CIMB Research maintains Hold on KLCC Property, target price RM6.90

KUALA LUMPUR (Dec 16): CIMB Research has maintained its “Hold” rating on KLCC Property Holdings Bhd at RM6.50 with an unchanged target price of RM6.90 and said that in the current market conditions, REITs could provide a safe haven for capital preservation given its stable dividend yields.

In a note Tuesday, the research house said during its recent tour of some of KLCCP's assets, it was pleasantly surprised that Menara ExxonMobil still looked relatively new despite being almost 18 years old.

“This gives us confidence that it will not face issues extending its tenancy when it expires in 2017. We were also impressed by Menara 3, which was more recently built (in 2011) and houses Petronas's offices and other O&G companies.

“While the offices were impressive, we understand that KLCCP's acquisition pipeline remain scarce in the next 1-2 years.

“We maintain our Hold call and DDM-based target price of RM6.90. For exposure to M-REITs, we prefer Axis REIT,” it said.

KL shares close marginally higher

Shares of the following companies had unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the close in Kuala Lumpur. The FTSE Bursa Malaysia KLCI Index rose 0.27 point, or less than 0.1 per cent, to 1,559.04.

DRB-Hicom Bhd, an automotive, construction and property group, dropped 2 per cent to RM2.52, its lowest close since Jan. 26. Third-quarter net income slipped 28 per cent from a year earlier to RM79.6 million, the company said in a stock-exchange filing.

Dutch Lady Milk Industries Bhd, a dairy-products maker, jumped 6.6 per cent to RM27.50, a record close. The company declared a dividend of 50 sen per share and a special dividend of 80 sen after fourth-quarter profit more than doubled to RM28.4 million from RM10.8 million a year earlier, according to an exchange filing.

KLCC Property Holdings Bhd, the owner of Kuala Lumpur’s Petronas Twin Towers, gained 3.7 per cent to RM3.40, its highest close since July 22. Its third-quarter profit jumped to RM518.7 million from RM67.8 million a year earlier, the company said in a statement.

Latexx Partners Bhd, a rubber-glove maker, slid 7.7 per cent to RM1.55, its largest loss since July 25. Its fourth-quarter profit slumped to RM926,000 from RM5.6 million a year earlier, according to an exchange filing.

Oriental Holdings Bhd, a vehicle assembler, advanced 2.8 per cent to RM6.24, its highest close since Feb. 23. The company may be bought out by its single-largest shareholder, the Star newspaper reported, citing a person it didn’t name. Robert Wong and Lim Su Tong, managing directors at Oriental, weren’t immediately available for comments when contacted at their office.

Silk Holdings Bhd gained 2.5 per cent to 40.5 sen, its highest close since Feb. 22. PLUS Expressways Bhd is interested in buying the highway toll concessions of Silk and Lingkaran Trans Kota Holdings Bhd, the Edge newspaper reported, citing people it didn’t name. Lingkaran added 0.8 per cent to RM4.03, its highest close since Dec. 6, 2007.

Silk Executive Chairman Mohammed Azlan Hashim didn’t immediately reply to an e-mail by Bloomberg News seeking comments. Lingkaran Executive Director Yusoff Daud wasn’t in the office when phoned. -- Bloomberg



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KLCC rises on Q3 profit jump

KLCC Property Holdings Bhd, the owner of Kuala Lumpur’s Petronas Twin Towers, gained 3.7 per cent to RM3.40, on course for its highest close since July 22.

Its third-quarter profit jumped to RM518.7 million from RM67.8 million a year earlier, the company said in a statement. - Bloomberg




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Consumer stocks lead blue chips higher in early trade

KUALA LUMPUR (Feb 27): Consumer stocks led blue chips higher in early trade on Monday, with Dutch Lady and Nestle among the top gainers but in relatively thin trade.

At 9.04am, the FBM KLCI was up 6.86 points to 1,565.63. Turnover was 88.31 million shares valued at RM48.58 million. There were 146 gainers, 66 losers and 121 stocks unchanged.

Dutch Lady was the top gainer, up RM2.20 to RM28 while Nestle added 78 sen to RM55.98 and Carlsberg 43 sen to RM9.88.

Among PLANTATION []s, KLK jumped RM1.22 to RM24.70 and PPB 10 sen to RM17.20.

Other gainers were Oriental Holdings 19 sen to RM6.26, KLCCP 12 sen tp RM3.40 and AEON 10 sen to RM8.10.

