• Stocks on Bursa Malaysia resumed trading on a high note with the FBM KLCI nudging 0.5% higher for the day, in tandem with the gains in regional stockmarkets, as it also made another pass at the 1,780 resistance level with index heavyweights chased up by institutional investors. All Bursa Malaysia sub-indices rose, with the Industrial Products index surging nearly 2.0%, followed by the Technology (+0.9%) and Properties (+0.8%) indices.

• Expectedly, market breadth was positive with winning stocks ahead of losing stocks on a ratio of 560-to-376 stocks. Traded volumes also climbed nearly 10% to 3.55 bln shares.

• Topping the FBM KLCI gainers list were Petronas Chemicals (+16.0 sen) and Petronas Gas (+62.0 sen), followed by Genting Malaysia (+16.0 sen) and CIMBG (+6.0 sen). On the broader market, AEON Credit rose 64.0 sen, while Ajinomoto and Petron Malaysia gained 54.0 sen and 51.0 sen respectively. Hartalega (+31.0 sen) was also among the main mover after it reported stronger earnings. EKA Noodles rose 1.5 sen as it reported changes to its restructuring plans, while IWCity managed to rebound 6.0 sen after it recent steep losses.

• Meanwhile, Nestle (-44.0 sen), United Platations (-32.0 sen) and Fareast Holdings (-26.0 sen) were the main losers on the broader market. On the key index, the main losers were Maybank (-5.0 sen), Telekom Malaysia (-5.0 sen) and KLCC (- 6.0 sen).

• The Nikkei (+0.3%) continues to head higher as the Yen nears its two month low with banks and telecommunication stocks leading the gains. The Hang Seng rose 0.4% to its highest level in nearly two years, while the Shanghai Composite managed to reverse its intraday losses to climb 0.3% for the day. ASEAN indices, however, were mixed with Thai stocks dipping, while the Indonesian market is closed for a public holiday.

• Wall Street slid overnight after worstthan-expected results from retail bellwethers like Macy’s and Kohl’s resulted in a selldown on other retail stocks, sending the S&P 500 lower by 0.2%, while the Dow retreated 0.1%. The Nasdaq also retreated from its all-time high, slipping 0.2% for the day.

• European stockmarkets also retreated after their recent gains that were brought about by the results of the French Presidential election. The DAX fell 0.40%, while the CAC slipped 0.3%. Bucking the region’s negative trend was the FTSE which closed with slight gains.

The Day Ahead

• Once again, the key index made a pass at the 1,780 resistance level, but the level continues to be steadfast as we note that stronger market catalysts are required for the level to be cleared convincingly.

• Therefore, we think the above resistance level will continue to hold firm over the near term and the key index may instead stage a pullback to end the week. This follows the weaker overnight closing of some the key global stocks indices which we think will permeate to the local bourse.

• Still, we think any pullback will be mild given that there is little selling pressure as yet. Thus, we think the key index will find ample support at around the 1,760 level. Similarly, we think mild profit taking activities will permeate to the lower liners and broader market, but the overall market sentiments remain firm for now. COMPANY NEWS

• Mitrajaya has secured a RM160.1 mln contract to construct residential buildings for an undisclosed institute of higher learning. The project is expected to take two years to complete from the middle of this month.

Comments

• The award of the above contract falls within our orderbook replenishment target of RM800 mln for 2017 and with the inclusion of the above contract Mitrajaya has now secured RM343.5 mln worth of new contracts for the year and lifting its construction orderbook to RM1.51 bln. We also assumed that the new contract could command similar EBITDA margin as its previous contracts at around 15%.

• There is no change to our 2017 earnings estimates, but after tweaking our forecast, we raise our net profit forecast to RM101.1 mln (from RM97.7 mln), translating to a net EPS of 16.2 sen and 15.1 sen for 2017 and 2018 respectively. At RM1.37, Mitrajaya’s shares trades at PERs of 8.5x and 9.1x respectively, which remains below its industry peer average of 11x-13x.

