• Despite opening higher at the start of the trading bell, quick profit taking sent the key index to linger in the negative territory for most of the trading session before closing 0.1% yesterday as the FBM KLCI bucked the positive performance across key regional indices. The lower liners also ended mostly lower as the FBM Small Cap and FBM ACE shed 0.2% and 0.4% respectively, while the broader market closed mixed.

• Market breadth stayed negative as losers outstripped gainers on a ratio of 477-to- 400 stocks, while 386 counters flat-lined. Traded volumes, however, rose 2.7% to 2.40 bln shares on rotational play amongst the lower liners.

• Nestle (-30.0) topped the big board decliners list, followed by Am Bank (-13.0 sen), Genting Malaysia (-12.0 sen), MISC (-10.0 sen) and Tenaga (-6.0 sen). BAT (- RM1.92) sank after its shares were excluded from the KLCI components list while other significant decliners on the broader market were Tasek (-36.0 sen), Perdana Petroleum (-30.0 sen), Lafarge (- 29.0 sen) and Selangor Properties (-26.0 sen).

• Notable advancers on the broader market include Heng Yuan (+RM1.06), Far East Holdings (+44.0 sen), Malaysian Pacific Industries (+30.0 sen), Hartalega (+29.0 sen) and Dutch Lady (+14.0 sen). Meanwhile, Hong Leong Bank (+28.0 sen), Hong Leong Financial Group (+20.0 sen), Petronas Gas (+20.0 sen), Petronas Dagangan (+12.0 sen) and Genting (+9.0 sen) were the key index biggest gainers.

• Asia benchmark indices started off the week on a solid footing with the Nikkei (+1.6%) recorded its biggest daily gain in a month, supported by financial and export-related shares. The Shanghai Composite added 0.1% after being traded in a lackluster manner, while the Hang Seng Index (+0.7%) rebounded, taking cue from the positive developments in Wall Street on last Friday. ASEAN stockmarkets, meanwhile, closed mostly higher.

• U.S. stockmarkets extended their gains overnight to close at fresh record high levels as the Dow added 0.6% investors focused on the progress of the proposed tax legislation. On the broader market, the S&P 500 climbed 0.6%, while the Nasdaq (+0.9%) ended marginally below the 7,000 psychological level.

• Earlier, European benchmark indices – the FTSE (+0.6%), CAC (+1.3%) and DAX (+1.6%), all advanced after the U.S. Dollar strengthened against a basket of currencies. Gains were also spurred by M&A activities with French aerospace and defense group Thales announced it had agreed to buy chipmaker Gemalto for around €4.80 bln to in bid to create the world leader in digital security.

The Day Ahead

• Although there were bouts of rally in global equities, the immediate local market environment is expected to remain relatively insipid as most market participants are staying on the sidelines with the lack of positive catalysts. Therefore, we expect most indices on Bursa Malaysia to continue on their drifting mode.

• Still, we think that the downside could be cushioned by the ongoing window dressing activities with the key index likely to find firm support at the 1,730 level for now. Meanwhile, the resistances are at 1,765 and 1,770 levels.

• We expect gains over the rotational play on the lower liners and the broader market will be kept modest as investors would opt for a clearer market direction. Additionally, trading interest may thin as we approach the year end Christmas and New Year breaks.

Company Update

• Econpile Holdings Bhd, via its subsidiary Econpile (M) Sdn Bhd, has secured a RM32.8 mln contract from Majestic Maxim Sdn Bhd, to undertake piling and related works for a mixed development in Kuala Lumpur. The subsidiary will undertake bored piling, pilecaps and substructure works for four 37-storey blocks of apartments; an eight-storey podium for retail and office space, as well as car park. The duration of the contract is about 10 months. (The Edge Daily)

Comments

• With the incorporation of the abovementioned project, the group’s total orderbook replenishment now stands at RM307.5 mln mln – 51.3% of our targeted orderbook replenishment rate of RM600.0 mln for FY18. We expect the aforementioned contract could generate a pretax profit margin between 9.0%- 11.0%, which is similar with margins on the piling works for building projects.

• The award of the new project 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. We also maintain our HOLD recommendation with an unchanged target price of RM3.15 by ascribing a unchanged target PER of 16.5x to its FY18 EPS of 19.2 sen.

