• The FBM KLCI (-0.1%) pared its intraday gains yesterday – dragged down by last minute selling-pressure on selected heavyweights as investors looked to the Congress’s decision on Donald Trump’s new healthcare bill. The lower liners, however, advanced – led by the FBM Ace (+3.4%), while the broader market continued to rally with the exception of the trading and services (-0.1%) and the plantations (-0.6%) sectors.

• Market breadth was positive as advancers overtook the losers on a ratio of 596-to-378 stocks. Traded volumes also jumped by 51.0% to 4.78 bln shares amid strong buying-interest in technology counters.

• Key decliners on the FBM KLCI were BAT (-50.0 sen), Petronas Gas (-26.0 sen) Hong Leong Bank (-18.0 sen), Hap Seng Consolidated (-17.0 sen) and Kuala Lumpur Kepong (-12.0 sen). Fraser & Neave (-22.0 sen), Amway (-21.0 sen), Lafarge Malaysia (-20.0 sen), KESM Industries (-12.0 sen) and Lingkaran Trans Kota (-11.0 sen) weighed on the broader market.

• Consumer-products bellwethers like Dutch Lady (+48.0 sen) and Nestle (+26.0 sen) outperformed its peers, followed by Panasonic Manufacturing (+86.0 sen), Rev Asia (+29.5 sen) and Malaysian Pacific Industries (+28.0 sen). Meanwhile, Petronas Dagangan (+24.0 sen), Sime Darby (+24.0 sen), Hong Leong Financial Group (+22.0 sen), Maybank (+6.0 sen) and Petronas Chemicals (+3.0 sen) topped the key-index outperformers list.

• Key regional benchmark indices recovered yesterday, ahead of a key healthcare vote by the U.S. Congress. The Nikkei (+0.2%) climb was led by gains in Toshiba (+13.8%) and Tokai Carbon (+4.2%), while the Shanghai Composite index (+0.1%) clawed back earlier losses to close marginally in green. The Hang Seng (+0.03%) flatlined amid lower-thanexpected corporate earnings. The majority of ASEAN stockmarkets also finished on an upbeat note.

• U.S. stockmarkets edged lower amid rising doubts on the ability of the Trump administration to deliver its proposed regulations reforms after the Republicans delayed the scheduled vote on a healthcare bill. The Dow (-0.02%) closed in marginally in red – weighed down by United Health Group (-1.0%), while the S&P 500 pullback 0.1% to close slightly above the 2,345.0 psychological points. The Nasdaq also took a hit, finishing 0.1% lower overnight.

• European equities climbed on Thursday, as investors digested corporate earnings by retailers. The FTSE rose 0.2% - led by gains in Next (+8.1%) and Marks & Spencer (+3.8%), amid a recovery in the U.K.’s retail sales. The DAX also gained 1.1% ahead of the European Central Bank’s general council meeting, while the CAC was 0.8% higher to 5,032.8 points.

The Day Ahead

• Market conditions are likely to remain generally mixed as the weekend looms with few trading catalysts and we think the key index could turn on a sideway trend for now after their recent strong gains. With the market in a pause mode, the ongoing condolidation is set to continue over the near term, albeit the general market sentiments is still looking firm.

• We see the FBM KLCI lingering within the 1,740 and 1,750 levels for the time being as the market looks to digest its recent gains. We also think the 1,750 level may become a significant hurdle to clear convincingly until there are fresh catalyst.

• While the index heavyweights may take a pause, rotational interest among the lower liners and broader market shares are likely to stay elevated, thereby prolonging the rally among the lower liners.

Company Update

• Mitrajaya Holdings Bhd’s 60%-owned unit, Mitrajaya Equipment Resource Sdn Bhd is acquiring a 0.9-ha plot of leasehold land in Sepang for RM4.2 mln. The acquisition from Visible Profit Sdn Bhd will enlarge its property division's landbank for future developments. (The Edge Daily)

Comments

• We opine that it is a strategic move by Mitrajaya for its land-banking replenishment, given that its single ongoing property development project, Wangsa 9 Residency is slated to be completed by end-2018. The purchase price of the freehold land measuring 0.9- ha for RM4.2 mln translates to approximately RM43.35 psf comes close to the surrounding land market value.

• At this point, there is no changes to our earnings forecasts as the development plan is still at a preliminary stage. We maintain our BUY recommendation on Mitrajaya unchanged target price of RM1.75. 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 (unchanged) their respective book values. COMPANY BRIEFS

• Aeon Credit Service (M) Bhd is seeking to raise RM432.0 mln through a proposed rights issue to improve its capital adequacy ratio and financial flexibility. The proposed rights issue would be undertaken following a proposed 1-for-2 bonus issue at an issue price of 50 sen each.

• The proposed rights issue of the three year Irredeemable Convertible Unsecured Loan Stocks (ICULS) is, however, not conditional on the propsosed bonus issue. It involves issuing 432.0 mln ICULS at 100% of its nominal value of RM1.00 each in cash based on 2 ICULS for each Aeon Credit share held. The coupon rate for the ICULS will be a minimum of 3.5% p.a., payable on an annual basis. The ICULS conversion price will be fixed at a later date.