• Consequently, we maintain our BUY recommendation on Mitrajaya with an unchanged target price of RM1.75, which was derived from ascribing an unchanged target PER of 11.0x to its 2017 (unchanged) construction earnings, while its property units (both local and foreign) are arrived at 0.8x their book values.

Company Briefs

• Three-A Resources Bhd’s 1Q2017 net profit jumped 54.3% Y.o.Y to RM10.3 mln, from RM6.7 mln a year ago – due to higher product margins and lower foreign currency losses of RM39,000, compared with RM1.2 mln last year. Quarterly revenue, however, fell 4.1% Y.o.Y to RM103.2 mln vs. RM107.6 mln in the previous year.

• The company has also announced a bonus issue of 98.4 mln new shares on the basis of one bonus share-for-every four shares held on the entitlement date of 25th May 2017. (The Edge Daily)

• T7 Global Bhd (formerly Tanjung Offshore Bhd) has established a 60:40 joint venture (JV) with KOV Ltd, a wholly-owned unit of Kilgour Metal Treatments Ltd, to pursue high-value metal treatment manufacturing.

• The JV company, known as T7 Kilgour Sdn Bhd will build, operate and set up a metal treatment plant in Malaysia to pursue high-value manufacturing businesses in metal treatments. The company will also provide various metal treatment services including nondestructive testing, painting and marking, chemical processing, heat treatment and surface treatment.

• Further, T7 Global has also inked a Heads of Agreement (HoA) with MARA Aerospace & Technologies Sdn Bhd to collaborate on human capital development in the aerospace industry.

• S P Setia Bhd posted a 14.8% Y.o.Y fall in its 1Q2017 net profit to RM105.2 mln, from RM123.4 mln a year ago, despite recorded higher revenue. The weaker earnings were attributed to lower other income generated from its wood-based manufacturing, trading activities, and the operation of retail mall and Setia City Convention Centre. Revenue for the quarter, however, grew 3.5% Y.o.Y to RM940.2 mln against RM908.5 mln in the last corresponding period.

• The group has also secured property sales of RM426.8 mln, made up of 82.0% of local sales contributed, whereas the remaining 18.0% were generated from international projects.

• S P Setia noted that the property sales secured were mainly driven by its property projects in the central region which generated RM249.7 mln. (The Edge Daily)

• Kerjaya Prospek Group Bhd has clinched a RM207.4 mln contract for the construction of 166 units of three-storey semi-detached houses, 99 units of threestorey bungalows and ancillary works in Shah Alam. The 29-month contract is expected to commence on 15th May 2017 until 30th September 2019.

• Inclusive of the new project, which was awarded by BCB Development Sdn Bhd, its outstanding orderbook amounts to RM2.5 bln. (The Star Online)

• CAB Cakaran Corp Bhd is proposing to undertake a share split and bonus issue to enhance the marketability and trading liquidity of its shares.

• The share split will involve the subdivision of every two existing shares into five split shares, and a bonus issue of up to 138.65 mln shares after the share split on the basis of one bonus share-for-every four split shares. (The Edge Daily)

• Matang Bhd has lost the bid for two parcels of oil palm land in Raub, Pahang, alongside a 60-tonne per hour palm oil mill located on-site. Subsequently, the tender deposit paid on 19th April, 2017 has also been returned to the group.

• To recap, Matang had bid for the 4,219.8 ac.s of leasehold land from Raub Mining & Development Company Sdn Bhd and Raub Oil Mill Sdn Bhd in April and it intended to pay via bank borrowings and fund-raising exercises. (The Edge Daily)

• Malaysian technology-based publiclisted company Omesti Bhd is partnering Foster Moore to introduce Foster Moore's proprietary electronic registry solution called Catalyst across the Asean region and beyond.

• Omesti has been selected as Foster Moore's implementation partner for the Asean region and emerging markets and both parties will work together to identify opportunities in countries including Singapore, Hong Kong, Vietnam, Myanmar and Malaysia. (The Edge Daily)  

Source: Mplus Research - 12 May 2017