• The FBM KLCI (+0.7%) climbed higher for the third straight session, taking cue from the rally in Wall Street overnight as the key index lingered in the positive territory for the entire trading session. The lower liners – the FBM Small Cap (+0.2%), FBM Fledgling (+0.1%) and FBM ACE (+0.8%) all rebounded, while the broader market ended in the positive.

• Market breadth turned positive as gainers outnumbered losers on a ratio of 390-to- 313 stocks. Traded volumes added 4.9% to 1.09 bln shares and bargain hunting and window dressing activities kicked-in.

• More than two-thirds the key index constituents advanced, led by BAT (+72.0 sen), followed by Hong Leong Financial Group (+40.0 sen), AmBank (+27.0 sen) and Petronas Dagangan (+26.0 sen). Astro added 13.0 sen after reporting a strong set of quarterly earnings. Notable gainers on the broader market were Aeon Credit (+60.0 sen), Carlsberg (+22.0 sen), UMW (+19.0 sen), NPC Resources (+17.0 sen) and DKSH (+16.0 sen).

• Meanwhile, amongst the biggest decliners on the broader market were consumer products stocks like Panasonic (-20.0 sen), Ajinomoto (-18.0 sen) and Dutch Lady (-12.0 sen). Aturmaju slipped 14.0 sen, while Tasek Plantation declined 12.0 sen. There were on three decliners on the key index – Petronas Gas (-22.0 sen), Public Bank (-2.0 sen) and Maxis (- 2.0 sen).

• Japanese stockmarkets extended their gains as the Nikkei (+1.5%) rose for the third consecutive session, buoyed by the gains on Wall Street overnight. The Hang Seng Index added 0.3% on gains in financial shares, but the Shanghai Composite Index (-0.2%) slipped into the negative territory in the final trading hour. ASEAN stockmarkets, meanwhile, ended mostly higher.

• Wall Street edged higher as the Dow (+0.3%) advanced for the fourth straight session as the month-long rally postelection rolled on. On the broader market, the S&P 500 added 0.7% led by gains in the financial sector (+0.7%), while the Nasdaq closed 0.4% higher.

• Earlier, European benchmark indices chalked in their fourth straight session of gains – the FTSE (+0.4%), CAC (+0.9%) and DAX (+1.8%) all closed in the positive note. Market sentiment was boosted by the European Central Bank’s move to extend its bond buying program through December 2017 (initially untill March 2017) with purchases of €60.0 bln a month.

The Day Ahead

• The rally on most global stock indices has also helped stocks on Bursa Malaysia to stage a commendable rebound after its recent weakness – allowing for the key index to string together a streak of three consecutive days of gains and to haul itself from the 1,620 support level. At the same time, the foreign selling has also dissipated, thereby allowing for the window dressing activities to materialise.

• With the market undertone turning more positive, we expect the Malaysia stockmarket’s recovery to extend and the window dressing activities to continue ahead of the long weekend. After yesterday’s gains, however, we think the ascent will be slower as quick profit taking activities could limit the gains to around the 1,650 level.

• Meanwhile, the lower liners and broader market stocks could see still some mild following as most retail players are still staying on the sidelines ahead of next week’s FOMC meeting to decide on the direction of U.S. interest rate.

Company Update

• Mitrajaya Holdings Bhd (MHB) and its wholly-owned subsidiary, Kemajuan Sekim Baru Sdn Bhd are objecting to the government's offer of RM31.5 mln for its land in Kota Tinggi, Johor.

• Mitrajaya will negotiate with the relevant parties to ensure that a fair compensation is received. The government had made a compulsory acquisition offer of its land to develop the Pengerang Integrated Petroleum Complex.

Comments

• We are neutral on offer price of RM31.5 mln for the purchase of 24.2 sq.m. land, given that the surrounding land market value are relatively close to the offer price that the government is offering.

• At this point, there will be no changes to our earnings forecasts as the proposed acquisition from the government is still at the negotiation stage. Hence, we maintain our BUY recommendation with an unchanged target price of RM1.90.

• 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 for 2016 and 2017 respectively, which is close to the construction industry average of 11.0x-13.0x.

