• After lingering mostly in the negative territory, the FBM KLCI (+0.02%) managed to stage a mild recovery yesterday, lifted by last minute buying support on selective index heavyweights. The lower liners, however, ended in the negative territory, while the broader market was painted mostly in red on a selloff in the Properties sector (-0.9%).

• Market breadth remained negative as decliners outpaced advancers on a ratio of 2-to-1 stocks. Traded volumes declined 11.3% to 1.78 bln shares as investors book profits ahead of the extended weekend break.

• Key winners on the FBM KLCI include Westports (+14.0 sen), BAT (+12.0 sen), CIMB (+6.0 sen), IJM (+5.0 sen) and IHH (+4.0 sen). Meanwhile, significant gainers on the the broader market were Kluang Rubber (+25.0 sen), United Uli Corporation (+25.0 sen), Sungei Bagan (+17.0 sen), Lafarge (+14.0 sen) and Sarawak Oil Palms (+14.0 sen).

• Heng Yuan (-RM1.09) slumped after reporting a weaker-than-expected earnings, while other notable losers on the broader market were Ajinomoto (-96.0 sen), Petron Malaysia (-69.0 sen), Lotte Chemical (-29.0 sen) and Far East (-28.0 sen). Genting Malaysia (-19.0 sen) continue to lead the big board decliners list, followed by Petronas Gas (-8.0 sen), KLCC (-8.0 sen), Hong Leong Bank (-6.0 sen) and Sime Darby (-4.0 sen).

• Japanese equities closed relatively flat as the Nikkei fell 0.01% on weakness in automotive stocks like Toyota Motor Corp (-0.5%) and Honda Motor (-0.3%). The Hang Seng Index added 0.1% after briefly re-testing the 28,000 psychological level, while the Shanghai Composite (+0.9%) jumped on better-than-expected corporate earnings. ASEAN stockmarkets, meanwhile, ended mostly higher.

• U.S. stockmarkets ended mixed as the Dow fell 0.02% after trading in a tight range as investors access the economic impact of Hurricane Harvey. On the broader market, the S&P 500 (+0.1%) extended its gains, lifted by the eleventh hour buying support, while the Nasdaq finished 0.3% higher.

• European benchmark indices – the FTSE (- 0.1%), CAC (-0.5%) and DAX (-0.4%), all extended their losses after the Euro Currency rose to its highest level since January 2015 against the U.S Dollar, hurting exporters. Basic resources shares were the worst-performing sector as investors digested the impact of Hurricane Harvey in the U.S.

The Day Ahead

• There remains no change to our near-term view and we expect the key index to trend within a tight range around the 1,770 level. At the same time, we also expect the downside bias to prevail as market interest is likely to stay thin with the upcoming long weekend looming, albeit the usual end-of-day support on selected index heavyweights could help to keep the FBM KLCI rangebound.

• There are also few catalysts for market players to follow with the ongoing results season providing few surprises with the earnings streams still mostly on the subdued side. Overseas markets are also on a holding pattern after their strong gains in 1H2017 with valuations on the toppish side, thus leaving little room for significant upsides.

• Under the prevailing environment, we also expect the lower liners and broader market shares to remain pressured by profit taking activities ahead of the long weekend, whilst fresh buying is likely to stay muted.

Company Updates

• Mitrajaya Holdings Bhd’s 2Q2017 net profit sank 55.4% Y.o.Y to RM13.2 mln dragged down by the weakness in construction segment. Revenue for the quarter, however, added 24.0% Y.o.Y to RM304.5 mln.

• For 1H2017, cumulative net profit fell 12.8% Y.o.Y to RM41.9 mln. Revenue for the period, however, expanded 35.1% Y.o.Y to RM595.9 mln. Although the reported earnings only amounted to 40.1% of our previous 2017 earnings forecast of RM104.5 mln, we deem it to be within expectations on seasonal factors. Over the past three years, Mitrajaya’s 1H2017 performance amounted to an average of 42.8% of its full year earnings. Revenue for the period, however, came above our expectations, accounting to 58.9% of our RM1.01 bln forecast.

Comments

• Although the reported earnings came within our expectations, we trimmed our earnings forecast for 2017 and 2018 by 9.8% and 5.0% to RM94.2 mln and RM97.1 mln respectively, to account for the additional construction cost. We, however, maintain our BUY recommendation on Mitrajaya but with a lower target price of RM1.65 (from RM1.85).

• We rolled over our valuation metrics to 2018 as we ascribed a target PER of 13.0x to its 2018 (fully diluted) construction earnings, while its local and overseas property development units are valued at an unchanged 0.8x their respective book values. At the target price of RM1.65, Mitrajaya will be trading at prospective PERs of 13.3x and 12.8x in 2017 and 2018 respectively, near its industry peer averages.

Company Briefs

• UMW Holdings Bhd's 2QFY17 net loss widened to RM209.3 mln, from RM12.1 mln, mainly due to a one-off loss arising from the demerger of associate UMW Oil & Gas Corp Bhd. Quarterly revenue on the other hand, rose marginally by 2.5% Y.o.Y to RM2.79 bln, from RM2.72 bln last year.

• Meanwhile, the group also posted a cumulative 1H2017 net loss of RM189.1 mln, compared with a net profit of RM4.5 mln a year ago, though revenue grew 14.2% Y.o.Y from RM4.83 bln in 1H2016, to RM5.51 bln. (The Star Online)

• Fitters Diversified Bhd has secured a contract to build two- and three-storey terraced houses in Rawang for RM81.5 mln. The two-year contract will commence from the date of building plan approval by the relevant authorities or 42 months from September 2017, whichever is earlier. (The Edge Daily)

• IOI Corp Bhd posted a 4QFY17 net profit of RM317.5 mln vs. a net loss of RM59.0 mln in the same quarter last year, boosted by foreign exchange (forex) gains on borrowings and lower fair value loss on derivative financial instruments from the resource-based manufacturing segment.

