KUALA LUMPUR: UOB Kay Hian Malaysia Research has advocated investors be defensive in the third quarter of 2011 (3Q2011) but it is positioned for a recovery in the 4Q2011.
It said on Tuesday, Aug 16 the optimism for 4Q2011 would be underpinned by the rise in market prices in reaction to more liquidity pumping, most prominently by the US Federal Reserve.
'We rationalise that by the 4Q11, the fed's actions would be justified by US economic indicators turning anemic coupled by 3Q11's commodity price deflation,' it said.
UOB Kay Hian Malaysia Research had recently presented its 2H11 Malaysian Market Strategy to over 50 institutional clients in Hong Kong, Singapore and Malaysia.
'All clients were naturally cautious through 2H11, in agreement with our view. However, with the FBM KLCI outperforming the regional bourses in the recent rout, more funds have turned neutral on Malaysia, particularly on the O&G sector which was relatively resilient,' it said.
It said there was some interest in some of its key themes:
a) rising importance of corporate Japan in M&A deals (40% of 2010 transactions) and FDI (12% of FDI), wherein we identified the steel sector as a potential M&A beneficiary
b) Iskandar development ' expect more development milestones after the historic announcement of Malaysia-Singapore iconic wellness township,
c) mega CONSTRUCTION [] projects such as MRT ' the award of the MRT construction could be delayed till end-2011, but the award of LRT extension packages is around the corner, and
d) development of prized federal landbank.
It added that among its top five large cap picks -- Berjaya Sports Toto (BToto), CIMB, Gamuda, MRCB, Telekom Malaysia and UEM Land -- BToto appeared to be the most well accepted given their potential in engaging in a significant capital management exercise soon.
'We also highlighted that UEM Land, which has fallen 31.4% from this year's peak, and TM are recent additions to our top picks.
'Meanwhile, we also mentioned that while we remain UNDERWEIGHT on the PLANTATION [] sector for now, we notice that values are emerging with the recent selldown, particularly IOI Corp which now trades at a 2012 PE multiple of 12.7 times, or almost 3.0 times below its large cap peers,' it said.
UOB Kay Hian Malaysia Research said non-rated smaller caps discussed were:
a) ECM Libra as a beneficiary of the financial industry consolidation,
b) Ann Joo as a potential beneficiary amid some foreign industry players' interests in the local steel industry,
c) CI Holdings ' wherein the research house highlighted a recent speculation of a higher bidder for Permanis, the local bottler for Pepsico.
CI Holdings trades at 27.5% below its expected cash per share of about RM5.80 after it completes the sale of Permanis to Asahi.
It said on Tuesday, Aug 16 the optimism for 4Q2011 would be underpinned by the rise in market prices in reaction to more liquidity pumping, most prominently by the US Federal Reserve.
'We rationalise that by the 4Q11, the fed's actions would be justified by US economic indicators turning anemic coupled by 3Q11's commodity price deflation,' it said.
UOB Kay Hian Malaysia Research had recently presented its 2H11 Malaysian Market Strategy to over 50 institutional clients in Hong Kong, Singapore and Malaysia.
'All clients were naturally cautious through 2H11, in agreement with our view. However, with the FBM KLCI outperforming the regional bourses in the recent rout, more funds have turned neutral on Malaysia, particularly on the O&G sector which was relatively resilient,' it said.
It said there was some interest in some of its key themes:
a) rising importance of corporate Japan in M&A deals (40% of 2010 transactions) and FDI (12% of FDI), wherein we identified the steel sector as a potential M&A beneficiary
b) Iskandar development ' expect more development milestones after the historic announcement of Malaysia-Singapore iconic wellness township,
c) mega CONSTRUCTION [] projects such as MRT ' the award of the MRT construction could be delayed till end-2011, but the award of LRT extension packages is around the corner, and
d) development of prized federal landbank.
It added that among its top five large cap picks -- Berjaya Sports Toto (BToto), CIMB, Gamuda, MRCB, Telekom Malaysia and UEM Land -- BToto appeared to be the most well accepted given their potential in engaging in a significant capital management exercise soon.
'We also highlighted that UEM Land, which has fallen 31.4% from this year's peak, and TM are recent additions to our top picks.
'Meanwhile, we also mentioned that while we remain UNDERWEIGHT on the PLANTATION [] sector for now, we notice that values are emerging with the recent selldown, particularly IOI Corp which now trades at a 2012 PE multiple of 12.7 times, or almost 3.0 times below its large cap peers,' it said.
UOB Kay Hian Malaysia Research said non-rated smaller caps discussed were:
a) ECM Libra as a beneficiary of the financial industry consolidation,
b) Ann Joo as a potential beneficiary amid some foreign industry players' interests in the local steel industry,
c) CI Holdings ' wherein the research house highlighted a recent speculation of a higher bidder for Permanis, the local bottler for Pepsico.
CI Holdings trades at 27.5% below its expected cash per share of about RM5.80 after it completes the sale of Permanis to Asahi.
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