• The FBM KLCI (+0.3%) finished on an upbeat tone, as foreign selling ebbed ahead of the upcoming Malaysian Budget 2018 in late October. The key index also notched a 0.5% W.o.W gain to close higher for the week. All the lower liners – the FBM Small Cap (+0.4%), the FBM Fledgling (+0.1%) and the FBM ACE (+0.8%) advanced, alongside the broader market, with the exception of the Mining sub-sector.

• Market breadth was positive advancers beat decliners on a ratio of 488-to-349 stocks. Traded volume, however, dropped 21.0% to 2.49 bln shares as investors retreated to the sidelines ahead of the release of the U.S. jobs data for September.

• Key index advancers include BAT (+82.0 sen), Petronas Dagangan (+12.0 sen), Hong Leong Financial Group (+8.0 sen), Sime Darby (+8.0 sen) and Genting (+7.0 sen). Meanwhile, Chin Teck Plantations (+33.0 sen), KESM (+20.0 sen), Panasonic Manufacturing (+20.0 sen) and Aeon Credit (+14.0 sen) topped the broader market gainers’ list. Lotte Chemical (+13.0 sen) also rebounded, despite falling below RM5.00 following a stop work order issued by the government last Monday.

• On the flipside, the broader market decliners include Magni-Tech (-21.0 sen), Enra (-18.0 sen), Knusford (-13.0 sen), Padini (-11.0 sen) and Riverview Rubber Estates (-9.0 sen). Meanwhile, there were only four major decliners on the Main Board last Friday, led by KLCC (-2.0 sen), followed by Genting Malaysia, MISC, and Telekom which was lower by 1.0 sen each.

• Key benchmark regional indices rallied ahead of the U.S. nonfarm payrolls data. The Nikkei finished higher by 0.3% for the third consecutive day, driven by recordbreaking close on Wall Street overnight. Similarly, the Hang Seng (+0.2%) also closed in the green, although gains were capped by losses in Macau casino shares amid lower-than-expected number of tourists during the Golden Week period, while ASEAN stockmarkets finished in the positive territory last Friday.

• Wall Street snapped its long run of record close following the first monthly decline in U.S. nonfarm jobs in seven years due to the recent hurricanes. The Dow (- 0.01%) was flat with gains in materialsrelated stocks offsetting losses in the telecommunication services sector. The S&P 500, meanwhile, also trimmed 0.1%, dragged down by pharmaceutical shares on fears of competition from Amazon. The Nasdaq (+0.1%), however, bucked the general decline and advanced for the ninth-straight session.

• Key European stockmarkets lost ground on Friday, weighed down by lower-than expected U.S. employment data and persisting Spanish political drama. The FTSE (+0.2%), however, closed in the green – led by gains in defensive counters, while the CAC and the DAX ended down 0.4% and 0.1% respectively.

The Day Ahead

• There appears to be some buying support as the key index attempts to find some footing around the 1,750 – 1,760 levels after the recent market selldown. We see further near recovery for now, but the gains may be limited as market conditions are still tentative with market players likely to adopt quick profit taking strategies due to the lack of fresh leads.

• On the upside, the 1,765 resistance should be cleared with ease, but the 1,770 level may prove to be more formidable for now amid a still cautious market environment.

• Similarly, we see the lower liners seeing more short-term trades with retail players likely to adopt hit-and-run tactics in view of the absence of a clear market direction for now.

Company Update

• Econpile Holdings Bhd has bagged a RM48.0 mln contract from Malaysian Resources Corp Bhd (MRCB) for its 9 Seputeh mixed development project at Old Klang Road. The contract entails piling and basement works for three residential blocks, a commercial area, and a two-storey basement car park. Econpile expects the project to be completed in about 18 months. (The Edge Daily)

Comments

• The abovementioned contracts marks the second major contract secured by the group in FY18, bringing its total orderbook replenishment to RM66.0 mln – 11.0% of our targeted orderbook replenishment rate of RM600.0 mln for FY18. The award of the new projects brings its total outstanding construction orderbook to approximately RM1.20 bln, implying a healthy orderbook-to-cover ratio of 2.1x against FY17 revenue of RM581.9 mln, which will provide earnings visibility over the next 2-3 years.

• With the contract falling within our targeted orderbook replenishment rate of RM600.0 mln for FY18, we leave our earnings forecast unchanged. Consequently, we maintain our HOLD recommendation but with a higher target price of RM3.15 by ascribing a higher target PER of 16.5x (from 16.0x) to its FY18 EPS of 19.2 sen. The higher ascribed PER is in tandem with the general uptick in the construction sector’s valuations.