Company Brief

• Salcon Bhd’s joint-venture (JV) in Vietnam has secured a contract worth RM77.1 mln from the water authority of Haiphong City to undertake phase two of its water supply system. The 75:25 JV company, which is held by Bach Dang Construction Corporation JSC and Salcon respectively had accepted the contract from Haiphong Water Joint Stock Company. The project includes the repairing and upgrading the water supply system, with no option for renewal. (The Star Online)

• Chin Hin Group Bhd has been awarded a contract worth RM238.3 mln from Saujana Vision for the construction of an integrated workers complex with comprehensive facilities in Pengerang, Johor. The 12-month contract is expected to commence on the 1st January, 2018 and will be funded by internally generated funds and/ or external borrowing. (The Star Online)

• Iris Corp Bhd has clinched a three-year contract worth RM5.0 mln from Malaysia's Home Affairs Ministry for the provision of equipment, software and facial live capture image maintenance services at the Immigration Department of Malaysia. The group had accepted the acceptance letter from the government on 15th December, 2017. Contract works include the provision of maintenance services of equipment, software, and facial live capture image (application system) at all passport recipient and issuance offices of Immigration Department of Malaysia, and is expected to commence on 1st January, 2018. The acceptance letter also involves the submission of performance bond to MOHA (Home Affairs Ministry). (The Star Online)

• Singapore tycoon Peter Lim is injecting his healthcare assets – comprising the 100.0% equity stake in Thomson Medical Pte Ltd and 70.4% of TMC Life Sciences Bhd, into his Singapore-based real estate company Rowsley Ltd.

• Consequently, Rowsley will acquire Sasteria Pte Ltd, the owner of Thomson Medical and the controlling shareholder of TMC Life, from Lim for S$1.6 bln (RM4.85 bln). Mr. Lim is also the controlling shareholder of Rowsley, with an indirect 45.4% interest via Garville Pte Ltd, Garville (Hong Kong) Ltd, Jovina Investments Ltd and Bellton International Ltd. Thomson Medical is Singapore’s largest private provider of healthcare services for women and children, while TMC Life operates the Tropicana Medical Centre in Kota Damansara. (The Edge Daily)

• Hai-O Enterprise Bhd’s 2QFY18 net profit rose 34.8% Y.o.Y to RM21.4 mln, from RM15.9 mln in the same quarter last year, on higher revenue in its wholesale and multi-level marketing (MLM) divisions. Revenue for the quarter, meanwhile, gained 23.8% Y.o.Y to RM123.5 mln, from RM99.8 mln a year ago, and the group also declared an interim dividend of six sen per share.

• Cumulative 1HFY18 net profit jumped 53.2% Y.o.Y to RM39.3 mln vs RM25.7 mln a year earlier, while revenue was 39.1% Y.o.Y higher at RM248.1 mln, from RM178.4 mln last year. (The Edge Daily)

• Berjaya Sports Toto Bhd's 2QFY18 net profit inched lower to RM61.7 mln, compared to RM62.2 mln a year ago, dragged mainly by lower contribution from its units HR Owen Plc and International Lottery Totalizator Systems, Inc (ILTS). Quarterly revenue also declined about 5.0% Y.o.Y to RM1.38 bln, from RM1.45 bln in the last corresponding period. Berjaya also declared a second interim dividend of four sen per share, payable on 13th February, 2018.

• For the cumulative 1HFY18 however, net profit grew 13.0% Y.o.Y to RM136.0 mln, from RM120.9 mln a year earlier, despite a marginal fall in revenue by 1.0% Y.o.Y to RM2.86 bln, from RM2.89 bln. (The Star Online)

• Ekovest Bhd has issued a takeover notice to buy a 62.0% equity interest in Iskandar Waterfront City Bhd at RM1.50 per share, via a cash deal or a one-for-one share swap deal to take the latter private. Subsequently, the group will submit the bid for approval to its shareholders at an extraordinary general meeting (EGM) that is expected to be convened in the middle of February 2018, or earlier.

• The offer price of RM1.50 represents a discount of more than 50.0% to IWCity’s estimated revised net asset value of RM3.03. Further, Ekovest has also signed a conditional share sale agreement (SSA) with Kumpulan Prasarana Rakyat Johor Sdn Bhd to acquire the latter’s 6.4% equity stake in IWCity totaled RM80.4 mln. (The Edge Daily)

• United Malacca Bhd's 2QFY18 net profit narrowed 30.5% Y.o.Y to RM12.9 mln, from RM18.5 mln last year, weighed down by the extended wet weather in Sabah which had affected crop production, as well as fresh fruit bunches (FFB) yield and higher unit cost of production. Revenue, however, gained 8.8% Y.o.Y to RM81.0 mln, from RM74.4 mln a year ago. Despite the weaker results, the group has declared a first interim dividend of six sen, payable on 8th February, 2018.

• Meanwhile, cumulative 1HFY18 net profit also lost 12.3% Y.o.Y to RM19.2 mln vs RM21.9 mln a year ago, while revenue grew 17.6% Y.o.Y to RM151.3 mln, from RM128.7 mln in 1HFY17. (The Edge Daily)

• Bina Puri Holdings Bhd has secured a project from Malaysia's Energy Commission to develop a 5MW solar photovoltaic plant in Kunak, Sabah under the commission's large-scale solar plant initiative.

• The project is on a build-own-operate (BOO) basis and is located in Kampung Dasar in Kunak. Consequently, the documentation is expected to be finalised by March 2018. Moving forward, the group plans to add more solar farms and mini hydro powers into its power portfolio. (The Edge Daily)  

Source: Mplus Research - 19 Dec 2017