Quick Profit Taking In The Offing

• The FBM KLCI (+0.9%) advanced for the third straight session yesterday, in tandem with the positive developments across regional peers amid the robust jobs data in U.S. The lower liners – the FBM Small Cap (+0.6%), FBM Fledgling (+0.3%) and FBM ACE (+0.1%) rose, while the broader market also closed on a positive note, led by the construction sector (+1.9%).

• Market breadth stayed positive as advancers outdone decliners on a ratio of 558-to-360 stocks. Traded volumes climbed 9.7% to 2.47 bln shares amid the positive market sentiment.

• Nestle (+RM5.50) was again the biggest gainer on the key index, while other notable gainers were Petronas Gas (+60.0 sen), Petronas Dagangan (+54.0 sen), Hong Leong Financial Group (+44.0 sen) and Hong Leong Bank (+34.0 sen). Significant advancers on the broader market include consumer products stock like Fraser & Neave (+72.0 sen), Ajinomoto (+52.0 sen), Carlsberg (+46.0 sen) and Heineken (+32.0 sen), while Hartalega jumped 78.0 sen.

• On the flipside, notable decliners on the broader market were Heng Yuan (-32.0 sen), Dutch Lady (-30.0 sen), Panasonic (- 20.0 sen) and MSM (-11.0 sen). SKP Resources slipped 7.0 sen to close lower for the fourth straight session. Meanwhile, there were no losers on the FBM KLCI.

• Asia benchmark indices continue to trend higher on Monday as the Nikkei (+1.7%) advanced for the third straight session, anchored by gains in technology shares. The Hang Seng Index (+1.9%) rose above the 31,000 psychological level, lifted by gains in financial shares on optimism over favourable corporate earnings, while the Shanghai Composite added 0.6%. ASEAN stockmarkets, meanwhile, closed mainly in the green.
• U.S. stockmarkets started off the week on a soft footing as the Dow (-0.6%) erased all its intraday gains ahead of the release of the U.S.’ inflation data. On the broader market, the S&P 500 fell 0.1%, dragged down by the industrials sector (- 1.2%), but the Nasdaq rose 0.4% to register its seventh consecutive winning day.
• Earlier, European benchmark indices ended mostly higher as the CAC and DAX climbed 0.04% and 0.6% respectively, taking cue from the positive sentiment in Asian stockmarkets. The FTSE, however, fell 0.1%, snapping a streak of five consecutive sessions of gains on weakness in mining shares on concern over U.S. tariffs on steel and aluminium.

THE DAY AHEAD

• After yesterday’s hefty gains, coupled with the weaker closing on Wall Street overnight, we see quick profit taking activities that could see the key index surrendering some of yesterday’s gains.

• As it is, much of yesterday’s gains on the key index were driven by bargain hunting activities by local funds, but with still few catalysts available, we think further upsides will be elusive for now and a consolidation is on the cards.

• Nevertheless, we think the pullback could be mild and is merely to lock in some of yesterday’s gains. The quick profit taking activities will also likely to extend to the lower liners and broader market shares as retail players would also opt to cash in on some of their gains.

• Consequently, we think the key index could find support at the 1,860 and 1,850 levels, while the resistances are at 1,870- 1,880 levels.

COMPANY UPDATE

• Econpile Holdings Bhd bagged a RM25.9 mln contract from Putra Perdana Construction Sdn Bhd for the redevelopment of a hospital building and a 12-storey building in Kota Damansara, Selangor.
• Econpile will undertake the earthworks, piling, basement, carpark lower ground and retaining wall for the redevelopment of an existing seven-storey hospital and an additional 12-storey building. The overall duration of the contract was about 15 months. (The Star Online)

Comments

• Together with the latest award, Econpile have secured six major contracts totalling RM467.8 mln in FY18 - representing 78.0% of our orderbook replenishment rate of RM600.0 mln for FY18. The group's current order book stands at approximately RM1.30 bln and will provide earnings visibility over the next three years.

• With the contract falling within our targeted orderbook replenishment rate, we leave our earnings forecast unchanged. Following the recent weakness on its share price, we, upgrade our recommendation on Econpile to BUY with an unchanged target price of RM1.25 by ascribing a unchanged target PER of 16.0x to its FY19 EPS of 7.8 sen.

COMPANY BRIEF

• Ekovest Bhd secured a contract worth RM99.9 mln to undertake improvement and beautification works under Package 2 – Taman Titiwangsa, Kuala Lumpur, which is a portion of the Phase 2 of the River of Life project.
• The group has received letter of acceptance from the Kuala Lumpur City Hall for the proposed project, which is slated for completion within 78 weeks. The group is also undertaking works on Phase 1 of the River of Life project. (The Star Online)
• UMW Oil & Gas Corp Bhd (UMW-OG) has clinched an umbrella contract from Petronas Carigali Sdn Bhd for the provision of 460K drilling hydraulic workover unit (HWU), which commenced 6th February this year for a term of three years with an option to extend for another year. (The Edge Daily)

• Bermaz Auto Bhd’s (BAuto) 3QFY18 net profit surged 61.0% Y.o.Y to RM40.5 mln, from RM25.1 mln a year earlier, mainly due to improvement in domestic sales with the higher sales volume from the new Mazda CX-5 model, while revenue also rose 65.0% Y.o.Y to RM559.4 mln, from RM338.7 mln.

