• The FBM KLCI (+0.7%) ended firmly in green yesterday, buoyed by the stronger crude oil prices and buying-support in selected heavyweights. The FBM Small Cap (+0.5%), the FBM Fledging (+0.1%) and the FBM Ace (+0.5%) all rallied amid a mostly positive broader market and window dressing activities.

• Market breadth turned positive as gainers overpowered decliners on a ratio of 416- to-287. Traded volumes jumped by 29.2% to 1.4 bln shares – led by the year-end window dressing activities which boosted Malaysian equities.

• BAT (+34.0 sen), Maybank (+20.0 sen), KLCC (+19.0 sen) and Maxis (+19.0 sen) buoyed the key index, while Genting gained 24.0 sen after a major investment bank indicated that the share has limited downside risks and undemanding valuations following its 14.4% share price drop since July. Other chart toppers were Nestle (+RM1.10), Hap Seng Consolidated (+16.0 sen), Time Dotcom (+14.0 sen), AirAsia (+12.0 sen) and Alliance Financial Group (+10.0 sen).

• On the other side of the trade, Dutch Lady (-50.0 sen), Panasonic Manufacturing (- 40.0 sen), Lingkaran Trans Kota Holdings (-14.0 sen), Kluang Rubber (-13.0 sen) and DKSH Holdings (-12.0 sen) were among the main losers. The five decliners on the Main Board include Hong Leong Financial Group (-4.0 sen), IOI Corporation (-4.0 sen), CIMB Bank (-2.0 sen), Tenaga (-2.0 sen) and IHH Healthcare (-1.0 sen).

• Japanese equities closed flat on Wednesday as Toshiba continued to see selling pressure on the back of potential impairment losses of several billion Dollars in relation to a U.S. investment. The Nikkei flatlined at 19,401.7 points (- 0.01%), while the Shanghai Composit Index fell 0.4% - on fears of an acceleration in the Yuan’s devaluation, as well as tightening liquidity in the money market with the onset of restricted cash outflows from the country beginning next year. On the other hand, the Hang Seng Index (+0.8%) climbed on the back of gains in the information technology (+2.2%) and consumer staples (+1.7%) sectors. ASEAN stockmarkets also finished broadly in the green.

• Wall Street finished on a soft footing on Wednesday, weighed down by losses in property and raw materials-related counters. The Dow continued to shy away from the 20,000 psychological mark, closing 0.6% lower at 19,833.7 points. On the broader market, the S&P 500 declined 0.8% with all of its sectors splashed in red, while the Nasdaq lost 0.9% after lingering in the negative territory for the whole session.

• U.K. equities surged on the back of gains in mining stocks as the FTSE (+0.5%) ended at a record high, above the 7,100.0 resistance level – buoyed by Fresnillo (+5.2%) and Randgold Resources (+4.9%). Meanwhile, the CAC (-0.01%) and the DAX (+0.02%) closed flattish.

The Day Ahead

• The FBM KLCI’s window dressing exercise may ease over the next two trading days after the key index hit the 1,630 level yesterday, which is also leaving it at the crossroads. This could also signal that the window dressing activities may be ending and the key index could drift lower as profit taking activities may start to seep into the market over the near term as fresh positive domestic leads are still lacking.

• This also means that there are limited upsides beyond the 1,630 level and a sideway trend between the 1,620 and 1,630 levels may be in the offing as markets players scour for new trading themes for 2017.

• Similarly, the lower liners and shares in the broader market may also revert to a rangebound trend over the near term and this could see a return of the insipid market breadth.

Company Update

• Econpile Holding Bhd and China Communications Construction Company (M) Sdn Bhd (CCCC) have received a Letter of Award from Gabungan Strategik Sdn Bhd to undertake the execution and completion of foundation, substructures and other ancillary works for Projek Penswastaan Lebuhraya Bertingkat Sungai Besi-Ulu Kelang – Package SUKECA3. The RM158.3 mln contract will be operated by EMSB and CCCC via 40:60 joint-venture for approximately 17 months.

