• Despite paring most of its earlier gains, the FBM KLCI (+0.2%) finished in the positive territory amid window dressing activities in selected plantations giants. The majority of the lower liners also advanced, with the exception of FBM Small Cap (-0.1%), while the broader market closed mostly in the red.

• Market breadth remained negative as losers edged the winners on a ratio of 375-to-333. Traded volumes, however, expanded by 12.3% to 1.1 bln shares amid the mild buying-interest in the lower liners.

• Key Main Board advancers were The Store Corporation (+19.0 sen), Bison (+10.0 sen), KESM Industries (+8.0 sen), Mieco Chipboard (+7.0 sen) and Seacera (+7.0 sen). Meanwhile, plantationsrelated blue chips such as Hap Seng Consolidated (+52.0 sen), PPB Group (+10.0 sen) and Kuala Lumpur Kepong (+8.0 sen) rallied. Other Main Board outperformers were BAT (+56.0 sen) and Petronas Gas (+6.0 sen).

• Hong Leong Financial Group (-8.0 sen), Tenaga (-4.0 sen) and Astro (-3.0 sen), were among the main losers, followed by telco giants like Maxis (-4.0 sen) and Digi (-2.0 sen). Broader market underperformers were Nestle (-94.0 sen), TAHPS Group (-25.0 sen), Box-pak (-23.0 sen), Panasonic Manufacturing (-20.0 sen) and SHL Consolidated (-18.0 sen).

• Key regional benchmark stockmarkets finished mixed despite better-thanexpected industrial data from China. The Nikkei (+0.03%) was flat after Japan’s consumer data fell below analysts’ expectations – reflecting the tenuous state of the country. The Shanghai Composite Index (-0.3%) ended weak on Tuesday’s closing bell after trading mostly in negative domain, while the Hong Kong stockmarkets closed for the public holidays. ASEAN stockmarkets, meanwhile, ended mostly up on Tuesday.

• U.S. equities trimmed earlier gains, albeit closing in green – led by stronger crude oil prices and better-than-expected consumer confidence data. The Dow rose 0.1% on the back of gains in Apple (+0.6%) and Cisco Systems (+0.5%). The S&P 500 (+0.2%) extended its rally for the second-straight day with nine out-ofeleven sectors in the green, while the Nasdaq added 0.5% to close at record high – lifted by gains in technologyrelated counters.

• European shares posted small gains amid thin trading as some of the key stockmarkets remain closed for the holidays. The CAC (+0.2%) closed at 4848.3 points following a volatile intraday session, while the DAX finished up by 0.2% - buoyed by gains in consumer staples and information technology sectors. Trading activities on the FTSE was closed on Tuesday for the Boxing Day holiday.

The Day Ahead

• Although market breadth and depth remained thin, the mild bout of window dressing activities helped the key index to close in the positive yesterday to reverse the negative spell that has undermined the market prior to the Christmas break.

• We think the window dressing activities will continue over the near term as institutional players use the calmer market conditions to pick-up selected stocks ahead of the year-end break. This should see the key index climbing back above the 1,620 level and potentially to target the 1,630 level over the coming days.

• Notwithstanding the sustained window dressing activities, we expect the market’s depth and breadth to remain on the thin side as the lack of catalysts, coupled with most market participants still on the sidelines, will limit the market interest, particularly among the lower liners and broader market shares.

Company Update

• Mitrajaya Holdings Bhd’s wholly-owned subsidiary, Pembinaan Mitrajaya Sdn Bhd has bagged a RM183.4 mln contract from concessionaire West Coast Expressway Sdn Bhd to build Section 2 of the West Coast Expressway (WCE) from the South Klang Valley Expressway interchange to the Shah Alam Expressway interchange. The contract is for duration of 30 months commencing from the date of site possession which would be advised in due course.

Comments

• With the incorporation of the abovementioned project, Mitrajaya’s construction orderbook replenishment amounted to RM919.8 mln YTD, surpassing our targeted orderbook replenishment rate of RM700.0 mln for 2016. 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 RM1.60 bln (implying an orderbook cover ratio of 1.9x of 2015’s construction revenue), will provide earnings visibility over the next two years.

