HLIB Research Summary - 23 Oct 2014

Construction (OVERWEIGHT  é)

Building on to a stronger 2015

• Development expenditure to increase 15% YoY in 2015
• Domestic contract flows remain robust with 9M14 at RM11bn (+4% YoY), likely to surpass 2013 at RM15bn
• 11MP, to be unveiled in May 2015 will be the next catalyst
• Key projects to watch out for: MRT Line 2, LRT Line 3, various highways and Warisan Merdeka
• Upgrade to sector to OVERWEIGHT with top picks being Gamuda (big cap) and HSL (small cap).

CMMT (HOLD çè)

9MFY14 Results

• 9MFY14 core net profit came in within our expectation but a little below consensus, accounting for 71.8% and 71.0% respectively.
• Dividend 2.12 sen was declared during the quarter, bringing the YTD dividend to 6.65 sen, accounting for 77.8% of our full year DPU expectation.
• Occupancy rate remain stable at 97.9%.
• We derived new TP of RM1.46 (previously RM1.36) with target yield of 6.3% (previously 7.0%) based on historical average yield spread of CMMT and 7-year MGS.  Maintain HOLD.

Traders Brief

Volatility is here to stay for a while     

• The technical rebound from recent low of 1766 towards our short term resistance near 1825-1834 levels is likely to continue but it will not be smooth, as sentiment could be affected by external volatility and potential hurdles in the CIMB/RHBCAP/MBSB mega bank merger after Bursa disallowed EPF to vote by virtue of EPF being the common major shareholder in all three affected companies. Moreover, a sharp fall below 1766 will reignite force selling and margin calls activities.
• Closed positions: We had closed our positions of UNISEM, VITROX and AZRB on 21 Oct after their share prices hit our upside and supports targets. 
• Today’s recommendation: Trading BUY on ARMADA.

Trading idea - ARMADA

ARMADA: Values resurfaced for LT investors

• Current share price is 29% below our Institutional target price of RM2.06. Armada’s share prices plunged 46% from 52-week high of RM2.52 in May to as low as RM1.36 (16 Oct) before closing at RM1.47 on 21 Oct.
• Technically, the selldown presents good trading opportunity to catch the imminent technical rebound as recent two candlesticks on weekly chart formed “Bullish Harami” candlestick pattern, suggesting impending reversal signal.
• We expect share prices to move higher towards RM1.53 and RM1.64, with a long term objective of RM1.76. Critical supports are located at RM1.40 and RM1.36. Cut loss below RM1.34.