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.

Jun 9, 2016

PMETAL – Technical Breakout

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PRESS METAL BHD Stock Code: 8869 The Group is also involved in property development waste management and environmental engineering projects.

pmetal chart analysis

PMETAL (Trading Buy, TP: RM3.49, SL: RM2.97). PMETAL has been undergoing a consolidation phase after reaching a high level of RM3.20 back in early-May. Yesterday, the share price surged 14.0 sen (4.68%) to stage a breakout away from its downtrend resistance line to close at RM3.13 on strong trading volume. MACD histogram showed signs of resurgence just above its zero-line, while strong uptick in RSI and Stochastic are indicating that buying momentum is piling up. With the positive technical outlook, we reckon it could look to retest its immediate resistance of RM3.20 (R1) before attempting RM3.52 (R2) next in the near-mid-term. We advocate interested investors to place a protective stop-loss 3 bids below its immediate support level of RM3.00 (S1) at RM2.97 with a target objective of RM3.49 (3 bids below the R2 level). Meanwhile, the next level of support is located at RM2.83 (S2).

source: Kenanga Research – 9/6/2016

Jun 6, 2016

Malaysian Stock 1Q16 Results Review: A Twisted Quarter

Across-the-board earnings disappointments resurged in the 1Q16 results season, which also saw a sharp sell-down in a handful of past multi-year favourites. Accordingly, we cut our 2016-17 FBMKLCI earnings forecasts by >4%. Although the FBMKLCI now faces the fourth year of earnings doldrums, the recent weeks’ selldown nevertheless provided selected buying opportunities. Top picks are Gamuda, Genting Bhd, and BIMB, Heineken, Kerjaya Prospek, Kim Loong and VS Industry.

1Q2016 resluts stocks

WHAT’S NEW
A slow and twisted start to the year. Earnings disappointments resurged in the 1Q16 season, with 28 (32%) of companies under our coverage missing expectations and only 9 (10%) beating expectations (see RHS chart for past quarterly trends). Disappointments or poor starts were found in all key sectors. While naturally the global and domestic economic slowdown has created an earnings downside for cyclical sectors such as automobile, O&G and banking, there were also downside twists in the technology (impact of Apple Inc’s sales slowdown), telecommunications (surge in price discounting) and banking (eg surprising jump in Maybank’s loan loss provision) sectors. There were also negative surprises within the more defensive plantation, gaming and power sectors.
Overall, we have cut our 2016-17 earnings forecasts for the companies under our coverage by 3.7% and 4% (-4.1% and -4.3% for FBMKLCI) on average. 1Q16 estimated core profit on average accounted for 24% of our revised full-year forecast.

ACTION

We trim our end-16 FBMKLCI target to 1,700 (implied 15.7x 2017F PE)., aligned with our bottom-up approach We expect the FBMKLCI to trade in the 1,600-1,728 range (from -0.7 to 0.1SD to the historical mean of 14.7x) in 2H16, based on the implicit assumption that the ringgit would be range-bound at RM4.00-4.10/US$.
Strategy-wise, although we remain somewhat defensive, we advocate having adequate exposure to small/mid caps, which continue to outperform the large-caps (see RHS). Our top picks are Gamuda, Genting Bhd, KLK and Tenaga for large-caps, and BIMB Holdings, Heineken, Kerjaya Prospek, Kim Loong and VS Industry for small-mid caps. We have removed Maybank as a top pick, and added KLK as a top pick.
Situational plays include Genting Bhd (20.7%-owned TauRx’s final clinical trial test result for its Alzheimer’s disease drug should be known by 3Q16), and Bumi Armada, which is highly confident in meeting delivery deadlines (in 3Q16) for two major FPSOs.
Our top SELLs continue to be Hartalega, UMW, Sapura Kencana (SAKP) and TM. Both UMW and SAKP are likely to be removed from the FBMKLCI index in the upcoming review period, and are likely to be replaced by Hap Seng Consolidated and IJM Corp.

bursa malaysia earning suprises stocks

source: UOBKayHian – 02/06/2016

May 24, 2016

PASDEC – Trading Buy

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PASDEC Stock Code: 6912  Target Price RM0.565

pasdec technical analysis
PASDEC has been experiencing persistent selling after reaching a high level of RM0.50 (R1) back in 11 May 2016. Yesterday, the share price managed to garner strong buying support from its RM0.42 (S1) level to surge 4.5 sen (10.71%), settling at RM0.465 on the back of strong trading volume, confirming the reversal play after the formation of an ‘Inverted Hammer’ candlestick. Strong uptick in RSI and Stochastic are also reinforcing the rebound play by reflecting the increasing buying momentum. With the bullish-bias technical picture, we are recommending a trading buy call on the stock with expectations that the share price will rebound towards its immediate resistance of RM0.50 (R1) and our target price objective of RM0.565 next in the near-term, which is 3 bids below its 21 April 2015 high level of RM0.58 (R2). Meanwhile, immediate support is seen at RM0.405 (S1) followed by RM0.35 (S2), where our protective stop-loss level is placed 4 bids below our S1 level at RM0.39.

Source: Kenanga Research – 24/05/2016

PASDEC HOLDINGS BERHAD
The principal activities of the Company are investment holding and provision of management services. The principal activities of the subsidiaries are property development project management; and trading of building materials hiring of machineries and to engage in construction business.