• The FBM KLCI (+0.5%) snapped a streak of four straight losing sessions yesterday as investors look beyond Donald Trump's healthcare reform setback. The lower liners – the FBM Small Cap (+0.5%), FBM Fledgling (+0.5%) and FBM ACE (+1.2%), all advanced, while the broader market ended positively.

• Market breadth turned positive as advancers outpaced decliners on a ratio of 513-to-366 stocks. Traded volumes, however, declined 22.8% to 3.07 bln shares as investors retreated to the sidelines amid the lack of fresh local catalysts.

• More than two-third the key index constituents advanced, led by Petronas Dagangan (+RM1.06), followed by Hong Leong Financial Group (+40.0 sen), Genting (+25.0 sen), Petronas Gas (+24.0 sen) and Hong Leong Bank (+20.0 sen). Significant gainers on the boarder market include Panasonic (+76.0 sen), Petron Malaysia (+50.0 sen), Fraser & Neave (+36.0 sen), KESM Industries (+30.0 sen) and TAHPS Group (+25.0 sen).

• On the flipside, United Plantations (-58.0 sen), Dutch Lady (-46.0 sen), Rapid Synergy (-30.0 sen) and Sui Wah (-15.0 sen) topped the broader market decliners list. Teck Guan Perdana sank 31.0 sen after reporting a weak set of quarterly earnings. Meanwhile, BAT (-8.0 sen) and Sime Darby (-6.0 sen) were the only two laggards on the big board.

• Japanese equities rebounded as the Nikkei rose 1.1% to reclaim its position above the 19,000 psychological level after the rally in Japanese Yen against the U.S. Dollar took a pause. The Hang Seng added 0.6%, but the Shanghai Composite (-0.4%) extended its losses as the People Bank of China stopped injecting short-term funds into the banking system for the third consecutive session. ASEAN stockmarkets, meanwhile, ended mostly higher.

• Wall Street rebounded overnight as the Dow (+0.7%) closed on the positive note for the second time in nine days, boosted by the stronger-than-expected consumer confidence data that rose to 125.6, coupled with the recovery in crude oil prices. On the broader market, the S&P 500 rose 0.7%, anchored by the financial sector (+1.5%).

• Earlier, European stockmarkets – the FTSE (+0.7%), CAC (+0.6%) and DAX (+1.3%) all recouped their previous session losses as Britain prepares to unveil its plan to leave the European Union. Meanwhile, Tesco PLC (+0.7%) has announced it will pay a fine of £129.0 mln to settle a probe over a 2014 profit overstatement.

The Day Ahead

• The key index has done well to climb above the 1,750 level amid some fresh buying yesterday. With the key index now above the 1,750 level, the FBM KLCI will now attempt to shore up its position and this will be helped by the positive overnight performance of key global stock indices.

• We expect the key index to look to fortifying its position above the 1,750 level and to target the next resistances at the 1,770 level. We also think the lower liners and broader market shares to see increased following amid the more positive near term outlook, albeit we continue to think that the market’s valuations is already stretched.

Company Update

• Econpile Holdings Bhd has bagged a RM92.5 mln contract from Mujur Minat Sdn Bhd to build the diaphragm wall for the Kampung Baru North Underground Station for Sungai Buloh-SerdangPutrajaya line of the Klang Valley Mass Rapid Transit (KVMRT2).

• The project is anticipated to take approximately 450 days from date of commencement to complete, which will be determined in due course. (The Edge Daily)

Comments

• With the incorporation of the abovementioned contract, Econpile has secured some RM1.14 bln worth of construction contracts, accounting to 95.4% of our targeted orderbook replenishment rate of RM1.20 bln for FY17. The award of the new projects brings its total outstanding construction orderbook to approximately RM1.50 bln, implying an orderbook-to-cover ratio of 3.2x against FY16 revenue of RM462.1 mln, which will provide earnings visibility over the next 2-3 years.

• Given that the contract secured is within our orderbook replenishment assumption, we make no change to our earnings estimates and we maintain HOLD recommendation on Econpile with an unchanged target price of RM2.30. Our target price is derived from ascribing an unchanged target PER of 13.0x to its FY17 EPS of 17.6 sen, which is in line with its peers with similar market capitalisation.

