Ready For Near-Term Gains

• Tracking the rebound in the regional markets and Wall Street overnight, the FBM KLCI also closed slightly higher, helped by gains in Petronas-linked stocks and mild bargain-hunting activities. The lower liners churned out gains, alongside most of the broader market, with the exception of REITs, Energy and Healthcare sectors.

• Market breadth was positive as winners overtook the losers on a ratio of 552-to- 351 stocks. Traded volumes, however, sunk by 23.4% to 3.05 bln shares amid the lack of fresh trading catalysts.

• Petronas-affiliated shares like Petronas Gas (+54.0 sen) and Petronas Chemicals (+28.0 sen) were amongst the heavyweights’ outperformers, together with Kuala Lumpur Kepong (+30.0 sen), Tenaga Nasional (+26.0 sen) and Nestle (+20.0 sen). Other gainers include Heineken Malaysia (+98.0 sen), Fraser & Neave (+50.0 sen), Chin Teck Plantations (+33.0 sen), Carlsberg (+32.0 sen) and KESM Industries (+30.0 sen).

• On the flipside, Panasonic Manufacturing (-26.0 sen), Air Asia (- 13.0 sen), Kluang Rubber (-12.0 sen), Aeon Credit (-10.0 sen) and Ajinomoto (- 10.0 sen) retreated. Key-index decliners, meanwhile, include Public Bank (-36.0 sen), Genting (-12.0 sen), Top Glove (- 8.0 sen), Genting Malaysia (-4.0 sen) and Hap Seng Consolidated (-3.0 sen) after giving up earlier gains.

• Key benchmark regional indexes took a breather from the previous selldown and closed mostly higher on expectations of further support measures from the Chinese government, in a bid to shore up the financial markets. The Shanghai Composite and the Hang Seng Index recovered 1.3% and 1.2% respectively, while the Nikkei added 0.5% - led by gains in Kikkoman after its quarterly earnings beat analysts’ estimates. The ASEAN equities, meanwhile, also closed with gains on Tuesday.

• U.S. equities finished mostly on an upbeat tone as benchmark indices extended their gains, boosted by upbeat manufacturing data and gains in tech stocks. The Dow gained 1.4%, while on the broader market, the S&P 500 and the Nasdaq rose 1.5% and 2.1% respectively.

• Major European stockmarkets rallied, intandem with the recovery in global equities as investors shrugged of the coronavirus fears and focus on global political developments. The FTSE (+1.6%), the DAX (+1.8%) and the CAC (+1.8%) all gained on Tuesday’s close.

The Day Ahead

• After a period of lull, the key index managed to tip higher with substantive gains yesterday amid the improved sentiments for equities. The improvement came as investors turned their attention to a string of stronger-than-expected economic data performance, coupled with the stimulus package from Beijing that allowed the key index to stage a rebound from its bout of oversold.

• With the market conditions improving, there appears to be more upside potential over the near term as bargain hunting is materialising after the recent sell down. However, we also think that the gains may be tempered by the still uncertain developments over the coronavirus outbreak that saw number of casualties still on the rise. On the upside, we think the key index could retest the 1,550 resistance, which is followed by the 1,560 level. The supports, on the other hand, are at 1,515 and 1,500 respectively.

• The lower liners and broader market shares should also be heading higher in tandem with the improved market sentiments. This could entice more retail players to undertake bargain hunting activities, but the general market undertone will still be dictated by the any major developments over the coronavirus outbreak.

Company Update

• Serba Dinamik Holdings Bhd has secured 12 new contracts — half of which is worth a combined US$78.0 mln (approximately RM320.9 mln), while the other half are on call-out basis. The six contracts comprise one contract in Oman for its whollyowned unit Serba Dinamik International Ltd, and five contracts secured by 75.0%- owned indirect subsidiary PT Serba Dinamik Indonesia.

• The other six contracts were awarded to Serba Dinamik’s wholly-owned Malaysian subsidiary Serba Dinamik Sdn Bhd (SDSB) — three of which come with the option for an one year extension. (The Edge Daily)

Comments

• The abovementioned news marks the first batch of contracts secured by Serba Dinamik in 2020. Consequently, contract wins year-to-date at approximately RM940.0 mln, comprising RM870.0 mln from the operation and maintenance segment (O&M) and RM70.0 mln from the engineering, procurement, procurement construction and commissioning (EPCC) makes up to 26.9% of our orderbook replenishment of RM3.50 bln for the group in 2020. Moving forward, the group’s orderbook to RM10.7 bln will provide solid earnings visibility over the next 3 years.

• With the reported job wins falling within our expectations, we made no changes to our earnings assumption and we maintained our BUY recommendation on Serba Dinamik with an unchanged target price of RM2.63. We arrive at our target price by ascribing a PER of 15.0x to its forecast 2020 EPS of 17.5 sen. The ascribed target PER is similar to midlarge cap oil & gas peers’ average of 16.0x.

COMPANY BRIEF

• Genetec Technology Bhd has since the start of the year secured orders worth a total of RM38.5 mln from new and existing customers in the electronics and automotive industries. The new orders were secured from 12 customers for customised machines of assembly lines and supply of component parts in electronic, semiconductor, hard disk drive and automotive industries. (The Star Online)

• Eversendai Corporation Bhd has secured six new projects worth RM323.0 mln by its group of companies in Malaysia, India and Qatar. The group has increased the value of its order book to approximately RM1.87 bln inclusive of the new wins.

• The newly secured contracts include a structural steel link bridge connecting two buildings and structures for a retail leisure commercial project in Kuala Lumpur. It has also secured the structural steel works for a commercial building project in Hyderabad, India. The group secured three new contracts in Qatar for a commercial building podium structure; a hotel and a mixed-use building project. (The Star Online)

• AirAsia Group Bhd co-founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have been urged by the Minority Shareholders Watch Group (MSWG) to step down from the company, not just relinquish their executive roles pending investigations over Airbus SE bribe claims against two AirAsia executives.

• According to UK court documents, Airbus secured sale of its aircraft to AirAsia in 2005-2014 by bribing two AirAsia executives in the form of a US$50.0 mln sponsorship for a sports team owned by the two individuals. (The Edge Daily)

• CAM Resources Bhd has reported that its’ 2MW biogas plant has commenced supply via feed-in-tariff (FiT) structure, beginning December 2019. CAM built the plant for approximately RM19.8 mln, on the back of a deal to supply power to the Malaysian grid under the FiT system for 16 years, commencing from 24th May 2019. (The Edge Daily)

• Dayang Enterprise Holdings Bhd was awarded a three-year umbrella contract for the provision of modification works from CARIGALI- PTTEPI Operating Company Sdn Bhd (CPOC). The contract was awarded to Dayang’s wholly-owned unit Dayang Enterprise Sdn Bhd, effective 30th January 2020. The contract comes with a two-year extension option. (The Edge Daily)

• Unisem (M) Bhd has paused operations in Chengdu, China, under the instruction of local authorities to contain the Wuhan coronavirus outbreak. Its operations in Chengdu comprising one packaging and testing facility and one wafer bumping facility is paused from 2nd February 2020 to 9th February 2020. (The Edge Daily)  

Source: Mplus Research - 5 Feb 2020