2016, cumulative net profit jumped 142.1% Y.o.Y to RM10.5 mln. Revenue for the period, however, slipped 4.3% Y.o.Y to RM407.5 mln. Both the reported earnings and reported revenue came below our expectations, accounting to only 39.6% and 65.0% of our previous full year estimated net profit and revenue of RM26.5 mln and RM626.9 mln respectively.

Comments

  • With the reported earnings coming below our estimates, we trimmed our earnings forecast by 5.6% and 10.8% to RM25.0 mln and RM35.6 mln for 2016 and 2017 respectively to reflect the delay in work billings and slower work flow. Nevertheless, we maintain our HOLD recommendation with a lower target price of RM0.66 (from RM0.68) as the company is well supported by its unbilled orderbook of RM1.23 bln (with earnings visibility up until 2017-2018).
  • Our target price is arrived by ascribing an unchanged PER of 15.5x to our fully diluted revised 2017 EPS estimate of 4.3 sen. We think that earnings should recover over the foreseeable future, premised to a slew of recently secured contracts that will be recognised progressively over the coming months.
  • Coastal Contracts Bhd’s 1QFY17 net profit plunged 86.9% Y.o.Y to RM3.1 mln, mainly due to a substantial decline in vessel deliveries (only one vessel was delivered during the quarter vs. 10 units in 4QFY16), higher financing cost and an increase in effective tax rate. Revenue for the quarter tumbled 91.3% Y.o.Y to RM76.2 mln.
  • Both the reported earnings came below our estimates, accounting to just 1.9% and 3.8% of our previous full year FY17 net profit and revenue of RM167.1 mln and RM2.01 bln respectively.

Comments

  • With the reported earnings coming below our forecast, we slashed our earnings estimates by 74.1% and 33.0% to RM43.4 mln and RM69.3 mln for FY17 and FY18 respectively, to reflect the poor sentiment in the OSV industry. We downgrade Coastal to SELL recommendation with a target price of RM1.05 (from RM1.65)
  • Our target price is arrived by ascribing a target PER of 8.0x to our revised FY18 EPS estimate of 13.0 sen per share. At the target price of RM1.05, Coastal will be trading at PERs of 12.9x and 8.1x of FY17 and FY18 respectively, which is close to its closest peer - Nam Cheong Holdings Ltd.

Company Briefs

  • Multi-Usage Holdings Bhd’s (MUH) board has decided to suspend two directors, Gerald Mak Mun Keong and Tan Chew Hua for two months as part of an investigation.
  • In May 2016, MUH had lodged a police report against Tan for possible breaches of the penal code in respect of the purchase of properties from MUH’s unit, TF Land Sdn Bhd. Subsequently, in October, Deloitte, the company’s external auditors, expressed a qualified opinion in its report in respect of the findings of a special audit conducted in response to complaints filed against certain directors of the MUH group. (The Star Online)
  • TH Plantations Bhd's 3Q2016 net profit jumped 209.7% Y.o.Y to RM19.2 mln on higher crude palm oil (CPO) and palm kernel (PK) prices that offset the effects of lower production and yields, which continue to suffer from the lagged effect of the El Nino weather. Revenue for the quarter increased 27.5% Y.o.Y to RM170.3 mln.
  • For 9M2016, cumulative net profit rose 9.5% Y.o.Y to RM19.6 mln. Revenue for the quarter added 20.3% Y.o.Y to RM392.2 mln. (The Star Online)
  • Manulife Holdings Bhd's 3Q2016 net profit fell 20.8% Y.o.Y to RM12.6 mln, dragged down by the low interest environment, worsening claims experience, higher medical costs and channel distribution expansion costs. Revenue for the quarter, however, gained 39.2% Y.o.Y to RM266.3 mln.
  • For 9M2016, cumulative net profit declined 35.3% Y.o.Y to RM18.3 mln. Revenue for the period, however, rose 34.9% Y.o.Y to RM810.1 mln. (The Edge Daily)
  • Tan Chong Motor Holdings Bhd’s 3Q2016 net loss stood at RM4.5 mln vs. a net profit of RM29.2 mln reported in the previous corresponding quarter, mainly impacted by foreign exchange rates and the weaker Ringgit. Revenue for the quarter, however, grew 2.2% Y.o.Y to RM1.40 bln.
  • For 9M2016, cumulative net loss stood at RM56.3 mln as oppose to a net profit of RM69.7 mln recorded in the previous corresponding period. Revenue for the quarter, however, rose marginally by 0.7% Y.o.Y to RM4.24 bln. (The Edge Daily)
  • UMW Oil & Gas Corp Bhd’s (UMWOG) 3Q2016 net loss stood at RM135.4 mln vs. a net profit of RM0.2 mln in the previous corresponding quarter due to the idling of most of its assets under the drilling services segment. Revenue for the quarter fell 76.7% Y.o.Y to RM49.7 mln.
  • For 9M2016, cumulative net loss stood at RM267.8 mln vs. a net profit of RM36.8 mln in the previous corresponding period. Revenue for the period fell 62.3% Y.o.Y to RM267.3 mln. (The Edge Daily)
  • Scomi Group Bhd’s 2QFY17 net loss stood at RM21.2 mln vs. a net profit of RM5.0 mln in the previous corresponding quarter due to lower contributions from its oilfield services, transportation solutions and marine services segments. Revenue for the quarter fell 47.9% Y.o.Y to RM176.1 mln.
  • For 1H2017, cumulative net loss stood at RM33.4 mln, as oppose to a net profit of RM14.7 mln in the previous corresponding period, Revenue for the period declined 42.4% Y.o.Y to RM413.6 mln. (The Edge Daily)
  • MCT Bhd's 1QFY17 net profit increased 3.8% Y.o.Y to RM16.1 mln on a lower effective tax rate. Revenue for the quarter, however, fell 16.3% Y.o.Y to RM155.3 mln. (The Edge Daily)
     
  • TRC Synergy Bhd has received a notice of termination from MMC Gamuda KVMRT (PDP SSP) Sdn Bhd for works related to the new Sg Buloh-Serdang-Putrajaya Mass Rapid Transit Line (MRT Line 2). The RM74.4 mln contract included works to relocate a craft museum, Karyaneka office and the National Heritage Department office to Bangunan Sultan Abdul Samad as part of the MRT Line 2 project.
  • TRC has initiated the negotiation and discussion with the owner's project delivery partner on the consequences of the termination and to ascertain the final quantum of compensation payable to TRC pursuant to the contract documents.
  • Separately, TRC’s 3Q2016 net profit gained 78.0% Y.o.Y to RM15.2 mln, boosted by higher margins. Revenue for the quarter, however, decreased 20.0% Y.o.Y to RM165.1 mln.
  • For 9M2016, cumulative net profit declined 3.5% Y.o.Y to RM20.7 mln. Revenue for the period fell marginally, by 0.8% Y.o.Y to RM547.5 mln. (The Edge Daily)  

Source: Mplus Research - 29 Nov 2016

Related Stocks
Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment