• The FBM KLCI managed to post another up day, gaining 0.3% as it continues its recovery from last Friday with most index linked stocks making decent gains. Most Bursa Malaysia sub-indices also gained ground with the technology index the leading gainers, climbing nearly 1.9% for the day, while the small cap index was the sole underperformer, slipping 0.3%.

• Market breadth stayed positive with gainers ahead of losers 546-to-388 stocks, while traded volumes continue to perk up with slightly over 4.0 bln shares done for the day, some 12% higher than last Friday’s volume as interest on the lower liners climbed amid the more stable market environment, both globally and domestically.

• In the broader market, the big movers were Time dotcom (+81.0 sen), Ajinomoto (+48.0 sen), Petron Malaysia (+43.0 sen) and Panasonic Malaysia (+43.0 sen). Among the index heavyweights, Maybank was the main index gainer, rising 9.0 sen, followed by MISC (+7.0 sen), Maxis (+4.0 sen) and Hong Leong Financial Group (+22.0 sen).

• There were only four losers on the FBM KLCI - Petronas Gas (-8.0 sen), Genting Malaysia (-25.0 sen), IHH (-1.0 sen) and Petronas Dagangan (-2.0 sen). On the broader market, the main decliner was IW City (-92.0 sen), which went limit down on the resumption of its trading after its unit lost the Bandar Malaysia project. Other big losers include F&N (-36.0 sen), UMW (-16.0 sen) and Batu Kawan (-14.0 sen).

• Asian stocks were on the ascent with the Nikkei (+2.3%) closing at a new 17-month high after its long break as political concerns in Europe ebbed and investors chased up cyclical stocks. The Hang Seng climbed 0.4%, but China stocks continue to whittle amid the authorities’ clampdown on leveraged stock trading. Most ASEAN stock indices, however, started the week on a positive note.

• U.S. equities eked-out minor gains on Monday, after hitting fresh record highs, spurred by easing geopolitical risks following the anticipated win of Emmanuel Macron. All three key benchmark indices - namely the Dow, the Nasdaq and the S&P 500 finished with less than 1.0% gain, capped by the weakness in materials-related shares amid the lack fresh trading catalysts.

• European stockmarkets retraced on profit-taking activities following the conclusion of France’s Presidential election. U.K. stocks inched higher after a volatile trade, weighed down by mining stocks after China reported a lower-thanexpected trade data. The CAC, meanwhile, came off its nine-year high, as investors lock-in profits following Emmanuel Macron’s expected win in the election and the DAX declined 0.2% to 12,694.6 points.

The Day Ahead

• We see the market continuing to gain ground over the near term as market conditions remain on the positive side as IWCity’s Bandar Malaysia issues are cast aside. At the same time, there is still substantive trading interest in the broader market, judging by the firming market volumes that indicate a still buoyant market environment, particularly among the lower liners where retail players continue to take an active interest.

• While we think that the market will maintain its ascent, the upsides may continue to be limited amid as investors search for more sustainable leads.

• Therefore, we see the near term upsides curtailed at the 1,780 resistance level again as it would require stronger catalyst for the level to be cleared convincingly. In the meantime, the 1,750 level remains the main support for now.

COMPANY NEWS

• Kimlun Corp Bhd's 40%-owned joint venture company, JBB Kimlun Sdn Bhd has bagged a RM263.0 mln contract to construct an office complex block for Majlis Bandaraya Johor Bahru (MBJB) in Plentong, Johor. JBB Kimlun accepted the letter of award for the job from property developer Astaka Padu Sdn Bhd.

• The project's duration is 30 months from the date of site possession and is expected to be completed in October 2019.

Comments

• The above contract will have little impact on the group’s earnings as the project will be undertaken by an associate. Hence, we only see the contract contributing some RM1.0 mln and RM2.0 mln in associate earnings in 2017 and 2018 and lifting its net EPS to 27.4 sen and 29.3 sen, from 27.2 sen and 28.9 sen respectively.

• After rolling over our earnings matrix to 2018, we lift our target price to RM2.40 (from RM2.25). The target price is derived from ascribing an unchanged target PER of 11x and 6.0x (both unchanged) to the fully diluted earnings of its construction and manufacturing divisions respectively. The property division’s valuation remains derived at 0.6x its book value due to its relatively small scale development projects.

• There is, however, no change to our recommendation and we maintain our HOLD recommendation on Kimlun as its recent share price gains have already reflected its strong orderbook.

Company Briefs

• Media Prima Bhd is taking over Rev Asia Bhd's advertising and social media business, which is parked under Rev Asia Holdings Sdn Bhd, for RM105.0 mln, which the companies said would create Malaysia's largest digital media company.