Harvest Court Industries was up 13 sen to RM1.18 with 3.19 million shares done.



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Way of the dragon

In the Q&A below, HwangDBS Vickers Research explains the significance and expectations of the Year of the Dragon, which will reign from Jan 23, 2012 through Feb 9, 2013.

Q: Can you briefly explain the Chinese animal signs and basics of Chinese geomancy?
A: According to the Chinese almanac, the lunar calendar runs on a 60-year cycle, rotating among 12 animal signs of the zodiac and five elements that represent the basic components of everything in the universe — fire, earth, metal, water and wood, in this order — with their inter-relationships governed by the cycle of birth and destruction. This year, we are marking the Year of the Water Dragon, which takes over from the Metal Rabbit.

How do you know about celestial predictions when you are supposed to be a financial analyst? Who are your sources?
We do not pretend to know everything, certainly not the art of fortune telling. We trawl through cyberspace and borrow the crystal balls of experts who use a combination of astrology, horoscope and metaphysics principles. Based on consensus opinion, we then link their interpretations to our stock market knowledge, with a dose of logic of course.

Are the astrologers’ forecasts reliable?
Call them what you want — geomancers, soothsayers, astrologers, fortune tellers, feng shui practitioners — these self-styled masters earn a living by making predictions. Just like us, who advise clients by recommending what stocks to buy or sell (and hope we will be rewarded with commissions in return). Since forecasting is more art than science, based on different methods and subjective interpretations, there is no guarantee of accuracy. So, please do not hold us liable for their forward-looking opinions.



But were the predictions accurate last year?
To be honest, it was mixed. We wrote that the stock market rally would extend into 2011, but our local bourse could not sustain its momentum despite registering new highs. Yet, the advice to be more vigilant in the later stages due to possible cooling effects arising from the water element with the arrival of the Year of the Dragon seemed to offer a sense of truth.

In hindsight, investors who emulated the traits of the Rabbit would have benefited. Calls to use the long bunny ears to filter out market noises, avoid overconfidence, and show resilience, were timely. A word of caution — past track record is not a guarantee or reflection of future performance.

Why should we then read this report?
This report is for fun, if you will. The content is merely for amusement to take your mind off the shaky global economic outlook. It is not meant to be a substitute for our fundamental approach. So, be open-minded and stay positive. You can choose to believe or ignore these general forecasts, which are made without considering specific elements. Whatever the omens, remember, you are the master of your own destiny. So, let’s use our common sense to seek the truth.

Which elements will dominate in the Year of the Dragon?
We will see water sitting on top of earth. This represents a destructive cycle as earth is the destroyer of water according to the cycle of birth and destruction. Due to this conflicting relationship, there could be upheavals arising from a sense of imbalance. The combination of the water and earth elements may also result in murky waters, which could obscure the outlook. In addition, the Dragon is the only animal in the Chinese zodiac that is mythical, which implies events may unfold in an illusory manner. Yet, the later part of the year promises stability and recovery.

Will the world end on Dec 21?
As an investor, you should worry more about whether you will make money this year. Contrary to popular belief, the Mayan doomsday prophecy did not predict that the world would end on Dec 21, 2012. It merely said the date marks the end of a great cycle and the beginning of another in their calendar. It is also a leap year, which signifies that we will be able to jump over obstacles ahead. And just to be clear, we plan to be around this time next year to write on the Year of the Snake.

What happened in previous Dragon years?
An analysis of historical stock market performance was inconclusive. In Malaysia, the benchmark KLCI saw an obvious downtrend in 2000, but chalked up gains in 1988. If we go back to the last Year of the Water Dragon in 1952, the DJIA on Wall Street pulled back first (-7%) before rebounding subsequently to close the year up a minute 4%.

When will the bulls return? What does the Year of the Dragon hold for our stock market?
We wish we knew the exact timing. According to the soothsayers, the bulls may not make their presence felt this lunar year. This is because of the missing fire element, which represents the driving force behind the stock market. You may argue that the mythical creature could breathe out fire, but let’s not forget the dominance of the water element in the Year of the Dragon that can calm its fire. Also, because the spirit of the Dragon tends to make everything seem larger than life, the financial markets could see more volatility this year.

To prosper, be adaptable like the Dragon, which can live in water, on land and in the air. Being imaginative and self-driven are essential investment traits, too, as the divine beast is always able to see and chart new paths.


