Looking To Re-test 1,700

• Tracking the gains of its offshore peers, the FBM KLCI rebounded from the red, helped by last-minute buying-support in selected heavyweights. The lower liners finished mixed with the FBM Ace (+0.7%) in the green, despite the FBM Small Cap (-0.2%) spiraling lower. The FBM Fledgling flatlined, while the broader market was also mixed.

• Market breadth remains negative as decliners continued to hold the upperhand against the winners. Traded volumes, however, regained its momentum after climbing 10.6% to 1.74 bln shares, boosted by mild bargainhunting activities in the lower liners.

• Significant key-index advancers were Petronas Dagangan (+78.0 sen), Public Bank (+14.0 sen), IHH Healthcare (+13.0 sen), Maxis (+12.0 sen) and Dialog (+11.0 sen). Consumer products giant Fraser & Neave (+28.0 sen) outperformed its broader market peers, alongside Airasia (+16.0 sen), Pentamaster (+12.0 sen), MB World Group (+10.0 sen) and Malaysian Pacific Industries (+10.0 sen).

• On the flipside, BAT (-32.0 sen), Time Dotcom (-27.0 sen), Aeon Credit (-26.0 sen), Allianz Malaysia (-14.0 sen) and Dufu Technology (-14.0 sen) retreated on Monday. Plantations-linked heavyweights like Kuala Lumpur Kepong (-22.0 sen), Sime Darby Plantation (-12.0 sen) and IOI Corporation (-8.0 sen) also traded lower amid the challenging business environment, while both Hong Leong Bank and Petronas Gas closed lower by 8.0 sen each.

• Key regional stockmarkets finished mostly higher on Monday on hopes of a U.S.-China trade concession at the upcoming G-20 summit on Friday that will calm the ongoing trade tensions. The Nikkei gained 0.8% as consumer staples and industrial sectors rallied, while the Hang Seng index (+1.7%) also traded higher after lingering in the positive territory for the entire intraday session. The Shanghai Composite (-0.1%), however, underperformed its peers slightly after weakening in the eleventh hour. ASEAN equities were broadly higher yesterday.

• U.S. equities, meanwhile, staged a strong rebound, helped by gains in retailers on upbeat sales expectations during the Black Friday and Cyber Monday annual sale bonanza. All of the U.S. benchmark indices – the Dow (+1.5%), the S&P 500 (+1.6%) and the Nasdaq (+2.1%) rallied on Monday.

• Earlier, European stockmarkets rallied as investors cheered positive developments from the political front. The FTSE rose 1.2%, lifted by financials-related heavyweights after Britain sealed a Brexit deal with the EU. The CAC also added 1.0% after Italy announced a small budget deficit target in an attempt to appease the EU, while the DAX closed 1.5% higher.

The Day Ahead

• Yet again, institutional nibbling late in the trading day lifted the key index to a positive close in a day where market interest remained insipid. Although there remains few positive leads, both from domestic and overseas sources including President Trump’s re-iterated of his intention to impose higher tariffs on all China imports beginning next year if a trade deal is not reached, the renewed uptrend on most key global indices overnight will provide further near term catalyst for stocks on Bursa Malaysia to head higher over the near term.  While the general market environment is still one of caution, Wall Street’s gains could aid the FBM KLCI’s climb to the 1,700 points level over the near term, which is also the immediate resistance. Further above, the resistance is at 1,710, while the supports remain at 1,690 and 1,680 respectively.

• Although the near term positivity could also help the lower liners and broader market shares to stage an overdue rebound, the gains may be tempered by quick profit taking and selling into strength activities amid the still thin market following.

Company Update

• Econpile Holdings Bhd’s 1QFY19 net profit fell 29.0% Y.o.Y to RM15.0 mln, dragged down by higher contribution from piling and foundation works for infrastructure projects that yields lower margins. Revenue for the quarter, however, rose 18.6% Y.o.Y to RM192.3 mln.

• The reported earnings came below our expectations, amounting to only 16.6% of our previous FY19 estimate of RM90.6 mln. The reported revenue, however, came within our expectations, amounting to 26.2% of our full-year forecast of RM763.8 mln.

Comments

• With the reported earnings falling short of our forecast, we slashed our net profit forecast by 27.7% and 30.6% to RM65.4 mln and RM56.8 mln for FY19 and FY20 respectively to reflect the potential slowdown of orderbook assumption for FY19, coupled with the higher contribution from piling and foundation works for infrastructure projects that yields lower margins.
• We maintain our HOLD recommendation on Econpile, but with a lower target price of RM0.65 (from RM0.90) by ascribing a target PER of 13.0x (unchanged) to its revised FY19 EPS of 4.9 sen. We, however, continue to like Econpile as a niche construction company, specialising in piling and foundation works, backed by its solid unbilled orderbook of RM1.10 bln that will sustain its earnings over the next two years.

COMPANY BRIEF

• Kerjaya Prospek Group Bhd,via its unit Kerjaya Prospek (M) Sdn Bhd, has secured two contracts worth RM282.3 mln from Nusmetro Group for construction works in Mont Kiara and Jalan Cheras, Kuala Lumpur.

