Najib’s Exit – Here’re His Cronies & Stocks You Should Avoid
Source: Finance Twitter
http://www.financetwitter.com/2015/05/p ... avoid.html
Key sectors affected: +ve for Consumer and –ve for Infra, Banks;
PH’s pledge to review mega projects will inevitably affect timing, scale and margins, even if the likelihood of cancellations seems low. Infra plays to be affected - GAM, IJM.
For Banks, a defensive strategy will endure (pending clarity on policies to meet our 6-7% growth target). This along with PH’s focus towards SMEs (tax benefits) benefits Public. CIMB would be sold off due to perceived BN link.
Consumer: PH’s promise of abolishment of the 6% GST and re-introduction of petrol subsidies would alleviate pressure on the Malaysia consumer. We like Padini.
Switch into selected defensive names before we see tangible improvements
Malaysia has traded at a premium to peers given its stability, high economic growth and liquidity. That said, we believe the market could take a breather as investors assess the incoming government.
As such we downgrade the end-2018 KLCI target from1964 to 1896 (3% upside) at 15.5x PE which is below its 10-year mean multiples.
While the LT prospects are good, we suggest investors look at stocks with external demand (PCHEM, IHH, Glove, HART, TOPG, KRI), MYR depreciation beneficiaries (exporters, petrochem players) and consumer plays (Public, Padini).
Stocks that are likely to be hit are government related/China linked names like TNB, MYEG, MRC, CIMB, AIRA, FGV, GKEN, SAPE, UMWOG, MAHB, GAM and IJM. Good quality companies likely sold off but we would buy on dips include MAHB.
Furniture
Within the furniture space, Lii Hen Industries and Latitude Tree Holdings are two stocks which caught the research house’s attention considering 70%-90% of their sales are directed to the US.
Furthermore, both have solid balance sheets with a net cash position, making up 10%-20% of their corresponding market capitalisation. Valuation wise, they are trading at less than 10 times price-to-earnings (PE) while offering commendable dividend yields of more than 3%.
Wood-based panel makers
For wood-based panel makers, potential beneficiaries would be Mieco Chipboard, Evergreen Fibreboard, and HeveaBoard.
That said, the US forms only less than 10% of their total sales. Among them, HeveaBoard has the sturdiest financial position with a net cash pile of RM23mil (5% of its market cap) while Mieco and Evergreen have net gearings of 0.6 times and 0.1 times respectively. They trade at an average PE of 12 times.
Although the KLCI was flattish MoM, we noted gains in the share prices of selected stocks from certain sectors (construction, plantation, property and gaming).
Key domestic lookouts in Feb 2019 are:-
(i) 4Q18 GDP announcement on 14 Feb – we forecast 4Q18 GDP growth YoY of 4.4-4.7%
to bring 2018’s growth to 4.7%; and
(ii) 4Q18 corporate results season – we expect our 4Q18 research universe earnings growth to remain tepid, especially the plantation sector.
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