• Tracking the positive developments across global stockmarkets, coupled with the firmer Ringgit against the Greenback, the FBM KLCI (+0.2%) extended its gains after trading in the positive territory the entire trading session yesterday. The lower liners – the FBM Small Cap (+0.9%), FBM Fledgling (+0.2%) and FBM ACE (+1.4%) all rebounded, while the broader market closed mostly positive.

• Market breadth turned positive as advancers outstripped decliners on a ratio of 589-to-318 stocks. Traded volumes, however, fell 1.6% to 2.24 bln shares amid a still broadly cautious market environment.

• Once again, Petronas Dagangan (+56.0 sen) topped the FBM KLCI advancers list, followed by Genting (+21.0 sen), Hong Leong Financial Group (+20.0 sen), Genting Malaysia (+16.0 sen) and Westports (+12.0 sen). Key winners on the broader market include KESM Industries (+84.0 sen), Hartalega (+61.0 sen), Heng Yuan (+58.0 sen) and Heineken (+48.0 sen). Serba Dinamik added 15.0 sen to close at fresh record high level after reporting a strong set of quarterly earnings.

• Among the biggest losers on the broader market were DKSH (-23.0 sen), Sarawak Oil Palms (-16.0 sen), Genetec (-14.0 sen), Lii Hen (-14.0 sen) and Focus Lumber (-13.0 sen). Meanwhile, BAT (- RM1.00) Petronas Gas (-42.0 sen), PPB Group (-22.0 sen), Telekom (-15.0 sen) and MISC (-8.0 sen) were the big board biggest decliners.

• Asia benchmark indices extended their gains yesterday as the Nikkei gained 0.5% to close at a two-week high. The Hang Seng (+0.6%) closed above the 30,000 psychological level, driven by gains in energy and property developer shares, while the Shanghai Composite gained 0.2%. ASEAN stockmarkets, meanwhile, closed mostly higher.

• U.S stockmarkets retreated from their alltime high levels as the Dow fell 0.3% after the Federal Reserve expressed concern over the impact of the stockmarket’s sharp rise. On the broader market, the S&P 500 slipped 0.1%, dragged down by the weakness in financial and real estate sector that declined 0.4% each.

• European equities closed on a mixed note as the FTSE (+0.1%) eked-out minor gains after trimming most of its intraday gains. The CAC fell 0.3% on weakness in technology sand consumer shares, while the DAX (-1.2%) tanked as market sentiment was dampened by the political uncertainty.

The Day Ahead

• We think the key index will continue to firm up a base around the 1,720 points level as we see further near term recovery after its recent falls. Nevertheless, we see the general market environment remaining relatively subdued as fresh leads are still scant. Therefore, any gains will likely limited to bargain hunting activities and could be punctuated by profit taking activities.

• With the gains likely to be contained, the upsides could be capped at around the 1,725-1,730 levels. Meanwhile, the 1,720 level will serve as the main support, followed by 1,716 level, which is also the FBM KLCI’s recent low.

• Elsewhere, the bouts of trading activities will continue, but as with the index-linked stocks, we see the upsides capped by quick profit taking activities in light of the lack of sustainable leads. COMPANY UPDATE

• Econpile Holdings Bhd’s 1QFY18 net profit grew 28.9% Y.o.Y to RM21.2 mln, buoyed by advanced progress billing in certain projects coupled with the higher billing from its increased orderbook. Revenue for the quarter improved 48.1% Y.o.Y to RM168.9 mln.

• An interim dividend of 1.5 sen per share – representing a 37.9% payout from its 1QFY18 net profit of RM21.2 mln was declared.

Comments

• The results were within expectations with its revenue amounting to 23.5% of our full-year forecast of RM719.6 mln, while its net profit came in at 22.0% of our estimate of RM96.5 mln. The slight variance was mainly due to its higher effective tax rate of 27.2% vs. our estimate of 26.5%.

• With the earnings coming within our expectations, we leave our earnings forecast unchanged. We also maintain our HOLD recommendation with an unchanged target price of RM3.15 by ascribing an unchanged target PER of 16.5x to its FY18 EPS of 19.1 sen, which is in line with its peers with similar market capitalisation.

