Uptrend To Return, But More Measured

• Despite opening higher at the start of the trading bell, profit taking activities in selective index heavyweights sent the FBM KLCI (-0.3%) lower and halted its four straight day winning streak. The lower liners ended mostly lower as the FBM Small Cap and FBM Fledgling fell 0.5% each, albeit the FBM ACE gained 0.2%. Meanwhile, the broader market ended mostly negative.

• Market breadth turned negative as decliners overpowered advancers on a ratio of 716-to-387 stocks, while 361 stocks flatlined. Traded volumes slipped 7.0% to 6.48 bln shares as market sentiment turned bearish on profit taking activities.

• More than half of the key index constituents retreated, dragged down by Nestle (-40.0 sen), followed by Petronas Gas (-20.0 sen), AmBank (-20.0 sen), Genting (-14.0 sen) and Sime Darby (- 10.0 sen). Semiconductor giants like KESM Industries (-72.0 sen), Malaysian Pacific Industries (-40.0 sen) and Inari (- 15.0 sen) sank, while BAT and Scientex slipped 70.0 sen and 35.0 sen respectively.

• Significant gainers on the broader market were Supermax (+23.0 sen), Dutch Lady (+20.0 sen), Uchi Technologies (+17.0 sen), Air Asia (+15.0 sen) and MMC Corporation (+15.0 sen). Tenaga (+18.0 sen) topped the big board advancers list, followed by KLK (+6.0 sen), MISC (+6.0 sen), IOI Corporation (+3.0 sen) and Press Metal (+3.0 sen).

• Asian benchmark indices continue to post relatively strong gains yesterday as the Nikkei gained 0.6%. The Hang Seng Index (+0.4%) rallied for the eleventh straight session to close above the 31,000 psychological level, while the Shanghai Composite added 0.1%, lifted by gains in consumer shares. ASEAN stockmarkets, meanwhile, ended mostly positive.
• U.S. stockmarkets advanced to close at fresh record high levels overnight as the Dow gained 0.4% ahead of the corporate earnings season. On the broader market, both the S&P 500 and Nasdaq added 0.1% each as the former was lifted by the healthcare sector (+1.1%).
• Earlier, European stockmarkets – the FTSE (+0.5%), CAC (+0.7%) and DAX (+0.1%), all advanced, tracking the positive momentum in Asian equities. The positive sentiment was also supported by the upbeat Eurozone’s unemployment rate that fell to 8.7% in November 2017 – the lowest level since January 2009.

The Day Ahead

• After a mild pullback yesterday, we think the market may resume its uptrend, albeit the overbought conditions still permeates. The strong global equity market undertone, brought about by the gains in many overseas markets, will continue to drive the local market as well.

• The way up, however, could be more measured as we see increased sellinginto-strength activities with more market players could opting to lock-in profits on some of their winning positions. As it is, many stocks, particularly the lower liners and broader market shares, have made decent gains over the past few weeks where their valuations are already stretched, thus leaving little room for further near term upsides.

• On the upside, we see resistances at the 1,837-1,840 levels, while on the downside, the support are pegged at 1,820 and 1,800 points respectively.

Company Update

• Mitrajaya Holdings Bhd has been appointed as the main building works contractor for a public housing project in Precint 17, Putrajaya under the 1Malaysia Civil Servants Housing Programme (PPA1M). The RM103.1 mln contract was awarded to the construction firm’s wholly-owned unit, Pembinaan Mitrajaya Sdn Bhd, by Putrajaya Homes Sdn Bhd. The contract will commence on 15th January 2018 for a duration of 36 months and it is expected to be completed by 14th January 2021. (The Edge Daily)

Comments

• The award of the above contract falls within our orderbook replenishment target of RM600.0 mln for 2018 and consequently lifting its construction orderbook to approximately RM2.00 bln. We also assumed that the new contract could command similar EBITDA margin as its previous contracts at around 13%- 15%.

• With the construction orderbook falling within our expectations, we leave our earnings forecast unchanged and we maintain our HOLD recommendation on Mitrajaya with an unchanged target price of RM0.95. Our target price was derived from sum-of-parts valuation 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.

Company Brief

• Serba Dinamik Holdings Bhd is planning to raise up to RM433.9 mln via a private share placement to independent third party investor(s) to be identified later, mainly for the partial development of Pengerang eco-Industrial Park (PeIP).
• The placement will involve up to 133.5 mln new shares representing 10.0% of the company enlarged issued share capital. (The Star Online)
• IDimension Consolidated Bhd has been slapped with additional income tax and penalty amounting to RM406,019 for its 2013 and 2014 assessment years by the Inland Revenue Board (IRB). The additional tax came up to RM280,013, with a 45.0% penalty of RM126,006. The charges were imposed as expenses previously charged in the aforementioned periods were not qualified for tax deduction under Section 33(1) of the Income Tax Act, 1967. (The Edge Daily)

• Perdana Petroleum Bhd has signed four time charter party agreements with its major shareholder, Dayang Enterprise Holdings Bhd to supply two accommodation work barges and two anchor handling tug/supply vessels for an estimated RM41.8 mln.

• The four vessels, which will be chartered for nine months, came together with an option of three monthly extensions, starting from 1st March 2018. The vessels charter is related to the contract secured by Dayang for the maintenance, construction and modification works for Baronia Rejuvenation CP 3. (The Edge Daily)

• Sedania Innovator Bhd has appointed Daniel Bernd Ruppert as its Chief Executive Officer, effective 8th January 2018, replacing Mahadzer Arshad who resigned due to personal commitments. Ruppert was previously the Director of business development at LNE Network Systems (Asia) Sdn Bhd, a contract manufacturer of electronic components. (The Edge Daily)

• Uzma Bhd has secured three umbrella contracts from Petronas Carigali Sdn Bhd (PCSB) for the provision of electrical submersible pump (ESP) and services to the latter.

• The project include the supply of jointed tubing ESP and coiled tubing ESP and their respective deployments, as well as surveillance, monitoring and maintenance of ESP.

• The tenure for each of the umbrella contract is three years, commencing from 20th November 2017 until 19th November 2020, with a first extension option of one year. (The Star Online)

• Peterlabs Holdings Bhd has appointed Lau Kin Wai as Executive Director of the company. Mr. Lau is currently the Chairman of iCandy Interactive Ltd, the Executive Director of Fatfish Internet Group Ltd and Managing director of Fatfish Global Ventures AB (Sweden). He is also a Non-Executive Director of Sedania Innovator Bhd. (The Edge Daily)

• Prestar Resources Bhd, which is planning to list its 51.0%-owned manufacturing and trading subsidiary Tashin Steel Sdn Bhd (TSSB) on the ACE Market, will do so through a special purpose vehicle, Tashin Holdings Bhd, by 4Q2018.

• As part of the proposed listing, Prestar and Formula Naga Sdn Bhd – the owner of the remaining 49.0% stake in TSSB will transfer their stakes in TSSB to Tashin Holdings via a share sale agreement for RM144.1 mln.

• The share sale will be satisfied by Tashin Holdings issuing around 288.1 mln new shares at an issue price of 50.0 sen per share to Prestar and Formula Naga. This will result in Prestar and Formula Naga owning 51.0% and 49.0% stake in Tashin Holdings respectively.
• Subsequently, Tashin Holdings will go for an initial public offering (IPO) that will involve the issuance of 59.1 mln new shares, which is equivalent to 17.0% of its enlarged share capital, at an issue price to be determined later. (The Edge Daily)

Source: Mplus Research - 10 Jan 2018