Comments

• With the inclusityion of the abovementioned contract, Econpile has secured some RM386.8 mln worth of construction contracts, accounting to 64.5% of our targeted orderbook replenishment rate of RM600.0 mln for FY17. The award of the new projects brings its total unbilled construction orderbook to approximately RM900.0 mln, implying an orderbook-to-cover ratio of 1.9x against FY16 revenue of RM462.1 mln, which will provide earnings visibility over the next 18 months.

• Given that the above contract is within our orderbook replenishment assumption, we made no changes to our earnings estimates and we maintain HOLD recommendation on Econpile with an unchanged target price of RM1.95.

• Our target price is derived from ascribing an unchanged target PER of 13.0x to its FY17 EPS of 15.0 sen, which is in line with its peers with similar market capitalisation.

Company Briefs

• Scientex Bhd is acquiring two parcels of land measuring 121.2 ac. in Kulai, Johor, from Lee Rubber Co (Pte) Ltd for RM123.6 mln where it plans to undertake a mixed property development project.

• The company added it is premature to determine the total gross development value, development cost, the expected starting and completion dates of the development and the expected profits to be derived from the development.

• The land is in close proximity between its existing Senai and Pulai developments and the proposed development would enable the company to tap on the operational efficiencies and generate better margins through economies of scale to be achieved during project implementation. The proposed acquisition, which is subject to the Estate Land Board’s approval, is expected to be completed in 2H2017. (The Star Online)

• Gas Malaysia Bhd announced that an Incentive Based Regulation (IBR) framework will be used to fix the natural gas base tariff for the non-power sector in Peninsular Malaysia, for a three-year period from 1st January 2017.

• Under the framework, the company would allow changes in the gas costs to be passed through via the Gas Cost Pass Through (GCPT) mechanism every six months.

• A unified base rate for natural gas of RM26.71/mmbtu (mln British Thermal Units) will be charged across all categories in 1H2017, before increasing to RM28.05/mmbtu in 2H2017.

• In 2018, the base rate will be increased to RM30.90/mmbtu in 1H2018 and further raised to RM31.92/mmbtu in 2H2018.

• For 2019, the base rate will be raised to RM32.69/mmbtu in 1H2019 and RM32.74/mmbtu in 2H2019. (The Edge Daily)

• APM Automotive Holdings Bhd is penetrating into the Internet of Things (IoT) market via the acquisition of a 52.0% stake in Omnimatics Sdn Bhd for RM625,000. Omnimatics is a tech startup to develop its flagship product, CARdio — an IoT telematics platform that connects cars to the cloud, to make day-to-day driving a better and safer experience through information awareness.

• The emergence of IoT applications embedded in automobiles would lead to an increase in connectivity, productivity and ability to perform diagnostics while on the move. (The Edge Daily)

• Borneo Oil Bhd’s 3QFY17 net profit soared 310.6% Y.o.Y to RM21.6 mln, attributed to revaluation gain of RM35.0 mln in its investment properties. Revenue for the quarter surged 39.7x Y.o.Y to RM950.4 mln.

• For 9MFY17, cumulative net profit surged 322.7% Y.o.Y to RM36.7 mln. Revenue for the period sky-rocketed 38.9x to RM3.49 bln. (The Edge Daily)

• Solid Automotive Bhd's 2QFY17 net profit sank 49.6% Y.o.Y to RM1.4 mln, mainly due to lower gain on foreign exchange and higher inventories written down in the quarter. Revenue for the quarter fell 2.1% Y.o.Y to RM32.5 mln.

• For 1HFY17, cumulative net profit dropped 39.7% Y.o.Y to RM2.5 mln. Revenue for the period, however, rose marginally by 1.0% Y.o.Y to RM62.2 mln. (The Edge Daily)  

Source: Mplus Research - 29 Dec 2016