Which sectors will see good fortune?
Industries associated with the wood and earth elements. This is because according to the cycle of birth and destruction, wood conquers earth while earth conquers water (and earth and water are the two dominant elements in the Year of the Dragon). They include consumer products, food and beverage and media (wood element), and property, construction, petroleum related and mining (earth element). Meanwhile, industries that fall under the fire element (airlines, for example) and water element (shipping) are expected to face turbulent times.

Where should investors put their money? And why?
In defensive stocks, of course. For prudence’s sake, that’s why. If the worst is yet to come, then it only makes sense to adopt a capital preservation investment strategy. To seek shelter in Malaysia, consider the following eight names. They are either in auspicious sectors or offer attractive dividend returns: Berjaya Sports Toto Bhd (“buy”, target price: RM4.70), Parkson Holdings Bhd (“buy”, TP: RM6.55), KLCC Property Holdings Bhd (“buy” TP: RM3.70), Axis REIT (“buy”, TP: RM2.75), Gamuda Bhd (“buy”, TP: RM4.80), Petronas Gas Bhd (“buy”, TP: RM16.90), Bumi Armada Bhd (“buy” TP” RM5) and Malayan Banking Bhd (“buy” TP: RM10.60).



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KLCI stays in the red, lags regional markets

KUALA LUMPUR (Jan 10): The FBM KLCI lagged behind the regional markets and remained in negative territory at the mid-day break on Tuesday, weighed down by select blue chips, with GENTING BHD [] among the major decliners

Asian shares and the euro rose on Tuesday, but concerns over funding of euro zone sovereigns ahead of key auctions this week and of the debt crisis spilling into the wider financial system kept investors cautious about taking riskier positions, according to Reuters.

The FBM KLCI was down 1.58 points to 1,520.15 at the mid-day break. The broader market displayed signs of caution, with losers beating gainers by 352 to 274, while 329 counters traded unchanged. Volume was 955.36 million shares valued at RM788.27 million.

The ringgit strengthened 0.43% to 3.1389 versus the US dollar; crude palm oil futures for the third month delivery added RM11 to RM3,221, crude oil rose 37 cents to US$101.68 while gold gained US$4.25 an ounce to US$1,615.82.

At the regional markets, Japan’s Nikkei 225 was up 0.41% to 8,424.49, Hong Kong’s Hang Seng Index added 0.55% to 18,969.75, the Shanghai Composite Index rose 1.53% to 2,259.88, Taiwan’s Taiex added 1.05% to 7,167.20, South Korea’s Kospi up 1.61% to 1,855.97 and Singapore’s Straits Times Index gained 0.93% to 2,716.18.

On Bursa Malaysia, Genting fell 20 sen to RM10.94, Lafarge Malayan Cement down 19 sen to RM6.71, Ta Ann and BHIC lost 12 sen each to RM5.48 and RM3.67, Nestle, Genting PLANTATION []s, GAB and Tradewinds down 10 sen each to RM55.90, RM8.80, RM12.50 and RM9.68 respectively, KLCCP eight sen to RM3.30 while Goldis fell seven sen to RM1.78.

Takaso was the most actively traded counter this morning with 58.4 million shares done. The stock gained 1.5 sen to 25.5 sen.

Other actives included JCY, KHSB, Versatile, Maybulk and Coastal warrants.

Gainers included Dutch Lady, Cepco, United Plantations, Petronas Gas, KLK, Harvest Court, F&N and Maybulk.



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Unresolved eurozone debt crisis haunts Asian markets

KUALA LUMPUR (Jan 6): Asian markets fell on Friday as Europe remained the central theme and the overhanging eurozone debt crisis kept investors on tenterhooks.

The FBM KLCI fell 4.71 points to 1,509.72 at the mid-day break, as blue chips including KLK, BAT, Petronas Gas and Maybank slipped.

Market breadth turned negative with losers beating gainers by 358 to 286, while 263 counters traded unchanged. Volume was 806.22 million shares valued at RM598.27 million.

The ringgit weakened 0.05% to 3.1525 versus the US dollar; crude palm oil futures for the third month delivery fell RM16 per tonne to RM3,173, crude oil slipped 46 cents per barrel to US$101.35 while gold added 85 cents an ounce to US$1,623.57.

Asian shares fell and the euro hovered near a 16-month low against the dollar on Friday on worries that the euro zone debt crisis is crippling European banks, with players hoping U.S. job data later in the day will help improve sentiment, according to Reuters.

