Jul 20, 2016

Pan Borneo Phase 2 Worth RM10bil Due For Award

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■ New Pan Borneo Highway packages worth RM10bil are due for awards.
■ This is in line with our expectations of a recovery in Pan Borneo’s newsflow in 2H16.
■ Gamuda, IJM Corp, Sunway and WCT are among the larger Klang Valley-based JV partners that are key contenders.
pan borneo highway sarawak
Pan Borneo Highway Sarawak enters phase 2 of awards
● StarBiz reported that eight major works packages worth up to RM10bn (US$2.5bn) for Pan Borneo Sarawak were finalised and would be awarded by this month. Among the Sarawak firms that had participated in the tenders are Cahya Mata Sarawak, Shin Yang Shipping and Naim Cendera. Some of the prominent bidders are JV companies where partners comprise of one Peninsular Malaysia-based firm and an East Malaysia player.

RM16bn estimated cost for Sarawak
● Based on our checks, the RM16bn (US$3.9bn) estimated cost is unchanged. YTD, two packages worth a combined RM3.2bn (US$780m were awarded to Zecon-Kimlun JV (RM1.5bn) and HSL-Daya Maju JV (RM1.7bn). Indications are that at least 4-5 packages will be awarded over the coming weeks, with the balance in the later part of 2016. In our sector outlook report in April, we highlighted that the RM16bn total construction covers a total alignment of 1,090km.

Funding is in the works

● Works Minister Datuk Seri Fadillah Yusof recently said more than 60% of the construction costs would be borne by the issuance of new sukuk by DanaInfraNasional while a further RM5bn (US$1.2bn) would come from the state’s development expenditure. According to the minister, this is the first time that DanaInfra has undertaken project financing beyond the MRT 1 and MRT 2 projects. The issuance of the bonds is timed for August and September.

Equal winning chance for Klang Valley contractors

● The roll-out of the Pan Borneo phase two awards is good news for both Sarawak and Klang Valley-based players given the predetermined JV structure for the tender phase. Most contractors under our coverage are among the contenders but we believe the key ones to watch out for are Gamuda, IJM Corp, Sunway (via Sunway Construction) and WCT. They are among the larger Klang Valley-based JV partners that are key contenders; at least RM1bn from each package if awarded.

pan borneo potentiable companies
Pan Borneo carries minimal execution risks, in our view

● Downside risks to Pan Borneo’s story are delays but we believe this is mitigated by the positive award momentum YTD. We believe Gamuda, our big-cap top pick, is among the frontrunners for this awards phase and a win could boost its all-time high order book of RM8.2bn (US$2bn) by 14%. We think WCT also stands a good chance given its track record in road works, with a potential 20% boost to its current unbilled order book of RM4.4bn (US$1.1bn ).

Overweight; 2H16 sector drivers intact

● This development ties in with our expectations of an overall recovery of sector drivers in 2H16. In our view, other key sector catalysts in the months ahead are 1) recovery in the award phase for MRT 2’s southern portal, 2) announcement of Budget 2017 in October, and 3) recovery in private sector-driven jobs. Separately, a dark horse could be stronger follow-up momentum on the execution of the KL-Singapore high speed rail (HSR) project.
source: CIMB 19/07/2016

Jul 18, 2016

MFLOUR Technical Analysis

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Malaysian Flour Analysis Stock Code: 3662

mflour share analysis
MFLOUR has experienced a breakout above the RM1.32 level with high volumes. Themalaysian flour data MACD Indicator has expanded positively above zero, while the RSI is overbought. Price may rally towards the RM1.42 and RM1.55 levels after a short consolidation. Support will be pegged around the RM1.28 level
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source: Malacca Securities Research 18/07/16

MALAYAN FLOUR MILLS BHD
The principal activities of the Company are to carry on the business of milling and selling wheat flour and its related products. The principal activities of the subsidiaries are transport management; processing and sale of poultry; breeding and sale of day-old chicks; manufacture and sale of animal feeds and related raw materials; purchase and contract farming of poultry for resale; and milling and selling wheat flour together with its allied products.