• HIL Industries Bhd’s 3Q2017 net profit jumped 41.7% Y.o.Y to RM6.4 mln, from RM4.5 mln in the previous corresponding period, on the back of higher profit recognition from its residential project following the completion of Quadz@Kemuning Greenhills. Revenue for the quarter also grew 21.8% Y.o.Y to RM29.5 mln, from RM24.2 mln in 3Q2016.

• Cumulative 9M2017 net profit, meanwhile, gained marginally by 3.4% Y.o.Y to RM2.6 mln, from RM2.5 mln previously – owing to higher interest income and improved performance from its property unit.

• The results were above our expectations, as net profit exceeded our full-year forecast of RM9.6 mln, by RM0.3 mln (or 3.5%), while revenue came in at 77.7% of our estimated revenue of RM93.8 mln. The variance was mainly due to higher EBITDA margin achieved at 23.2% vs. our forecast EBITDA of 20.8%, and higherthan-expected interest income.

Comments

• Following the recent outstanding quarterly results, we increase our 2017 net profit and revenue forecast to RM13.2 mln (from RM9.6 mln, +37.3%) and RM99.2 mln (from RM93.8 mln, +5.8%), on higher property sales and margins, which boosted overall group earnings outlook. Minor adjustments were also made to lower depreciation charges and increase net interest.

• Meanwhile, our 2018 estimated net profit was revised downwards, in-view of lower property sales, following the completion of Quadz@Kemuning Greenhills and weaker margins from the manufacturing segment. Revenue, however, is expected to improved, lifted by additional sales from a key automotive client and its overseas subsidiary.

• Consequently, we upgrade our call on HIL to BUY (from Hold), but with a lower target price of RM0.90 (from RM0.95), after rolling over our valuations to our 2018’s EPS of 3.6 sen. Our target price is premised on a sum-of-parts (SOP) approach, ascribing to a target PER of 11.0x to its manufacturing business and a 25% discount to our revalued net asset value (RNAV) estimate of HIL’s property unit.

• The target PER is similar to other smallto-mid cap peers and is trading at a slight discount to its closest competitor, APM Automotive Holdings, due to the latter’s larger market capitalisation.

Company Brief

• Kerjaya Prospek Group Bhd's net profit spiked 35.0% Y.o.Y to a record RM34.4 mln, from RM25.5 mln last year, on the back of stronger contribution from its construction segment, which offset the slowdown in its manufacturing segment. Revenue for the quarter also rose 20.7% Y.o.Y to RM229.9 mln, from RM190.5 mln in the same quarter last year.

• Meanwhile, 9M2017 net profit surged 30.4% Y.o.Y to RM96.2 mln, from RM73.8 mln, while revenue gained 23.4% Y.o.Y to RM703.4 mln, from RM569.9 mln in 9M2016.

• Topping off the upbeat quarterly results, the group also clinched a contract to build an upmarket Triuni Condominium within "The Sanctuary" development in Batu Uban, Penang, worth RM245.4 mln. (The Edge Daily)

• Telekom Malaysia Bhd registered a 32.5% jump in its 3Q2017 net profit to RM211.8 mln, from RM159.8 mln in the previous corresponding period, boosted by a foreign exchange gain, while revenue inched 0.6% Y.o.Y higher to RM2.94 bln, from RM2.92 bln last year.

• The group’s cumulative 9M2017 net profit also climbed 5.0% Y.o.Y to RM652.7 mln, from RM621.7 mln in the same period in 2016, while revenue came in at RM8.89 bln vs. RM8.82 bln previously. (The Edge Daily)

• TSH Resources Bhd's 3Q2017 net profit almost tripled to RM30.7 mln, compared to RM11.1 mln a year ago – led by strong fresh fruit bunch production growth, coupled with higher average crude palm oil selling price of RM2,576 per tonne. Revenue for the quarter also rose 20.4% Y.o.Y higher to RM256.8 mln, from RM213.3 mln in 3Q2016.

