• Late buying on selective index heavyweights sent the FBM KLCI (+0.3%) higher last Friday as the key index recorded its third weekly winning streak – rising 0.4% W.o.W. The lower liners – the FBM Small Cap, FBM Fledgling and FBM ACE, however, all shed 0.2% each as they remained splashed in red, while the broader market ended on a mixed note.

• Market breadth stayed negative as losers overcame winners on a ratio of 509-to- 369 stocks. Traded volumes, however, added 13.4% to 2.15 bln shares on rotational play amongst the broader market shares.

• Key winners on the FBM KLCI were BAT (+48.0 sen), Genting Malaysia (+14.0 sen), Hong Leong Financial Group (+14.0 sen), Genting (+12.0 sen) and IOI Corporation (+12.0 sen). Amongst the biggest gainers on the broader market were Far East Holdings (+30.0 sen), Time dotCom (+30.0 sen), Genetec (+19.0 sen) and Lafarge (+18.0 sen). Astro jumped 8.0 sen after reporting a stellar set of quarterly earnings.

• Magni-tech Industries sank RM1.14 after reporting a disappointing set of quarterly earnings while other notable losers of the broader market include United Plantations (-80.0 sen), Scientex (-63.0 sen), Panasonic (-60.0 sen) and Concrete Engineering Products (-17.0 sen). Meanwhile, KLK (-10.0 sen), Petronas Dagangan (-8.0 sen), Petronas Chemicals (-7.0 sen), Public Bank (-4.0 sen) and MISC (-3.0 sen) topped the big board decliners list.

• Asia benchmark indices ended mostly higher last Friday as investors brushed off North Korea’s nuclear test launch that flew past Japan. The Nikkei added 0.5% and subsequently registered its biggest weekly gain in 10 months (+ 3.3% W.o.W) as the Japanese Yen weakened against the U.S. Dollar. The Hang Seng rose 0.1% after recouping all its intraday losses, but the Shanghai Composite (-0.5%) extended its losses. ASEAN stockmarkets, meanwhile, finished mostly higher.

• U.S. stockmarkets rebounded to close at record high levels last Friday as the Dow gained 0.3% after the stronger-thanexpected inflation data boosted the expectation over another interest rate hike by end-2017. On the broader market S&P 500 (+0.2%) closed above the 2,500 psychological level, while the Nasdaq finished 0.3% higher.

• Earlier, European benchmark indices – the FTSE (-1.1%), CAC (-0.2%) and DAX (- 0.2%), however, all ended in the negative territory. The former sank amid the Bank of England’s hawkish stance over interest rate bolstered the British Pound against the Greenback, while the geopolitical tension in North Korea dented the overall market sentiment

The Day Ahead

• Despite the superficial gains last Friday, the FBM KLCI may continue to head higher over the near term in tandem with the record performances on Wall Street at the end of last week. However, the gains are likely to be muted given that market breadth remains on the dull side with fresh buying interest largely insipid with the lack of fresh leads.

• Consequently, we think the 1,790 level will remain a major hurdle for the market to clear as the market tethers on the expensive level once again. At the same time, there could also be bouts of profit taking as market players close out their short-term trading positions from last week.
   
• The lower liners and broader market shares could also continue to see a mixed trading pattern with few trading catalysts to sustain the buying momentum.

Company Update

• Kimlun Corporation Bhd has clinched a RM214.8 mln job from Hillcrest Gardens Sdn Bhd to build two blocks of condominiums and ancillary buildings in Puchong, Selangor. Although there was no mention when works will begin for the project, it will be slated for completion by June 2020. (The Star Online)

Comments

• The abovementioned contract brings Kimlun’s construction orderbook YTD to RM477.8 mln, representing 79.6% of our orderbook replenishment target of RM600.0 mln for 2017. We think that the project will be able to generate a gross profit margin between 12.0%-13.0%, which is similar with its previous construction projects margin. With that, the group’s unbilled construction order book stands at approximately RM2.00 bln will provide earnings visibility over the next 2-3 years.