• Cumulative 9MFY18 net profit, however, dropped 14.0% Y.o.Y to RM82.9 mln vs. RM96.8 mln in the previous corresponding period on the back of thinner margins and higher finance costs. Meanwhile, revenue rose 9.0% Y.o.Y to RM1.42 bln, from RM1.31 bln last year. BAuto has declared a third interim dividend of 2.3 sen per share, payable on 26th April 2018. (The Edge Daily)

• Malaysia Airports Holdings Bhd (MAHB) reported a 4.7% Y.o.Y increase in the number of passengers passing through the 39 airports in the country in February, at 7.7 mln passengers, from 7.3 mln a year ago - marking its highest record for the month of February.

• The jump was mainly due to higher contribution from the international sector. International traffic recorded 4.1 mln passengers (+10.8% Y.o.Y), although domestic traffic fell 1.3% Y.o.Y to 3.6 mln passengers in February 2018.

• Systemwide including its Istanbul operations in Turkey, MAHB handled 7.1% Y.o.Y more passengers to 10.1 mln in February 2018, compared with 9.4 mln in February 2017. (The Edge Daily)

• Ho Hup Construction Co Bhd has inked a joint-venture (JV) agreement with landowner Koperasi Serbausaha Makmur Bhd (KOSMA) to undertake a mixed development project in Kuantan, Pahang.

• The JV company will develop a parcel of freehold commercial land measuring 8,129.9 sq. m. in Kuala Kuantan into a block of seven-storey three-star hotel, three commercial office floors, a block of 23-storey serviced apartments, car parks and retail shops.

• Under the contract, KOSMA will purchase the hotel block for RM30.9 mln and the three commercial office floors for RM7.1 mln. KOSMA will also be entitled to a consideration sum of RM25.0 mln. (The Edge Daily)

• KSL Holdings Bhd is buying two parcels of land totalling 47.7 ha. in Tebrau, Johor, for RM133.6 mln cash from Grace Versatile Sdn Bhd. The 99-year leasehold parcels – situated in the Ulu Tiram locality, which will expire on 3th January 2115 will be used for landed property development. (The Edge Daily)

• Nexgram Holdings Bhd has signed a strategic cooperation framework agreement with China-listed Jiangsu Tongguang Electronic Wire & Cable Co Ltd to undertake operations in the field of communications cables.
• The partnership will allow Nexgram to carry out all-round operations in radiofrequency coaxial cables, high temperature resistant wires and cables for aerospace, aluminium-alloy electrical cables, submarine optical fiber cables and other optical cables along power transmission lines. The agreement is also for duration of one year with possible renewal. (The Edge Daily)
• T7 Global Bhd has received a three-year umbrella contract from Petronas Carigali Sdn Bhd for the provision of a hydraulic workover unit (HWU) on 6th February 2018 until 5th February 2021, with an option to extend for an additional year. The contract is also conditional upon TOS maintaining a valid licence with Petroliam Nasional Bhd. (The Star Online)

• Kossan Rubber Industries Bhd is acquiring two pieces of land in Bidor, Perak from Perbadanan Kemajuan Negeri Perak (PKNP) for RM82.4 mln cash by 1Q2019. The lands totalling 824.1 ac. will be used for its integrated glove manufacturing expansion. (The Star Online)

• Poh Kong Holdings Bhd posted a 20.8% Y.o.Y decline in its 2QFY18 net profit to RM4.8 mln, from RM6.1 mln a year ago, dragged down by higher operating expenses, despite a 19.3% Y.o.Y growth in revenue to RM270.0 mln, from RM226.3 mln in the same quarter last year.

• For 1HFY18, net profit jumped 29.7% Y.o.Y to RM10.2 mln, from RM7.8 mln in 1HFY17, while revenue grew 19.2% Y.o.Y to RM490.9 mln, from RM411.8 mln a year ago. (The Edge Daily)
• Sedania Innovator Bhd is partnering Matrix Energy Sdn Bhd (MESB) to jointly-deliver green technology (GreenTech) solutions to a major telecommunications company (telco) in Malaysia, aiming to achieve annual savings of 22.0% in energy costs.
• Both parties will design, install and commission energy saving devices and provide GreenTech solutions at selected facilities owned by the telco.

• The contract commenced on 9th March, 2018 and will continue for ten years from the date the GreenTech solutions are installed in each site. The expected time frame for the installation of the solutions to be completed is seven months, ending 30th September 2018. (The Star Online)

Source: Mplus Research - 13 Mar 2018