• For the first nine months of 2017, net profit expanded 15.9% Y.o.Y to RM92.3 mln, from RM79.7 mln, while its revenue increased 27.9% Y.o.Y to RM803.6 mln, from RM628.0 mln a year earlier. (The Star Online)

• YTL Corp Bhd's 1QFY18 net profit narrowed 5.0% Y.o.Y to RM142.9 mln, from RM150.3 mln a year ago, weighed down by higher tax expense, coupled with higher costs of sales and finance. Quarterly revenue, however, gained 13.0% Y.o.Y to RM3.93 bln, from RM3.49 bln in 1QFY17. (The Star Online)

• IJM Corp Bhd was awarded a contract to develop the Solapur-Bijapur section of the new National Highway 52 between the states of Maharasthra and Karnataka in India, for RM1.5 bln (2,325 crore rupees). The contract - awarded from the National Highways Authority of India will be on a design, build, finance, operate and transfer basis and is expected to commence in mid-2018 until 2021. (The Edge Daily)

• Hovid Bhd's Managing Director David Ho and private equity firm TAEL Two Partners Ltd, who have offered to take over the company, have lowered the acceptance condition threshold to 75.0% from 90.0%.

• That means the offer is now conditional on the joint-offerors receiving more than 75.0% of the pharmaceutical company's shares, including shares already held or acquired.

• They also made a second extension to the cut-off date for the acceptance of the offer, to 7th December 2017 from 4th December 2017. The original deadline was 20th November, 2017. (The Edge Daily)

• Kuala Lumpur Kepong Bhd (KLK) posted a 35.4% Y.o.Y decline in 4QFY17 net profit to RM242.1 mln, in comparison to RM375.1 mln in the previous corresponding period, mainly due to higher tax expenses, although revenue was 13.7% Y.o.Y higher at RM5.16 bln vs RM4.54 bln previously.

• Full-year net profit lost 36.9% Y.o.Y to RM1.0 bln, from RM1.59 bln in FY16, while revenue grew 27.2% Y.o.Y to RM21.0 bln, from RM16.5 bln last year. KLK has also declared a final single tier dividend of 35.0 sen per share. (The Star Online)

• Tambun Indah Land Bhd’s 3Q2017 net profit fell 5.3% Y.o.Y to RM23.9 mln, from RM25.2 mln previously, on fewer ongoing projects and lower new property sales, while revenue decreased 16.9% Y.o.Y to RM71.0 mln, from RM85.4 mln a year earlier. Despite the softer results, Tambun has declared a first interim dividend of 3.0 sen per share.

• Cumulative 9M2017 net profit dropped 12.2% Y.o.Y to RM68.0 mln, from RM77.4 mln previously, while revenue fell 20.6% Y.o.Y to RM221.6 mln, from RM279.1 mln in 9M2016.

• The group is planning to launch three new developments with a combined gross development value (GDV) of RM213.0 mln over the next 12 months. (The Edge Daily)

• Genting Plantations Bhd registered a 19.0% Y.o.Y drop in its 3Q2017 net profit to RM76.5 mln, from RM94.2 mln, dragged down by lower contributions from its Malaysian plantation operations and its property segment, despite an 8.0% Y.o.Y growth in revenue to RM429.4 mln, from RM396.7 mln in the previous corresponding year.

• Cumulative 9M2017 net profit spiked 48.0% Y.o.Y to RM220.0 mln, from RM149.0 mln a year ago as revenue grew 32.0% to RM1.28 bln, from RM966.7 mln earlier. (The Star Online)

• WCT Holdings Bhd's 3Q2017 net profit surged 70.2% Y.o.Y to RM40.8 mln, from RM24.0 mln, lifted by stronger contribution from its local construction division, while revenue expanded 13.4% Y.o.Y to RM469.8 mln vs RM414.4 mln in 3Q2016.

• 9M2017 net profit also jumped 47.0% Y.o.Y to RM95.3 mln, from RM64.9 mln, although revenue slipped 10.4% Y.o.Y RM1.33 bln, from RM1.48 bln in the same period last year. (The Edge Daily)  

Source: Mplus Research - 23 Nov 2017