Company Briefs

• Perak Transit Bhd is developing two plots of land near Universiti Teknologi Petronas in Tronoh, Perak to into an integrated bus terminal complex. The group is acquiring the land from Pasti Kenari Sdn Bhd for RM8.0 mln, which will be financed through internal funds. The proposed acquisition is in-tandem with its long-term strategy to develop integrated public transportation terminals in various parts of Perak. (The Edge Daily)

• Muar Ban Lee Group Bhd is planning to sell its oil palm unit, Sokor Gemilang Ladang Sdn Bhd to furniture maker Everhome International (M) Sdn Bhd (EIM) for RM35.1 mln.

• The parties have inked a Memorandum of Understanding (MoU) to outline the basic principles for the disposal and a definitive agreement is expected to be executed within six months.

• Proceeds from the disposal would be used for Muar Ban’s working capital, to pare its borrowings and fund future expansion of its core business. (The Edge Daily)

• United Malacca Bhd’s 3QFY17 net profit more than doubled to RM33.7 mln, from RM14.8 a year ago – mainly on higher average prices of crude palm oil (CPO) and palm kernel as well as higher fresh fruit bunches (FFB) production. Revenue for the quarter jumped 51.4% Y.o.Y to RM75.8 mln vs. RM50.0 mln in 3QFY16.

• Cumulative 9MFY17 net profit, meanwhile, surged 41.2% Y.o.Y to RM55.6 mln, compared to RM39.3 mln in the last corresponding period, alongside revenue which gained 29.5% Y.o.Y to RM204.4 mln, from RM157.8 mln in 9MFY16. (The Edge Daily)

• Cypark Resources Bhd has clinched three contracts worth RM28.5 mln from the Department of National Solid Waste Management. Two contracts to operate a leachate treatment plant in Pajam and Bukit Palong — both in Negeri Sembilan — for RM12.2 mln and RM11.4 mln respectively will be in force from 3th April 2017 until 2th April 2022.

• The third contract worth RM5.0 mln to operate a leachate treatment plant in Kuantan, Pahang, for two years will commence from 3th April 2017 until April 2 2019. (The Star Online)

• Astro Malaysia Holdings Bhd‘s 4QFY17 net profit slid 28.8% Y.o.Y to RM145.1 mln, from RM203.8 mln, weighed down by higher finance costs. Quarterly revenue, however, was only marginally lower by 0.3% Y.o.Y to RM1.39 bln, from RM1.4 bln a year ago.

• Astro’s FY17 net profit was up 1.4% Y.o.Y to RM623.7 mln, from RM615.3 mln last year, contributed by lower depreciation expenses and lower net finance cost, while full year revenue rose 2.5% Y.o.Y to RM5.61 bln, against RM5.48 bln in FY16.

• The group has proposed a fourth interim dividend of three sen per share, payable on 27th April this year. It also proposed a final dividend of 0.5 sen apiece for FY17, which is payable on a date to be fixed later. (Bernama)

• Kelington Group Bhd was awarded a contract from Hanwha Q Cells Malaysia Sdn Bhd for the onsite supply of nitrogen gas. Hanwha Q Cells is among the world’s largest manufacturers of solar cells and modules and uses nitrogen in its manufacturing process.

• Under the contract, Kelington will set up an onsite generator to produce nitrogen gas at the Hanwha Q Cells’ manufacturing plant in Cyberjaya, Selangor, while the latter will pay a fixed facility fee amounting to approximately RM20.0 mln over a period of 10 years. ? The 10-year contract is the group’s first industrial gas supply contract and is expected to contribute a stable and recurring income stream to the group. (Bernama)

• UEM Edgenta Bhd has signed an agreement for the issuance of Islamic Commercial Papers (ICP programme) and Islamic Medium Term Notes (IMTN programme) with a combined aggregate limit of up to RM1.0 bln. The proceeds from the corporate exercise will enable the group to rebalance its capital and will be utilised for its syariah-compliant general corporate expansion. (Bernama)

• Handal Resources Bhd has secured a maintenance contract worth RM2.3 mln from SapuraKencana Energy Peninsula Malaysia Inc. The two-year contract, which will commence from March 2017 to February 2019, comes with an additional one-year extension option and includes the provision of pedestal crane maintenance services for SapuraKencana Energy's production operations. (The Edge Daily)  

Source: Mplus Research - 29 Mar 2017