• With the orderbook replenishment falling within our estimates, we made no changes to our earnings forecast. We also reiterate our HOLD recommendation on Kimlun with an unchanged target price of RM2.30. Our target price is derived from ascribing an unchanged target PER of 11.0x to its 2018 construction earnings and PER of 6.0x (unchanged) to its manufacturing earnings, while its property development segment’s valuation remain unchanged at 0.6x its BV due to its relatively small-scale development projects.

Company Update

• AWC Bhd has clinched a subcontract for the provision of plumbing works worth RM32.6 mln, from Damai City Sdn Bhd for the 8 Conlay project. The project will commence in phrases, from 14th May, 2019 until 31st May 2021.

Comments

• We continue to be positive on AWC’s capability to secure premium plumbing contracts due to its proven track record and notable projects already secured like Signature Tower, Tun Razak Exchange. As revenue from the 8 Conlay contract will only be recognised from FY20 onwards, there is no bearing on our earnings forecast for FY18 and FY19. Consequently, we maintain our BUY recommendation on AWC with an unchanged target price of RM1.20.

• Our target price is derived from ascribing an unchanged target PER of 14.0x to its FY18 EPS of 8.7 sen. The targeted PER is based on a discount to the its nearest competitor, UEM Edgenta Bhd, due to the AWC’s smaller market capitalisation.

Company Briefs

• Daya Materials Bhd is collaborating with MIMOS Semiconductor Sdn Bhd (MSSB) to provide a crowd management and passenger system for rail as well as non-rail systems. Consequently, the group has signed a Memorandum of Understanding (MoU) with the latter to work together in certain areas of technology, which includes but is not limited to the crowd management and passenger system.

• The system will include information technology data transfer, security information capabilities, monitoring, management and recording of mass people and materials movement, which can be applied in rail or non-rail systems such as port entry and stadiums.

• IT specialist Accsoft Technology Bhd has entered into an MoU with Malaysian Formula Bikes Sdn Bhd - a local firm that assembles and trades motorcycles, to exploit the potential of last mile delivery in the e-commerce industry.

• Berjaya Corporation Bhd is selling its entire 100.0%-equity stake in Chinabased Berjaya Green Resources Environmental Engineering (Foshan) Co Ltd (BGREE) for RMB78.5 mln (RM50.9 mln). The proceeds from the proposed disposal will be used for working capital purposes.

• Meanwhile, Berjaya Food Bhd’s 1QFY18 net profit rose 7.0% Y.o.Y to RM5.3 mln, from RM5.0 mln last year, on the back of higher number of cafes in operation, while revenue was 9.0% Y.o.Y higher at RM154.4 mln, from RM141.4 mln in the last corresponding quarter. Subsequently, the group has declared a first interim dividend of 1.0 sen, payable on 27th October, 2017.

• DRB-Hicom Bhd’s partner, Zhejiang Geely Holding Group will be nominating a suitable candidate to take on the role of Chief Executive Officer (CEO) at Perusahaan Otomobil Nasional Sdn Bhd (PONSB), the production arm of Proton Holdings Bhd.

• The nomination for PONSB's CEO is included in the definitive deal with Geely, in which Geely is committed to not only hold an investment in Proton but also to lend its expertise in production, manufacturing, operations and marketing (PONSB).

• Omesti Bhd expects to raise its recurring income contribution to more than 50.0% of its total revenue within two to three years, mainly through longer term collaborations with existing clients. The recurring income segment contributed about 20.0% to its FY17 topline.

• The Federal Government has renewed Hibiscus Petroleum Bhd’s major project status to the West Seahorse Project, located in the Gippsland Basin, off the coast of Victoria. The project is undertaken by the group’s unit, Carnarvon Hibiscus Pty Ltd and aims to develop an important oil reservoir which is estimated to hold recoverable oil reserves of about 9.2 mln barrels.  

Source: Mplus Research - 18 Sept 2017