• For FY17, net profit climbed 18.0% Y.o.Y to RM743.2 mln, from RM629.7 mln in FY16, attributed to higher contribution from the plantation segment, while revenue grew 20.3% Y.o.Y to RM14.13 bln from RM11.74 bln. Moving forward, the group expects FFB production to increase next year due to higher yield and younger palm trees reaching the prime production age. (The Star Online)

• Tiong Nam Logistics Holdings Bhd‘s 1QFY17 net profit plummeted by 94.9% Y.o.Y to RM683,000 , from RM13.4 mln, dragged down by a loss in fair value of quoted shares, although revenue rose 7.5% Y.o.Y to RM140.9 mln, from RM131.1 mln in the previous corresponding period.

• The group has also earmarked RM100.0 mln of capital expenditure (capex) for FY18 to acquire new vehicles to grow the logistics and warehousing provider's transportation fleet, build new warehouses and strengthen its newlyestablished Southeast Asia to China cross-border logistics network. The group foresees that its warehousing capacity will increase by 700,000 sq. ft. to 5.9 mln sq. ft. by end-FY18. Its total warehousing capacity stood at 5.3 mln sq. ft. as at end-FY17. (The Star Online)

• Puncak Niaga Holdings Bhd’s 2Q2017 net loss expanded by 66.0% Y.o.Y to RM30.4 mln, from RM18.3 mln last year, on the back of higher operating costs, despite a 186.0% Y.o.Y surge in revenue at RM29.6 mln, from RM10.4 mln previously.

• Meanwhile, cumulative 1H2017 net loss also increased by 15.0% Y.o.Y to RM73.1 mln, from RM63.8 mln in the last preceding year, although revenue spiked 113.0% Y.o.Y to RM49.9 mln, from RM23.5 mln - due to the aforementioned reasons. On its prospects, the group is also looking to explore opportunities in new areas such as oil palm plantation and property development, aside from its core businesses. (The Edge Daily)

• MMC Corp Bhd posted a 49.7% Y.o.Y drop in 2Q2017 net profit to RM62.9 mln, from RM125.0 mln a year ago, attributed to the (i) the inclusion of a gain on sale of land at Senai Airport Free Industrial Zone in the previous period, (ii) the substantial completion of the KVMRT-SBK Line in 2016, and (iii) power outages that occurred at Tanjung Bin Energy's power plant in Johor. Quarterly revenue meanwhile, inched 0.6% Y.o.Y lower to RM944.4 mln, from RM950.3 mln in 2Q2016.

• Net profit in 1H2017 came in 33.1% Y.o.Y lower at RM118.1 mln, from RM176.4 mln in the previous corresponding period, while revenue declined slightly by 0.9% Y.o.Y to RM1.87 bln, from RM1.89 bln previously. (The Edge Daily)

• MMS Ventures Bhd’s 2Q2017 net profit soared 57.5% Y.o.Y to RM9.0 mln against RM5.7 mln last year, boosted by higher other operating income attributed to the fair value adjustment of other investments and the increase in interest income earned. Revenue also gained 46.4% Y.o.Y to RM29.4 mln, from RM20.1 mln in 2Q2016.

• Cumulative 1H2017 net profit, meanwhile, more than doubled to RM13.1 mln, from RM5.5 mln a year ago, while revenue jumped 65.2% Y.o.Y to RM44.3 mln, from RM23.9 mln in 1H2016. Consequently, the group has also proposed a transfer of its listing to the Main Market of Bursa Malaysia from the ACE Market.

• Going forward, MMS Ventures anticipates orders coming in from the growing smart devices, automotive and general lighting segments. (The Edge Daily)

• Mah Sing Group Bhd's 2Q2017 net profit improved 1.8% Y.o.Y to RM90.4 mln, from RM88.8 mln in the same period last preceding year, despite a 6.0% Y.o.Y drop in revenue to RM727.1 mln, from RM773.9 mln last year. The slight growth in earnings was mainly attributable to higher interest income. ? Cumulatively, its 1H2017 net profit slipped 1.6% Y.o.Y to RM180.8 mln, from RM183.9 mln, dragged down by higher selling, marketing and administrative expenses, as revenue declined 2.2% Y.o.Y to RM1.45 bln, against RM1.48 bln in 1H2016. The group expects to increase its landbanks in the Klang Valley to 75.0% from the current 67.0% in the next two years. (The Star Online)

• CIMB Group Holdings Bhd's 2Q2017 net profit grew 26.0% Y.o.Y to RM1.1 bln, from RM872.8 mln a year earlier, lifted by higher net interest and Islamic banking income, while revenue rose to RM4.33 bln from RM3.90 bln.

• For 1H2017, the group’s net profit rose to RM2.28 bln, compared to RM1.69 bln last year, on the back of stronger revenue, which gained 13.9% Y.o.Y to RM8.69 bln, from RM7.63 bln in 1H2016. The group declared a first interim net dividend of 13.0 sen per share to be paid via cash or an optional dividend reinvestment scheme.

• Looking ahead, CIMB remained cautiously optimistic over 2H2017’s prospects due to Malaysia and Indonesia's continued economic growth, as well as expectations of gradual improvement in Singapore and Thailand’s economies. (The Edge Daily)  

Source: Mplus Research - 29 Aug 2017