• The first contract worth RM29.8 mln is for the substructure works of a commercial development comprising a three-storey basement carpark and 51- storey office building in Mont Kiara. The contract is expected to be completed by 25th September 2020.

• Meanwhile, the second contract is worth RM252.4 mln, involving the construction of the main building of a proposed commercial development in Jalan Cheras that is expected to be completed by 31st March 2020. (The Star Online)

• Dayang Enterprise Holdings Bhd has won its first overseas contract for the maintenance of offshore facilities in the oil and gas (O&G) industry in Turkmenistan in central Asia. The threeyear contract for the provision of facilities maintenance support for Petronas Carigali (Turkmenistan) Sdn Bhd, which will be undertaken with its local partner, Gujurly Inzener via a jointventure company.

• The undisclosed contract value will be effective from 1st January 2019, has an option to be extended for one year. (The Star Online)

• Petra Energy Bhd's 3Q2018 net loss widened to RM27.0 mln, from a net loss of RM7.9 mln recorded in the previous corresponding quarter, due to losses incurred in an associate. Revenue for the quarter slipped 29.9% Y.o.Y to RM119.7 mln.

• For 9M2018, cumulative net loss stood at RM41.9 mln vs. a net profit of RM0.5 mln recorded in the previous corresponding period. Revenue for the period fell 19.4% Y.o.Y to RM275.6 mln. (The Star Online)

• IJM Corporation Bhd's 2QFY19 net profit slumped 80.8% Y.o.Y to RM21.9 mln due to weaker earnings posted its major divisions, coupled with an increase in net unrealised foreign exchange losses of RM33.5 mln. Revenue for the quarter fell 18.1% Y.o.Y to RM1.31 bln.

• For 1HFY19, cumulative net profit sank 64.0% Y.o.Y to RM84.6 mln. Revenue for the period fell 10.1% Y.o.Y to RM2.75 bln. (The Star Online)

• Panasonic Manufacturing Malaysia Bhd’s 2QFY19 net profit grew 44.3% Y.o.Y to RM34.1 mln on higher revenue for the quarter that gained 11.3% Y.o.Y to RM308.8 mln.

• For1HFY19, cumulative net profit dipped 6.3% Y.o.Y to RM59.3 mln. Revenue for the period, however, increased 1.5% Y.o.Y to RM614.4 mln. An interim single tier dividend of 15.0 sen per share, payable on 18th January 2019, was declared. (The Edge Daily)

• Pecca Group Bhd’s 1QFY19 net profit rose 24.4% Y.o.Y to RM3.5 mln, on stronger contribution from its original equipment manufacturing, pre-delivery inspection and replacement equipment manufacturer segments. Revenue for the quarter added 1.8% Y.o.Y to RM27.1 mln. (The Edge Daily)

• Telekom Malaysia Bhd’s 3Q2018 net loss stood at RM175.6 mln vs. a net profit of RM211.8 mln recorded in the previous corresponding quarter, dragged by an impairment loss of RM934.8 mln on network assets.

• For 9M2018, cumulative net profit sank 87.2% Y.o.Y to RM83.5 mln. Revenue for the period declined marginally by 1.7% Y.o.Y to RM8.73 bln. (The Edge Daily)

• Tropicana Corp Bhd’s 3Q2018 net profit rose 10.5% Y.o.Y to RM34.2 mln, mainly due to lower tax expenses. Revenue for the quarter, however, fell 32.9% Y.o.Y to RM307.1 mln.

• For 9M2018, cumulative net profit added 13.5% Y.o.Y to RM118.6 mln. Revenue for the period, however, fell 18.0% Y.o.Y to RM1.04 bln. (The Edge Daily)

• QL Resources Bhd’s 2QFY19 net profit grew 10.7% Y.o.Y to RM60.5 mln on higher sales from its marine product manufacturing (MPM) business as a result of recovery of low fish catch cycle and higher contributions from surimibased products. Revenue for the quarter expanded 13.9% Y.o.Y to RM920.3 mln.

• For 1HFY19, cumulative net profit increased 7.9% Y.o.Y to RM104.4 mln. Revenue for the period rose 9.4% Y.o.Y to RM1.74 bln. (The Edge Daily)

• MyEG Services Bhd has announced it is buying a 40.0% stake in an Indonesianbased e-government service provider, PT Cartenz Technology Indonesia for US$10.0 mln. MyEG’s wholly-owned unit MyEG (Indonesia) Sdn Bhd signed a Memorandum of Understanding today with Cartenz, marking the group’s entry into the Indonesian e-government space. (The Edge Daily)

• WCT Holdings Bhd’s 3Q2018 net profit declined 35.6% Y.o.Y to RM26.1 mln on lower revenue as a result of fewer billings from local and overseas infrastructure projects, coupled with lower property sales during the period. Revenue for the quarter fell 17.8% Y.o.Y to RM385.8 mln.

• For 9M2018, however, cumulative net profit added 14.4% Y.o.Y to RM108.3 mln. Revenue for the period gained 20.4% Y.o.Y to RM1.59 bln. (The Edge Daily)  

Source: Mplus Research - 27 Nov 2018