• Despite opening higher at the start of the trading bell, quick profit taking sent the FBM KLCI (-0.1%) lower as the key index bucked the positive performance on Wall Street overnight. The lower liners, however, closed mostly higher as the FBM Small Cap and FBM ACE gained 0.1% and 0.5% respectively, while the broader market ended mixed.

• Market breadth returned to negative as decliners edged advancers on a ratio of 454-to-415 stocks. Traded volumes, however, improved 13.1% to 2.00 bln shares amid the rotational play amongst the lower liners.

• Financial heavyweights like Hong Leong Financial Group (-14.0 sen), AmBank (- 11.0 sen), and Hong Leong Bank (-10.0 sen) topped the big board decliners list while BAT and Genting Malaysia shed 14.0 sen and 12.0 sen respectively. Amongst the biggest losers on broader market include Heng Yuan (-29.0 sen), Nestle (-22.0 sen), Allianz (-18.0 sen), Petron Malaysia (-17.0 sen) and Fraser & Neave (-16.0 sen).

• Meanwhile, Panasonic (+30.0 sen), TimedotCom (+21.0 sen), Ann Joo Resources (+21.0 sen), Pentamaster (+17.0 sen) and Microlink Solutions (+17.0 sen) topped the broader market advancers list. RHB Bank rose 19.0 sen after its merger talks with AmBank fell through, while other notable gainers on the key index were Petronas group of companies like Petronas Gas (+20.0 sen), Petronas Dagangan (+10.0 sen) and Petronas Chemicals (+8.0 sen).

• Japanese equities rebounded yesterday as the Nikkei (+0.3%) halted its five-day losing streak, taking cue from the positive Wall Street sentiment overnight.

Macro Brief

• Malaysia's inflation rate, as measured by the Consumer Price Index (CPI) in July 2017 rose 3.2% Y.o.Y – coming in below economists’ forecast of 3.4% Y.o.Y rise. The CPI was also lower than June 2017’s increase of 3.6% Y.o.Y. For the period January to July 2017, the CPI increased 4.0% Yo.Y.

• Among the major groups which recorded increases were the indices for transport (+7.7% Y.o.Y), food & non-alcoholic beverages (+4.2% Y.o.Y) and health (+2.9% Y.o.Y). (The Star Online

Company Updates

• Econpile Holdings Bhd’s 4QFY17 net profit added 12.2% Y.o.Y to RM20.9 mln, owing to the higher recognition from its ongoing foundation work projects. Revenue for the quarter gained 22.8% Y.o.Y to RM157.7 mln. For FY17, cumulative net profit increased 19.6% Y.o.Y to RM80.8 mln. Revenue for the year expanded 25.9% Y.o.Y to RM581.9 mln.

• The results were within expectations with its revenue amounting to 97.1% of our full-year forecast of RM599.1 mln, while its net profit came in at 98.5% of our estimate of RM82.0 mln. The slight variance was mainly due to its higher effective tax rate of 27.6% vs. our estimate of 27.0%.

Comments

• We tweak our earnings forecast by for FY18 and FY19 higher by 6.2% and 4.2% to RM94.4 mln and RM103.1 mln respectively to adjust for a lower depreciation rate amid the potentially slower CAPEX in FY18 as several of its projects are already at the tail-end of construction, freeing up some machinery capacity to undertake new projects.

• We also maintain our HOLD recommendation but with a higher target price of RM3.00 (from RM2.75) by ascribing a higher target PER of 16.0x (from 15.0x) to its revised FY18 EPS of 18.7 sen. The ascribed PER is in tandem with the general uptick in the construction sector’s valuations.

• Engtex Group Bhd’s 2Q2017 net profit slipped 34.5% Y.o.Y to RM13.6 mln, mainly due slower demand in certain metalrelated products amid the volatility in metal prices, whilst its hospitality division that was launched in 4Q2016 has yet to breakeven. Revenue for the quarter fell 4.2% Y.o.Y to RM284.7 mln on lower sales volume from the wholesale and distribution segment.

• For 1H2017, cumulative net profit declined 3.6% Y.o.Y to RM31.5 mln. Revenue for the period contracted 11.1% Y.o.Y to RM538.6 mln. The reported earnings came in slightly below our forecasts – accounting to 45.7% our full year estimated net profit of RM69.0 mln, while the reported revenue came within our expectations, accounting to 50.4% of our 2017 revenue forecast of RM1.07 bln.

Comments

• Despite the reported results coming in slightly below our forecast, we leave our earnings estimates unchanged and we also maintain our HOLD recommendation on Engtex with an unchanged target price of RM1.40. We think that earnings should recover in 2H2017, owing to the stabilising metal prices, whilst demand should recover ahead of the commencement of several mega infrastructure projects.

• Our target price remains derived from ascribing a unchanged target PER of 8.0x to our fully diluted 2018 forecast earnings of its manufacturing and wholesale and distribution businesses, in line with its historical PER. Its property development segment’s valuation remains unchanged at 0.6x its BV due to its relatively smallscale property development projects.