Jul 11, 2016

PENTA – Technical ‘Pennant’ Breakout

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PENTAMASTER CORPORATION BHD Stock Code: 7160

penta technical analysis

PENTA experienced a pennant breakout above the RM0.80 level with high volumes. The MACD Histogram has turned green, while the RSI is above 50. Price may pick up in buying momentum towards the RM0.855-RM0.91 levels. Support will be anchored around the RM0.77 level.

source: Malacca Securities Sdn Bhd

PENTAMASTER CORPORATION BERHAD
The Company is principally engaged in the design and manufacture of automated and semi-automated machines and equipment; design manufacture assembly and installation of computerised automation systems and equipment together with proprietary software systems

Jun 28, 2016

Picking The Brexit Winners

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■ Post-Brexit vote, the Pound and Euro have started to depreciate against the US$.
■ We chose from our coverage, stocks with no Euro and Pound exposure and/or US$
revenues, or those with no foreign currency exposure whatsoever.
■ Winners came from the finance, utilities, construction, glove, property,
transportation, technology and small-cap sectors.
■ Investors can also take refuge in dividend-yielding companies, especially REITs.
■ Malaysian stock market is largely unaffected by the immediate Brexit impact.
The Pound and Euro expected to remain weak relative to the US$
The equity markets worldwide dipped post-Brexit vote on Friday 23 Jun and we expect further weakness as world equity markets grapple with the uncertainties surrounding contagion risks. As such, currency markets are likely to see weakness in the Pound and Euro persist. Brexit may set precedence for more ‘referendums’ in Europe, including reigniting the Scottish independence movement.

Picking stocks with no Euro and Pound exposure

Gold and the US$ seemingly benefited, as traders scurried to seek safety and even the Yen rose to a new high. In our coverage universe of 133 stocks, we screened for companies with no Euro and Pound exposure and/or US$ revenues, as well as those with no foreign currency exposure whatsoever. We came up with a list of 34 companies.

Winners came from several sectors that are Ringgit dependent

Winners came from the finance, utilities, construction, glove, property, transport, technology and small-cap sectors. The other sectors, such as plantations, auto, consumer and healthcare, faced neutral to negative impact. The most secure sectors had the majority of earnings come from Malaysia and costs that are largely Ringgit denominated. Our top large-cap sectors are still construction and finance.

REITS and dividend yielders offer protection and returns

Given the negative outlook post-Brexit, interest rate hikes are likely to be delayed for now. As such, we believe the REIT sector also offers investors’ portfolios some protection. We performed a scan of the top dividend-yielding companies in our coverage and the top five were: UOA Development (7.1%), YTL Power (6.8%), Maybank (6.4%), YTL Corp (6.3%), LBS Bina (6.0%) and Axis REIT (5.5%). A detailed list is foundoverleaf.

Risks to our recommendations

Risks to our recommendations are: 1) the contagion effect spreads across the EU and more countries seek to exit, causing major currencies, including the US$, to tumble further. This would affect our selection of companies that are net US$ earners, 2) the economic slowdown spreads globally, which could cause demand for goods and services to weaken in Malaysia, 3) crude oil prices fall below US$35/bbl, negatively affecting Malaysia’s GDP forecasts.
brexit winner shares

Picking the Brexit winners

Malaysian Companies with no Euro or Pound exposure

Gold and the US$ seemingly benefited – so US$ revenue generators were also picked
Among the asset classes, gold and the US$ seemingly benefited as traders scurried to seek safety and even the Yen rose to a new high. In our coverage universe of 133 stocks, we screened for companies with no Euro and Pound exposure and/or US$ revenues, as well as those with no foreign currency exposure whatsoever. We came up with a list of 34 companies.
Winners came from finance, utilities, construction, glove, property, transport, technology and small-cap sectors. The other sectors, such as plantations, auto, consumer and healthcare faced neutral to negative impact. The most secure sectors had the majority of earnings come from Malaysia and costs that are largely Ringgit denominated. Many of the small-cap companies fit this profile. Our top large-cap sectors are still construction and finance.
brexit winner stock pick

REITs and dividend-yielders offer protection

Apart from property/REITs, our picks came mostly from utilities, construction and consumer sectors
Given the negative outlook post-Brexit, we believe that most developed and emerging markets are likely to delay interest rate hikes, at least until the currency volatility dissipates. As such, we believe the REIT sector offers investors’ portfolios some protection. We performed a scan of the top dividendyielding companies under our coverage and the top five were: UOA Development (7.1%), YTL Power (6.8%), Maybank (6.4%), YTL Corp (6.3%),LBS Bina (6.0%) and Axis REIT (5.5%). A detailed list is found below (Figure 3)
Figure 3: Malaysia’s Top Dividend Yield Company
malaysia top divident stocks