• Despite the inclusion of the contract to its outstanding orderbook, we keep our earnings forecast unchanged as the aforementioned contract was secured at end-2016 and the recognition will only commence in 2017 at the earliest, given that the site possession date has yet to be fixed. We reiterate our BUY recommendation on Mitrajaya 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.

Company Briefs

• Kuantan Flour Mills Bhd (KFM) is proposing an equity fund-raising exercise and a partnership with coal and starch trader, Lotus Essential Sdn Bhd as part of its plan to restructure its debt and reconstruct its business.

• The parties plan to enter into a contract manufacturing and offtake agreement for KFM to provide flour milling services to Lotus and to consider a strategic investment by Lotus in KFM. Both parties would negotiate in good faith on the terms and conditions of a definitive agreement to be entered between them and strive to ink the definitive agreement within six months from the date of the MoU signed on 27th December 2016. (The Star Online)

• Maxis Bhd is taking full control of Advanced Wireless Technologies Sdn Bhd (AWT) by acquiring the remaining 25.0% equity stake in the wireless multimedia related services provider from Astro Malaysia Holdings Bhd’s unit, MBNS Multimedia Technologies Sdn Bhd (MMT) for RM15.8 mln.

• AWT wholly owns UMTS (M) Sdn Bhd (UMTS), the holder of a 2100MHz spectrum assignment from Malaysian Communications and Multimedia Commission for 15 years expiring on 1st April 2018. The transaction was an important step in Maxis’ transformation to streamline its structure with the objective of providing it with greater operational agility and flexibility to respond quickly in a fast evolving telecommunications market.

• Astro, meanwhile, was selling the AWT shares to divest its interest from a business that was not part of the Astro group’s core businesses. Astro will incur an estimated one-off loss on disposal of the AWT shares of about RM12.1 mln, based on the carrying value of investment in AWT of RM27.9 mln as at its last audited financial statements for the financial year ended 31st January 2016. (The Star Online)

• Sedania Innovator Bhd’s wholly-owned subsidiary, IDOTTV Sdn Bhd is partnering with Iscada Net Sdn Bhd (IS.NET) to provide Internet of Things (IoT) solutions to the Fire and Rescue Department of Malaysia (JBPM) for a period of five years, effective 21st December 2016. The agreement will see IDOTTV and IS.NET collaborating to undertake the provision of iSNET Fire Safety Portal (iFSP) under Sistem Pengawasan Kebakaran Automatik (SPKA) for JBPM.

• The number of the devices to be designed, developed, procured and supplied to IS.NET is for a minimum 6,300 designated buildings identified by JBPM for a period of five years, which may increase from time to time when JBPM adds on to the designated building list. IDOTTV will be supplying the iFSP devices to IS.NET at a minimum selling price of RM2,300 per unit, excluding goods and services tax. (The Edge Daily)

• Selangor Properties Bhd’s 4QFY16 net profit plunged 88.1% Y.o.Y to RM57.4 mln, attributed to lower profit from its property investment division, higher losses from its property development segment due to marketing, corporate and administrative costs as well as foreign exchange loss of RM15.8 mln. Revenue for the quarter, however, rose 28.6% Y.o.Y to RM35.4 mln.

• For FY16, cumulative net profit tumbled 88.7% Y.o.Y to RM67.4 mln. Revenue for the year, however, climbed 22.4% Y.o.Y to RM121.8 mln.

• Separately, Selangor Properties has undertaken a revaluation exercise on all its investment properties to comply with the accounting standards under the Malaysian Financial Reporting Standards (MFRS) 140 on Investment Property. There is a revaluation surplus for an aggregate amount of RM20.7 mln following the revaluation exercise which will lead to an increase of six sen in the net asset per share of the group. (The Edge Daily)  

Source: Mplus Research - 28 Dec 2016