Company Brief

• Watta Holding Bhd has decided to stop its trading and distribution of its lossmaking automotive batteries business by 31st December 2017 and focus on its telecommunications products business.

• Its two automotive batteries units’ combined after-tax losses had increased from RM0.3 mln in FY14 to RM1.6 mln in FY16. Revenue had also declined from RM22.1 mln to RM14.9 mln in the same period. Since the implementation of AFTA in 2007, there has been influx of foreign brands and importation of automotive batteries into Malaysian markets which creates a stiffer competition in the market.

• The automotive batteries business account for 30.1% of group's revenue for 9MFY17. The disposal would also see a one-off redundancy cost and impairment loss on assets of RM2.0 mln. (The Star Online)

• Yinson Holdings Bhd’s unit, Yinson Juniper Ltd has issued US$100.0 mln (RM423.7 mln) perpetual securities, the first tranche under its US$500.0 mln multi-currency perpetual securities programme set up in July 2017.

• Yinsun issued the securities on 5th October 2017 by way of book building at par with a coupon rate of 7.85% and with a call option on the fifth anniversary of their issuance. The securities were listed on the Singapore Exchange Securities Trading Ltd on 6th October 2017.

• Proceeds from the issuance would be used for the group’s general corporate purpose and, in particular, future capital investments.

• Separately, Lembaga Tabung Haji (LTH) had ceased to be it substantial shareholder of Yinson after disposing of 14.0 mln shares with a market value of RM50.3 mln. This pared down the fund’s shareholding in Yinson to 40.9 mln shares or 3.8%. (The Star Online)

• The Department of Environment (DOE) has lifted its stop-work order on Lotte Chemical Titan Holding Bhd's (LCT) KBR Catalytic Olefins Technology catalytic cracking reactor (K-COT) within LCT's TE3 Project. The stop-work order issued by the DOE on 1st October 2017 was lifted upon the company satisfactorily completing the requested remedial actions.

• To recap, LCT had on 1st October 2017 received the stop-work order from the DOE on its K-COT to mitigate and reduce odour emission and eliminate surface oil sheen/film discharge. The commissioning and the commercial start-up of its TE3 Project remains on target for completion by 4Q2017. (The Edge Daily)

• Supermax Corp Bhd plans to pay a single-tier final dividend of three sen a share to its shareholders. The rubber glove manufacturer also intends to seek a renewal of shareholders' mandate for the company to buy back its own shares. On its share buy-back, Supermax said it plans to purchase up to 10.0% of the company's issued share capital. (The Edge Daily)

• SYF Resources Bhd’s wholly-owned subsidiary, SYF Development Sdn Bhd, has paid RM1.1 mln to settle outstanding tax claimed by the Inland Revenue Board (IRB). On 5th October 2017, the subsidiary was served with a winding-up petition by IRB over alleged failure to settle outstanding amounts totalling RM2.4 mln (including interest and penalty) for the years of assessment 2014 and 2015.

• However, SYF Resources has clarified that the total amount outstanding to date is actually RM1.1 mln as several payments had previously been made to IRB. (The Edge Daily)

• Muhibbah Engineering (M) Bhd's 49%- owned unit has secured additional design and construction work worth 105.8 mln Qatari riyal or RM120.5 mln at the Um Alhoul Economic Zone. The additional work order is associated with a contract it announced in January to build road and infrastructure at the economic zone for 356.7 mln Qatari riyal or RM438.1 mln, which is currently underway.

• The new work order involves designing and building complementary utilities and pavements for synchrolift, travel lift and the north side of the canal areas in the economic zone. The additional work will begin immediately and is expected to be completed by 2Q2018. (The Edge Daily)

• Karyon Industries Bhd is selling a piece of vacant freehold industrial land to Parit Yusof Oil Mill Sdn Bhd for about RM4.7 mln.

• The proposed disposal represents an opportunity for the company to unlock the value of assets that do not contribute towards the core business of Karyon and its subsidiaries, as the land is currently not in use.

• The gross proceeds of RM4.4 mln will be used for working capital and for the estimated expenses in relation to the proposed disposal. (The Edge Daily) 
• Boustead Plantations Bhd's proposed acquisition of 42 parcels of plantation land in Sabah for RM750.0 mln has been accepted by vendor Pertama Land & Development Sdn Bhd, a subsidiary of DutaLand Bhd. Both parties’ board has agreed to the sale and purchase of the plantation asset subject to the terms and conditions to be mutually agreed upon. The SPA shall be executed no later than 30 days from 6th October 2017. (The Edge Daily)  

Source: Mplus Research - 9 Oct 2017