Risks to our recommendations

For now, most risks are from external sources but this could change if global slowdown occurs.
Risks to our recommendations are mainly downside risks:
(1) The contagion effect spreads across the EU and more countries seek to exit,causing major currencies, including the US$, to tumble furtherl. This would affect our selection of companies that are net US$ earners; (2) The economic slowdown spreads globally, which could cause demand for goods and services to weaken in Malaysia;(3) Crude oil prices fall below US$35/bbl, negatively affecting Malaysia’s GDPgrowth forecasts and therefore, demand for goods.
source: CIM Research – 26/06/2016

Jun 21, 2016

MEXTER - Technical Analysis

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MEXTER TECHNOLOGY BHD Stock Code: 0075

Mexter share analysis

Earlier last month, its share price broke out of its sideways trend at RM0.08 (27-May) and commenced a four-day rally to as high as RM0.23. This came amid strong 1Q16 earnings and a positive commentary on future prospects by the management. While the share price pulled back to RM0.15 over the subsequent two weeks, buying interest returned yesterday after the share price shot up 3.5 sen (22.6%) to finish at the day’s high of RM0.19. More importantly, MEXTER has broken out of a “Bullish Flag” pattern to signal a continuation of its prior uptrend. From here, we expect a retest its recent high of RM0.23 (R1), before reaching the “Flagpole” measurement objective of RM0.31 (R2). Traders may look to buy now or on any weakness towards RM0.15 –RM0.17 (S1). The technical picture is deemed bullish unless the RM0.15 (S2) support is violated.

source: Kenanga Rsearch – 21/06/2016

Jun 16, 2016

Malaysia Major Infrastructure Projects To Roll Out In 2H16

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RM49bn worth of projects to roll out in 2H16 with potential bidders.

With roll out of major highway, MRT and LRT projects, we believe the total contract awards in 2016 could match the RM96bn recorded in 2015. We estimate the value of major infrastructure projects to roll out in 2H16 is about RM49bn, providing opportunities for the local construction companies to expand their order books.

Annual contract awards by government and private sector

malaysia annual contracts award

Balance of contracts to be awarded in 2H16 (Total RMbn 48.8)

Project: Klang Valley MRT Line 2 (Sg Buloh-Selayang-Putrajaya)  Cost: RMbn 7.3
Potential listed co bidders: Gadang, Mudajaya, GAQRS, WCT

Project: Pan-Borneo Highway (Sarawak section) Cost: RMbn 12.8
Potential listed co bidders: Cahya Mata-Bina Puri, Gamuda-Naim, WCT-KKB End, Suncon-KTS, IJM

Project: LRT Line 3 (Bandar Utama-Shah Alam-Klang) Cost: RMbn 9.0
Potential listed co bidders: Suncon, IJM, Gamuda, Gadang, TRC

Project: Southern Double-Tracking Rail  Cost: RMbn 8.0
Potential listed co bidders: Gamuda, IJM, WCT, Fajar Baru

Project: West Coast Expressway  Cost: RMbn 2.2
Potential listed co bidders: IJM, WCT, WZ Satu

Project: Sungai Besi-Ulu Kelang Elevated Expressway (SUKE)  Cost: RMbn 5.3Potential listed co bidders: IJM, Suncon, WCT

Project: Damansara-Shah Alam Highway (DASH) Cost: RMbn4.2
Potential listed co bidders: IJM, Suncon, WCT

Valuations for Malaysian construction companies
costruction share to buy

source: Affin Hwang Capital Research

Jun 15, 2016

COMCORP – Quick Chart Analysis

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COMINTEL CORPORATION BHD Stock Code: 7195


comcorp chart analysis
buy ComcorpCOMCORP has rebounded off the EMA9 level with improved volumes. The MACD Indicator has expanded positively above zero. The RSI, however, is slightly overbought. Price target will be envisaged around the RM0.91 and RM1.00 levels. Support will be located around the RM0.76 level.
source: Malacca Scurities – 15/06/2016
COMINTEL CORPORATION BHD
The principal activity of the Company is that of investment holding while the principal activities of its subsidiaries are Turnkey engineering design and integration programme management installation and commissioning; manufacturer and assembler of electronic components.