• Rev Asia holds a 70.0% equity stake in Rev Asia Holdings, while Youth Asia Bhd holds the remaining 30.0%.

• Other than the five subsidiaries held by Rev Asia Holdings, other subsidiaries under Rev Asia Holdings will be disposed of by the group prior to completion of the sale. (The Edge Daily)

• Tien Wah Press Holdings Bhd‘s 1Q2017 net profit fell 26.3% Y.o.Y to RM4.1 mln, from RM5.6 mln a year ago, mainly due to lower gross profit margin following the newly acquired subsidiary’s smaller gross profit margin. Revenue, however, expanded 34.0% Y.o.Y to RM110.4 mln against RM82.4 mln in 1QFY16. (The Edge Daily)

• PanPages Bhd is buying a 30.0% shareholding in G-MART Borneo Retail Sdn Bhd, Lay Hong Bhd’s subsidiary for RM10.8 mln. G-MART Borneo Retail Sdn Bhd is principally involved in the operation of retail supermarkets. (Bernama)

• ManagePay Systems Bhd is planning to deploy over 3,000 credit card terminals to Johor Corp’s subsidiary, Virtualflex Sdn Bhd — which has 748 outlets of prepaid payment kiosks nationwide — for five years.

• The agreement is subject to the commissioning of its terminals and ManagePay will absorb the costs of deploying the terminals, including the support and maintenance of the terminals in lieu of earnings from the payment processing and Tag-On revenue. Subsequently, Virtualflex and ManagePay will collaborate exclusively on terminals deployment and usage. (Bernama)

• Tenaga Nasional Bhd’s 100.0%-owned unit, TNB Repair and Maintenance Sdn Bhd (TNB Remaco) has secured a US$176.0 mln (RM763.2 mln) contract to operate and maintain the 1,223 megawatt (MW) Balloki combined cycle power plant in Punjab province, Pakistan.

• The 12-year contract, which is the largest O&M contract for a single power plant, both locally and internationally, was awarded by the National Power Parks Management Company (Private) Ltd, a government-linked company in Pakistan. (Bernama)

• Texchem Resources Bhd’s 1Q2017 net loss narrowed to RM575,000, compared to RM2.2 mln a year ago, in-tandem with higher revenue, which increased 5.5% Y.o.Y to RM271.0 mln, from RM256.8 mln.

• The group noted that the 1Q2017 losses was a result of unfavourable sales mix of lower margin products, though this was partly offset by improved sales across multiple divisions.

• Going forward, the company has earmarked RM44.0 mln to open 17 Sushi King outlets in Malaysia, Brunei and Indonesia, as well as expand its coffee cafes and frozen food business in Malaysia. (The Edge Daily)

• Censof Holding a RM7.5 mln contract to maintain application, hardware and licence renewal for the Inland Revenue Board's revenue accounting system or eRAS. The three-year contract will commence from 19th November 2017 to 18th November 2020. (The Edge Daily)

• Key ASIC Bhd is planning to begin production for the two chips it codesigned with RC Module — PCI-e SoC (system on a chip) and Numeric Matrix (NM) CPU — a leading system and chip design company in Russia. The company has clinched contracts worth RM7.0 mln as of May this year for the two chips.

• The group also has other projects it has been co-designing with customers using its IPs (intellectual property) and expects these projects to successfully go into production in the near future. (The Edge Daily)

• MK Land Holdings Bhd is planning to sell nine parcels of leasehold land in Kamunting, Perak for RM72.0 mln, in a bid improve its financial position. The group also expects to record a net gain of about RM32.1 mln from the disposal.

• Its wholly-owned subsidiary, Dominant Star Sdn Bhd has signed two sale and purchase agreements (SPA) with KL Teh Land and Development Sdn Bhd for the disposals.

• The first batch comprises six vacant land parcels, measuring approximately 13.6 ha. which will be disposed for RM9.0 mln. The remaining three land plots totaling 65.67 ha., on which a clubhouse, a golf course and a driving range are located, will be disposed of for RM63.0 mln. (The Edge Daily)

• Hovid Bhd has obtained the manufacturing licence for its pharmaceutical facility in Ipoh, Perak, from the Health Ministry after complying with the Ministry's regulations. The licence is valid from 5th May 2017 and will be renewed three months before to the expiry date on 31st December 2017.

• To recap, the Ministry had revoked the manufacturing licences of Hovid's two facilities in Perak in January this year, due to non-compliance with the regulator's good manufacturing practice.

• Besides the Ipoh facility, the Ministry had also revoked the licence for the facility along Jalan Ipoh/Chemor in Chemor, which was re-issued on 6th March 2017 and will be valid until 31st December 2017. (The Star Online)  

Source: Mplus Research - 9 May 2017