Construction (OVERWEIGHT)

9M11 results review

'''' There were more disappointments than upside surprises in what was a relatively slow quarter due to summer holidays in the Middle East and Raya festive break. The notable disappointments came from MRCB and TRC Synergy.

'''' Although the ETP projects have yet to materialise, construction counters on average have >1x order book to revenue ratio. Hence, this will be able to last them for at least another year through 2012.

'''' We remain our OVERWEIGHT stance on the sector as we foresee that the ETP projects should materialise in 2012. Notable projects are the ~RM20bn MRT project and various infrastructure projects namely the ~RM5bn West Coast Expressway.

'''' Top picks in order of preference:

MRCB (BUY, TP: RM2.22);

Sunway (BUY, TP: RM3.12);

Mudajaya (BUY, TP: RM4.61);

Gamuda (BUY, TP: RM3.81)

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More downward correction if 1450 support falters''

'''' Ongoing doubt over the euro-zone debt crisis and prospect of mass euro zone sovereign rating downgrades should continue to dampen investors' sentiment and encourage wild swings in the financial markets. A breakdown of 1450 support would mean that the rally from 1311 low (Sep 26) is likely exhausted and will head toward lower Bollinger band (1426) and 61.8% FR (1420) supports. Resistance levels are 1476-1488.

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DJIA: Downside bias amid weakening technicals''

'''' After rebounding from 25 Nov low of 11232 pts, the Dow surged to as high as 12266 on 7 Dec before retreating lower to close at 11823 yesterday, below the 200-d SMA of 11942 pts. Following the breakdown of 200-d SMA and mid Bollinger band (11829) as well as the weakening technical outlook, downside risks of Dow has increased. Further supports are 11600-11774. Immediate resistance levels are 11942-12266 levels.

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VIX: Anticipating a technical rebound''

'''' In view of the grossly oversold indicators and the breakout above the 200-d SMA, we may witness possible technical rebound in the coming days amid rising external woes. A breakout above the downtrend channel near 30 will likely to prompt more upside towards 35.0-36.0 territory, triggering an alarm bell to Dow and global equity markets.

'''' Immediate supports are 23.3 and 20.0.