COMPANY BRIEFS

• Eco World Development Group Bhd (EcoWorld) posted a 49.0% Y.o.Y jump in its 4QFY16 net profit to RM29.4 mln, from RM19.7 mln a year earlier - led by improved sales contribution and the steady progress of on-site construction works on its 11 ongoing projects. Quarterly revenue also gained 8.7% Y.o.Y to RM741.0 mln, from RM681.9 mln in 4QFY15.

• Meanwhile FY16 net profit almost tripled to RM129.3 mln, from RM44.0 mln previously, alongside stronger revenue at RM2.55 bln vs RM1.71 bln in the preceding year.

• Moving forward, the group plans to achieve some RM4.0 bln of revenue in FY17 from all its Malaysian development projects (including joint-ventures). (The Star Online)

• SapuraKencana Petroleum Bhd's 3QFY17 net profit grew 21.7% Y.o.Y to RM158.1 mln, from RM129.9 mln a year earlier, mainly due to a provision for impairment in 3QFY16. Revenue, however, dropped 23.1% Y.o.Y to RM2.22 bln, from RM2.89 bln in the previous corresponding period.

• Cumulative 9MFY17 net profit decreased 23.0% Y.o.Y to RM380.6 mln, from RM494.6 mln a year ago - dragged down by the weaker sales as revenue plunged 26.5% Y.o.Y to RM5.84 bln, compared to RM7.95 bln in 9MFY16.

• Looking ahead, the group foresees a challenging oil and gas sector on the persisting low levels of capital spending, amid low crude oil prices at about US$50.0 a barrel. (The Star Online)

• AirAsia Bhd has inked a 10-year maintenance, repair and overhaul (MRO) contract worth US$105.0 mln with Air France's unit to service the former’s growing fleet of Airbus A320neo jets.

• The agreement with Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) is the first maintenance contract signed for the new A320neo jets and is expected to boost the working relationship between AirAsia and AFI KLM E&M, which is already servicing the A330s fleet operated by AirAsia X.(The Star Online)

• Poh Kong Holdings Bhd’s 1QFY17 net profit grew five-fold to RM1.8 mln, from RM336,000 previously, mainly contributed by the increase in sales and improvements in margins. Meanwhile, revenue for the quarter rose 7.6% Y.o.Y to RM185.5 mln, from RM172.3 mln in the last corresponding year.

• Moving forward, Poh Kong expects to maintain its growth and leading position in Malaysia, despite challenging and competitive conditions in the domestic jewellery market. (The Edge Daily)

• Malaysia Steel Works (KL) Bhd (Masteel) and its three Executive Directors (ED) have been publicly reprimanded and fined a total of RM130,500 by Bursa Malaysia Securities Bhd for failing to release and announce its audited accounts and annual report as per the required deadline.

• Masteel’s Managing Director, Datuk Seri Tai Hean Leng @ Tek Hean Leng, as well as EDs Lee Kean Binh (who resigned on 30th September, 2015) and Lau Yoke Leong were reprimanded and fined RM43,500 each.

• The group said that its delay in making the announcements was because it failed to resolve audit issues with the external auditors, which could not express their opinion on the annual audited report for FY14 due to the uncertainties in some sales transactions recorded by Masteel. (The Edge Daily)

• Bermaz Auto Bhd saw its 2QFY17 net profit plunged 42.3% Y.o.Y to RM30.6 mln, from RM53.1 mln a year ago, attributed to lower revenue, which was 12.8% Y.o.Y lower at RM473.2 mln, as well as thinner profit margins as the Ringgit continued to slide against the Yen. The group has proposed a second interim dividend of 2.75 sen per share, payable on 25th Januar 2017.

• Further, Bermaz is also planning to list its indirect subsidiary, Bermaz Auto Philippines Inc (BAP) on the main board of the Philippine Stock Exchange by 1H2017 to unlock the value in BAP and provide a transparent benchmark for the Mazda automotive business of Bermaz Auto in the Philippines. (The Edge Daily)

• MQ Technology Bhd has announced the appointment of Robbie Hari Krishnan Tatparanandam as its new Executive Director, effective on 8th December 2016. Robbie currently acts as the executive producer of Astro, where his role was focused on branding and content development.

• He has over 15 years of business development, management and production experience and is also the nephew of tycoon T Ananda Krishnan, the substantial shareholder of Maxis Bhd and Astro Malaysia Holdings Bhd. (The Edge Daily)  

Source: Mplus Research - 9 Dec 2016