Market Roundup | 6 July 2015

FBMKLCI   1717.05  -17.19pts (-0.99%)      Volume 1.543b   Value RM1.408b

1) KLCI dipped to a low of -27pts before recovering to -17pts(-0.99%) inline w global markets as investors sentiment were shaken by Greece decision with a NO vote. Regional bourses were broadly lower led by the HSI which fell -3.2% its steepest loss since 2012 as it entering a correction phase, NIKKEI -2.08%, HSCEI 2.99%, ASX -1.14%. SHCOMP +2.41% bucked the trend as the Govt unveiled fresh measures to support the slumping mainland markets . CONSTRUCTION -1.52% index lost the most grounds amongst the sector as IJM -1.61%, GAMUDA -1.66%, KEURO -2.91% fell into the red. Market breadth was negative with losers outpacing gainers by 646 : 158. Futures closed at 1705 (12pts discount).

2) Heavyweights : MAYBANK -0.97% RM9.19, AXIATA -1.24% RM6.37, GENTING -1.81% RM8.13, MAXIS -1.88% RM6.26, IHH -1.86% RM5.78, TM -2.04% RM6.71, SIME -1.03% RM8.57, AMBANK -2.49% RM5.86.

3) DBT: PERDANA 10.704mil @ RM1.55 (1.43% PUC), HIBISCS 9.6mil @ RM0.74 (1.03% PUC), IDMENSN 6mil @ RM0.11 (1.212% PUC), ILB 2mil  @ RM0.82 (1.12% PUC).

4) Situational:-
GUH +0.99% RM1.02 - GUH Holdings Bhd is tendering for about RM1.6b worth of water and waste water treatment plant projects this year. Group managing director said the tenders were for about 10 projects located in the central and northern regions. They expect to secure some of the projects this year. The water treatment segment contributed 12.5% to the net profit last year.

TENAGA  -0.47% RM12.62 - Share price dipped 3% on earlier trade before erasing most of its losses following its announcement of an agreement with 1MDB for the acquisition of 70% in Jimah East Power Sdn Bhd (JEP) or the Track 3B project, for RM46.98m.

5)JAKS
Announced today the entry of China Power Engineering Consulting Group Co. Ltd ('CPECC') as a joint venture equity partner in its Build-Operate-Transfer (BOT) power plant project in Hai Duong Province, Vietnam valued at a project cost of USD1.87 b (approx RM7.05 billion). The key agreements include: a) JAKS Power Holding Limited ('JPH') subscribing for 140.1m ordinary shares in JAKS Pacific Power Limited ('JPP') at a subscription price of USD140.1m(RM528.8m) , and CPECC to also subscribe for 140.1m JPP shares at a subscription price of USD140.1m; and 186.9m redeemable convertible preference shares ('RCPS') in JPP at a subscription price of USD186.9m (RM705.1m), b) Shareholders agreement between JPH, CPECC and JPP to regulate JPH and CPECC's relationship as shareholders of JPP and c)  Call option agreement between JPH and CPECC whereby JPH shall have the option to purchase from CPECC such number of shares or RCPS in JPP whereby JPH's interest in JPP's enlarged share base after conversion of the RCPS shall be up to 40%. JAKS Hai Duong Power Company Limited is certified to undertake the design, engineering, procurement, construction, financing and operation of the 2 x 600 MW coal-fired thermal power plant project at Phuc Thanh Commune, Kinh Mon District in Hai Duong Province, Vietnam pursuant to a build-operate-transfer contract.

The construction of the power plant, which comprises of two-(2) 600 MW generating units is scheduled to begin in the first (1st) half of 2016 & commence generation of power in 2020 ; +ve. The JV introduces CPECC as a reputable partner in the power industry with established EPC expertise enabling Jaks to leverage on it's experience and track record to ensure execution in delivering this project. This is a game-changer for JAKS and fulfils it's diversification strategy from once being reliant on pipes. JAKS will be able to recognise additional revenue stream from it's proposed participation in the Engineering, Procurement and Construction ('EPC') contracts awarded by the JV company.

On completion of construction and upon commencement of commercial operations, the Group will then enjoy recurrent concession-type earnings from the generation and sale of power under the PPA." On JAKS' equity commitment of USD140.1 million (RM528.8 million), it would likely be met via a combination of internally-generated funds, as well as bank borrowings. Overall, project is expected to contribute positively towards the future financial performance of the Group. Operating cash-flow over the next few years is expected to be healthy as group is pursuing a construction tenderbook of RM3.5 billion in various road, water & sewerage infrastructure projects, and planning to launch a mixed development project at USJ1 which can potentially generate an estimated Gross Development Value of RM2b. Overall weakness in global equities currently present an excellent opportunity to accumulate this growth stock.


6) Market: Turmoil from Greece problems to the negative bias in China equities will continue to see investors sidelined at best. Further selling by foreigners cannot be discounted especially with our own domestic issues with the 1700pts likely retested.