At the regional markets, Japan’s Nikkei 225 fell 1.05% to 8,399.66, Hong Kong’s Hang Seng Index lost 1.4% to 18,550.37, South Korea’s Kospi was down 1.64% to 1,833.18, the Shanghai Composite Index down 0.32% to 2,141.51, Singapore’s Straits Times Index fell 0.23% to 2,706.66 and Taiwan’s Taiex shed 0.18% to 7,118.38.

On Bursa Malaysia, KLK fell RM1.02 to RM24.24 after the price surge on Thursday BAT down 36 sen to RM49.30, BHIC 20 sen to RM3.91, Tradewinds PLANTATION []s 15 sen to RM4.35, Petronas Gas and Box-Pak 10 sen each to RM14.74 and RM2.42, Parkson nine sen to RM5.47 while AIRB, Jetson and Maybank lost eight sen each to RM1.59, RM1.24 and RM8.21 respectively.

Among the gainers, Dutch Lady rose 40 sen to RM25.40, Can-One 27 sen to RM1.64, NSOP 23 sen to RM5.78, Maybulk 17 sen to RM1.71, BLD Plantations 15 sen to RM7.75, MPI 14 sen to RM2.87, KLCCP 12 sen to RM3.32 and Nestle up 10 sen to RM56.40.

Nextnation was the most actively traded counter with 43.4 million shares done. The stock rose three sen to 11.5 sen.

Other actives included Unisem, Hibiscus, XDL, Utopia, Maybulk and JCY.



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Two new towers in KLCC

KUALA LUMPUR: KLCC Property Holdings Bhd (KLCCP) and the Qatari Investment Authority will build a new retail mall plus two towers next to the Petronas Twin Towers. The new development is set to expand the retail, office and hotel space in the KLCC development.

The two new towers, one for offices and the other a hotel, will sit on the new four-storey podium retail block (with 300,000 sq ft of retail space), which will be integrated with the present Suria KLCC mall.

The new development is slated for completion by 2015. However, details on the cost of the development and specifications are still being finalised and should be available in early 2012, according to Andrew Brien, CEO of Suria KLCC Sdn Bhd, who told journalists at the company’s Media Day yesterday.

Suria KLCC, a joint venture between KLCCP and CB Richard Ellis (CBRE), recently opened the extension to its present mall. Known as “Ramlee expansion”, the new extension added 140,000 sq ft and 37 speciality outlets to the present mall that has a total gross floor area of 1.78 million sq ft and 384 outlets.

“Acting on consumer insights from research, we have embarked on a series of refurbishments to our mall to further set us apart, as well as stay fresh and relevant to our retail partners and consumers,” said Brien.

Aside from owning 51% of the Suria KLCC mall, KLCCP owns Kompleks Dayabumi, Menara ExxonMobil and has a 33% stake in Menara Maxis, according to the company’s recent annual report.

Suria KLCC has an annual turnover of RM2 billion and an average of 41 million visitors each year. The six-level mall covers a gross area of 1.78 million sq ft with a net lettable area of 1.17 million sq ft.

KLCCP saw its profit before tax for the quarter ended Sept 30 rise 6% year-on-year to RM152.37 million. Revenue improved 5% to RM244.83 million, mainly contributed by the retail space at Menara 3 Petronas, rental revisions and new leases in Suria KLCC as well as better performance from its car park management business.

“The directors are of the opinion that the prospects for the financial period ending Dec 31, 2011 will be satisfactory with the existing long- term tenancies, and contribution from the retail space of Menara 3 Petronas,” said KLCCP.


This article appeared in The Edge Financial Daily, November 23, 2011.



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KLCCP, Qatari JV to build 2 towers next to Petronas Twin Towers

KUALA LUMPUR (Nov 22): KLCC PROPERTY HOLDINGS BHD [] and Qatari Investment Authority will undertake to build two towers to be built next to the Petronas Twin Towers.

"The two blocks -- an office tower and a hotel -- will sit on a four-storey podium retail block which will be integrated with the present four-storey retail mall," said Suria KLCC Sdn Bhd at the company's Media Day on Tuesday.

It said the development will be completed by 2015 and is expected to attract more local and international visitors to the mall.



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Be prepared for profit taking

We were wrong on October as we had expected the market to retrace towards the lows hit in late September. Instead, global markets rallied on hopes that the European sovereign debt crises could be resolved through loan haircuts and the European Financial Stability Facility (EFSF).

For November, given the previous month’s sharp rally, we expect some pullback in global markets, with Malaysia being no exception. Barring the announcement of a general election, we remain defensive on the Malaysian market and would advocate a “buy” only if the FBM KLCI retraces towards 1,300 points, while we may call a “sell” if the market heads towards 1,533. We are “neutral” for now, with our defensive top 5 “buys” all maintained.