Company Briefs

• UOA Development Bhd’s 2Q2017 net profit increased 33.3% Y.o.Y to RM165.7 mln, from RM124.2 mln a year ago, mainly due to higher contribution from South View Serviced Apartments which were completed during the quarter under review. Revenue also surged 57.9% Y.o.Y to RM465.6 mln, from RM294.8 mln in the same period last year.

• Cumulative 1H2017 net profit, however, slipped to RM209.0 mln against RM220.3 mln, despite a 25.1% Y.o.Y increase in revenue to RM620.7 mln, from RM496.0 mln last year. (The Star Online)

• Hua Yang Bhd is confident that it is able to achieve its RM400.0 mln new property sales target in FY18, as the group prepares to launch an estimated RM2.0 bln project in Puchong, Selangor, in 2HFY18. (The Star Online)

• UEM Sunrise Bhd registered a 73.0% Y.o.Y jump in 2Q2017 net profit to RM94.6 mln, from RM54.7 mln a year earlier, in-tandem with a 67.0% Y.o.Y surge in revenue to RM897.8 mln from RM537.81 mln last corresponding year.

• The improved earnings were attributed to higher progress billings from the group's Residensi 22 project in Mont Kiara, Teega in Puteri Harbour and Aurora Melbourne Central in Australia. Further, proceeds from the disposal of Alderbridge land in Richmond, Canada, amounting to C$113.0 mln (RM3710. mln) also lifted quarterly earnings.

• Cumulative 1H2017 net profit soared 170.0% Y.o.Y to RM155.8 mln, from RM57.7 mln last year, alongside revenue which was 81.0% Y.o.Y higher at RM1.44 bln, from RM795.6 mln in 1H2016. (The Star Online)

• IHH Healthcare Bhd’s 2Q2017 net profit gained 29.0% Y.o.Y to RM316.6 mln, compared to RM246.1 mln in the previous year's corresponding quarter, on the back of a one-off gain of RM241.1 mln from the divestment of its non-core minority stake in Apollo Hospitals in May. Quarterly revenue also grew 12.0% Y.o.Y to RM2.77 bln, from RM2.47 bln a year earlier.

• Cumulative 1H2017 net profit saw a 63.0% Y.o.Y hike to RM786.6 mln, from RM481.6 mln in 1H2016, while revenue expanded 10.0% Y.o.Y to RM5.46 bln, from RM4.95 bln previously. (The Edge Daily)

• Hap Seng Plantations Holdings Bhd registered a 46.0% Y.o.Y growth in its 2Q2017 net profit to RM28.9 mln, from RM19.8 mln 2Q2016, while quarterly revenue gained 21.0% Y.o.Y to RM133.5 mln, from RM110.6 mln last year – led by higher average CPO prices as well as stronger sales volume.

• Consequently, cumulative 1H2017 net profit almost doubled to RM63.0 mln, from RM36.4 mln a year earlier, while revenue rose 29.0% Y.o.Y to RM277.6 mln, from RM214.7 mln. (The Edge Daily)

• TH Heavy Engineering Bhd’s net loss widened 145.0% Y.o.Y to RM16.8 mln, from RM6.9 mln a year ago, dragged down by unrealised foreign exchange losses. Revenue for the quarter also narrowed 69.0% Y.o.Y to RM2.4 mln vs. RM7.7 mln previously.

• On the other hand, cumulative 1H2017 net loss shrank 6.0% Y.o.Y to RM38.0 mln, from RM40.3 mln, even as revenue plunged 79.0% Y.o.Y to RM4.63 mln, from RM22.24 mln in 1H2016. (The Edge Daily)

• IJM Corp Bhd's 1QFY18 net profit gained 9.0% Y.o.Y to RM126.4 mln, from RM115.5 mln in the previous year's corresponding quarter, on the back of higher contribution from its construction, property development and infrastructure segments. Quarterly revenue was also up by 12.0% Y.o.Y to RM1.47 bln, from RM1.31 bln a year earlier. (The Edge Daily)

• Magnum Bhd saw a 175.0% Y.o.Y jump in 2Q2017 net profit to RM60.0 mln, from RM21.8 mln a year ago, lifted by higher gaming profit, albeit slightly offset by loss from investment holdings and other divisions. Revenue for the quarter, however, declined marginally by 0.8% Y.o.Y to RM620.6 mln, against RM625.8 mln previously.

• For cumulative 1H2017, Magnum’s net profit flatlined at RM90.5 mln against RM90.7 mln a year ago, while revenue slipped 4.4% Y.o.Y to RM1.32 bln, from RM1.38 bln last year. (The Star Online)

• Genting Plantations Bhd's 2Q2017 net profit more than doubled to RM71.0 mln, from RM33.9 mln in the same quarter last year, boosted by a 44.0% jump in quarterly revenue to RM446.3 mln, from RM309.1 mln. The improved revenue was attributed to stronger palm products selling prices, higher FFB production and higher sales of biodiesel and refined palm products. (The Edge Daily)

• D&O Green Technologies Bhd has requested for the trading halt of its shares for 24th August 2017, pending the release of a material announcement. The group’s share price rose 102.0% year-to-date and hit a high of 74.0 sen in March. (The Edge Daily)  

Source: Mplus Research - 24 Aug 2017