• Of the expected RM432.0 mln gross proceeds, RM155.0 mln would be set aside to partially repay bank borrowings, which now total RM5.26 bln and RM272.4mil would be for working capital. The proposal is expected to be completed in 3Q2017. (The Star Online)

• Utusan Melayu Malaysia Bhd is teaming up with two Indian companies — Krishna Industrial Corp Ltd, Coimbatore Institute of Technology and a local firm, Primainfo Technologies Sdn Bhd, to venture into the business of information and technology in Malaysia. The MoU is effective for a period of three years. (The Edge Daily)

• PLB Engineering Bhd’s 60%-owned subsidiary, PLB Terang Sdn Bhd has been awarded a contract to develop a large scale solar photovoltaic plant of 20MW in Penang at the price of 40.8 sen per kilo Watt hour (kWh) for 21 years. (The Edge Daily)

• Scomi Group Bhd has taken up a 30.0% interest in renewable energy company, Strong Elegance Sdn Bhd to provide itself an avenue to undertake new businesses related to the construction and development of solar photovoltaic plants. The remaining interest is held by Synergy Generated Sdn Bhd (40.0%), which owns and operates a 5.0MW solar photovoltaic plant in Setiu, Terengganu, and Lembaga Tabung Angkatan Tentera (30.0%). (The Edge Daily)

• Systech Bhd plans to acquire 51.0% equity stake in Singapore-based Postlink Pte Ltd for RM9.8 mln. Postlink is involved in the mailing house, transport, design and information system service business. (The Edge Daily)

• Mexter Technology Bhd is raising up to RM14.3 mln through a private placement of shares to fund its expansion into healthcare services, in which it intends to venture into the mother and child healthcare segment by setting up a postpartum care centre in Plaza VADS, with a capacity of 33 beds.

• It is proposing to undertake a private placement of up to 20.0% of its share capital to fund its expansion as it seeks to diversify its earnings base and reduce its reliance on its existing core businesses in information technology based solutions and services. The proposal is expected to be completed by 3Q2017. (The Edge Daily)

• Gamuda Bhd’s 2QFY17 net profit grew 3.8% Y.o.Y to RM166.3 mln, due to cost savings enjoyed from the near completion of underground works of the Klang Valley Mass Rapid Transit (KVMRT) Line 1. Revenue for the quarter added 61.9% Y.o.Y to RM853.9 mln.

• For 1HFY17, cumulative net profit gained 2.2% Y.o.Y to RM328.4 mln. Revenue for the quarter climbed 30.8% Y.o.Y to RM1.36 bln. (The Edge Daily)
   
• Hiap Teck Venture Bhd’s 2QFY17 net profit stood at RM3.9 mln vs. a net loss of RM22.8 mln in the previous corresponding quarter, mainly due to improved margins and higher other income. Revenue for the quarter, however, was declined 2.2% Y.o.Y to RM269.1 mln.

• For 1HFY17, cumulative net profit stood at RM3.0 mln vs. a net loss of RM60.0 mln in the previous corresponding period. Revenue for the quarter, however, decreased 7.5% Y.o.Y to RM548.5 mln. (The Edge Daily)

• ML Global Bhd’s unit, Delta Gallery Sdn Bhd is partnering with Alaf Cahaya Development Sdn Bhd to develop a leasehold plot in Seri Kembangan, Selangor, into a mixed project with an estimated gross development value of RM270.0 mln. The plot measures 18,965.7 sq.m. and is intended to house 74 commercial units and 398 service apartments with development span over five years. (The Edge Daily)

• Iris Corp Bhd is being sued by Roxwell Group Sdn Bhd over an alleged commission payment related to the build, own and transfer (BOT) passport contract in the west African nation of Guinea.

• Roxwell is seeking a commission payment of RM169.5 mln under an agreement signed in 2011 between the two parties, based on the formula of 15.0% on the reported value of the buildoperate-transfer passport contract awarded by the government of Guinea to Iris in 2013. (The Edge Daily)

• Integrated Logistics Bhd’s wholly-owned unit, IL Solar Sdn Bhd has received approval to construct a large-scale solar photovoltaic plant in Bandar Bukit Kayu Hitam, Kedah, which has the capacity to produce 10.0MW of electricity. It has also signed a 21-year power purchase agreement with Tenga Nasional Bhd at a fixed price at 43 sen per kilo-Watt hour, with no increase throughout agreement period. The plant will start commercial operations by 1st January 2018. (The Edge Daily)

• Jaycorp Bhd’s 2QFY17 net profit contracted 24.3% Y.o.Y to RM4.6 mln due to lower operating profit. Revenue for the quarter, however, grew 5.4% Y.o.Y to RM79.6 mln.

• For 1HFY17, cumulative net profit declined 12.7% Y.o.Y to RM10.1 mln. Revenue for the period, however, improved marginally by 1.0% Y.o.Y to RM153.6 mln. (The Edge Daily)  

Source: Mplus Research - 24 Mar 2017