Rebound catches strategists on the wrong foot
October 2011 proved to be one of the best October months ever for global markets as indices in the US and Europe gained over 10% during the month. The rally, which began early in the month, caught most strategists flat-footed as earlier expectations were for a continued market meltdown. The rally was triggered by hopes that European leaders would be able to resolve the sovereign debt crisis.

While there appears to be a resolution in the form of a 50% debt haircut by banks and the agreement to leverage up the EFSF, we still see poor fundamentals in Europe as most countries are still plagued by weak economic growth and budget deficits.

Malaysia is ripe for profit taking
While Asian markets generally rebounded less than their Western counterparts, Malaysia put on a good show by climbing 7.5% in October and came in fourth among its regional peers.

Nonetheless, as with global markets, we feel the October rally was overdone and there is a strong possibility that markets worldwide may pull back somewhat in November, especially given that there are still concerns on Europe.

On the local front, the 3QFY11 results season may see some construction companies carry out kitchen-sinking exercises while plantation companies may post reduced profit on lower crude palm oil (CPO) prices.

While we continue to remain “neutral” on the market for now, we take note of the volatility and highlight the levels which are good for trading. If the market were to drop towards 1,300 points, there would be increased upside to our 1,466 fair value for 2012 and we would advocate a “buy into weakness” strategy.

On the other hand, as the market rises towards our 1,533-point projected market high, there may be increasing risk of a retracement, in which case we would advocate a “sell into strength” strategy.

While October’s top buys disappointed — apart from AirAsia Bhd — we retain all five companies for November given the strong risk of a market pullback after the sharp rally in October. We also expect all five companies to post decent enough results.


Best October since 1987?
The rebound caught strategists on the wrong foot. While the FBM KLCI hit its low towards the end of September, many other markets around the world hit bottom in early October. In fact, there was much doom and gloom surrounding world markets, with many forecasting that markets would continue to fall to new lows in the month.

The month did indeed start off badly but with expectations running high that a resolution to Greece’s sovereign debt would be reached in Europe on Oct 26, markets began to rally in the first week of October itself. With US economic data coming in surprisingly strong with 2.5% GDP growth in 3Q and the US corporate results season still looking positive, optimism of an early resolution to Europe’s problems saw markets rallying globally.

In fact, October was the best month ever in terms of percentage gains and point gains for both the Dow Jones Industrial Average and the S&P 500 indices, which jumped more than 11% each. The rally in Europe was also just as strong as the DAX rose more than 13% during the month.

While it does appear as if Greece is not about to default in the short term after banks agreed to a 50% haircut and the EFSF was geared up to €1 trillion (RM4.3 trillion), the longer-term problems of anaemic growth and budget deficits continue to plague Europe.

Asian markets’ rebound less strong
While Asia’s markets were the hardest hit in September, they still rebounded less in October, with many of the markets only seeing single-digit rebounds during the month compared with the double-digit gains in Europe and the US.

Of course, Asia’s fundamentals were not that great, as floods inundated Thailand and Indochina, typhoons hit the Philippines and a fire broke out at an oil refinery in Singapore at the end of September.

Leading the rebound was Hong Kong, with total returns of 12.95%, followed by the Philippines at 8.4% and South Korea at 7.9%. Laggards were Japan (+3.3%), China (4.6%) and Taiwan (+5.1%). Year-to-date performances saw the Philippines still in the lead with a total return of 6.5% followed by Indonesia at 4.4%.

Our call for continued weakness in the Malaysian market in October proved incorrect as it actually outperformed most of its regional peers, especially towards the end of the month.

While its peers slipped towards month-end, the FBM KLCI continued to charge ahead right up till the end of the month. In terms of the major news during the month, the most significant was the unveiling of Budget 2012 on Oct 7.

While lacking in cheer for the middle class or the broader market, the budget was perceived to be an election budget as it gave a number of goodies to the poor, including one-off cash handouts, the abolishment of school fees, civil servants’ pay hike and the continuation of subsidies.

Of course, the question remains whether all of these goodies can be sustained in the long run given the continued deficit but the focus of Budget 2012 may have been somewhat shorter term in nature. Also, the impact of Thai floods on Malaysian companies, both good and bad effects, was the focus of much of the month, given the severity of the Thai floods.

Cyclicals bounce back
Smaller cyclical stocks in the finance, oil and gas, construction and property sectors rebounded the most during the month as expected after their severe beating in previous months. However, property counters were also the worst hit, with names such as S P Setia Bhd and KLCC Property Holdings Bhd among the top 20 losers. Also losers were Proton Holdings Bhd and UMW Corp Bhd on fears the Thai floods would impact their operations given the large number of autoparts companies hit by the floods.

As mentioned, after their severe selldown in the past months, small caps saw a strong rebound in October as investors traded and looked for value.

For October, our advice that it was probably too late to sell proved correct given the market rally. Even among our calls, despite our continued “neutral” call on the overall market, value emerged for a number of stocks given the selldown in the previous two months. As such, we had more upgrades than downgrades in our earnings universe.

Outlook: Beware of profit taking
The market has indeed been volatile. Global equity markets including the FBM KLCI have been swinging wildly since the start of August, with the index going through a 386-point swing from Aug 1 through its closing low of 1,332 points on Sept 26 before rebounding to current levels.

While our calls were perfect at that time, we would at least like to think these have provided investors some form of correct guidance. We had downgraded the Malaysian market to a “neutral” on Aug 8 when the FBM KLCI was at 1,524 points. On Sept 26, while still feeling that the FBM KLCI had room to fall further, we recommended that investors not fear a recession but instead begin to “bottom nibble”, although we had mistakenly not called for aggressive “bottom fishing”.

Our call is still “buy” at 1,300, “sell” at 1,533 points. Over the past three months, given the market volatility, we have often been asked what the market’s entry and exit levels should be. Our advice has been to “buy” when the FBM KLCI fell below 1,300 points and to “sell” when it broke above the 1,533. We retain this piece of advice going forward. Nonetheless, we caution that these figures are not cast in stone and that investors may consider “buying on weakness” as the market approaches 1,300, and “selling on strength” as the market climbs towards 1,533.

The significance of these levels
Our 1,466-point fair value for the FBM KLCI in 2012 is derived from:

• 11.4% FBM KLCI corporate earnings growth in 2012
• Application of a 13.5 times price earnings ratio (PER) on the FBM KLCI earnings per share (EPS)
• Our expectations are that earnings growth could be cut to 5% in 2012 which would imply a PER of 14.5 times, below historical average PER of 16.5 times

Our 1,533-point “sell” trigger level is derived from:
• 2011 year-end target for FBM KLCI or expected high
• Half way point between 2011 fair value of 1,605 and 2012 fair value of 1,466 points
• Slightly above the FBM KLCI level when we downgraded our call

Our 1,300-point “buy” trigger level is derived from:
• 13% upside to our 2012 FBM KLCI fair value of 1,466 points
• Equivalent to a PER of 12 times based on current earnings growth projections

Despite the wild swings in the FBM KLCI, we retain our “neutral” view on the market and maintain our top 10 defensive “buys”. This is because we are not positive on the fundamental outlook. Despite the potential resolution of the sovereign debt crisis in Europe, we continue to see the whole continent remaining in a difficult position between the flagging economic growth that should require stimulus and budget deficits that have required the cutting in spending.

As such, we feel that there is still a risk of recession in Europe. While the US is not in such bad shape, there still appears to be a lack of catalysts to truly spur growth going forward.

While some have called for a major selldown on the market, we are not that negative either. We see Malaysia still avoiding a recession with the Economic Transformation Programme, if it truly kicks off in a major manner in 2012 to help spur domestic growth through infrastructure spending. Also, Asia as a whole should be able to still avoid a recession. Finally, there is still room for the general election to provide some short-term trading opportunities.

Remain defensive and beware of profit taking
Looking at the performance of our top 10 defensive “buys” since Aug 6, six out of 10 have outperformed the FBM KLCI and we continue advocating them. For November, given that the markets have rallied so strongly in October and broke above our 2012 fair value, we advocate a cautious stance as profit taking might set in.

Top “buys” maintained
Our October “top buy” call was a washout. As we had expected the market to turn south in October, we had maintained our top 5 defensive buys during the month. Unfortunately all except AirAsia disappointed given the market’s rebound.

However, since we expect profit taking to set in for November, we are maintaining the same defensive stock list of Axiata Group Bhd, Petronas Gas Bhd, Telekom Malaysia Bhd, AirAsia and KPJ Healthcare Bhd. We expect these five companies to report relatively resilient earnings as well during the 3Q11 results reporting season.


This article appeared in The Edge Financial Daily, November 4, 2011.