Highlights

KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Fri, 18 Jan 2019, 09:53 AM

 

Malaysia Strategy – 2019 Outlook

Author:   |    Publish date:


Key market themes for 2019 are the government-linked companies (GLC) reform and Petronas monetization, according to Macquarie Equities Research (MQ Research) in their research report released yesterday (7 Jan). MQ Research highlighted their top stock picks, showing preference for discounted, yield resilient beta stocks over fully-valued defensives.

Read on for more information, and for MQ Research’s top picks.

Conclusion

  • Against a backdrop of sustained albeit decelerating global growth, Malaysia’s relative resilience is reinforced by positive emerging markets differentiators re current account surplus, contained FX vulnerabilities and sturdy national oil corporation (Petronas). Nonetheless, structural threats from de-globalisation and peak manufacturing mean the new government must expedite domestic institutional reforms to stimulate internal growth drivers and lift broad quality of governance, especially for the expansive GLCs sector (>50% of KLCI capitalisation). Related restructurings and regulatory clarity, with optimised leveraging of Petronas via higher dividends/stake rationalisations, will drive a market re-rating despite the challenging earnings growth outlook.

Impact

  • Macro - pressured, but resilient: Malaysia’s 2019 gross domestic product growth outlook is buffered by anticipated normalisation of commodity-specific supply shocks, fiscal stimulus via Petronas’ one-off RM30bn special dividend and mass consumption support from lower fuel and housing costs. Financial system indicators are robust, with ample Ringgit liquidity and external assets containing stresses relating to foreign portfolio outflows.
  • Reforms need to accelerate: with a historically trade/manufacturing-led economic growth model now structurally at risk, reforms aimed at lifting domestic competitiveness and productivity of non-tradable sectors are urgent. There is plenty of low hanging fruit re the discounted GLC space; regulatory clarity by itself would re-rate flagship stocks like Tenaga and Telekom. Fiscally-driven pressure on Petronas to monetise subsidiary stakes (convertible bonds most sensible) would also boost KLCI free-float.
  • Market, sector positioning: base case 12mth KLCI target is 1,775, +5.9% or 16x 2019E price-earnings ratio (PER) (market dividend yield is 3.5%). Delivery on GLC Reform, Petronas monetisation themes would put blue-sky bottom-up KLCI target of 1,889 (+13%, 17x PER) within reach, especially if overlaid with high-impact infrastructure stimulus (ECRL, water).

Outlook

  • Favoured Khazanah-GLCs are Tenaga, Telekom, Axiata and CIMB; for Petronas subsidiaries, MQ Research likes PChem and MISC. Re sectors, MQ Research favours banks (Maybank, RHB preferred over Public, HLBK), transport (AirAsia) and exporters (semicons Inari, Vitrox preferred over gloves). PGas, BAT, IHH and QL are (non-consensus) Underperform ratings.

Source: Macquarie Research - 8 Jan 2019

Share this

  Be the first to like this.
 


 

402  326  492  672 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 ARMADA 0.22+0.06 
 SAPNRG 0.285-0.005 
 SUMATEC 0.005-0.01 
 MYEG 1.01-0.06 
 BARAKAH 0.08+0.02 
 NEXGRAM 0.020.00 
 IRIS 0.15+0.005 
 XINGHE 0.045+0.005 
 KNM 0.09+0.01 
 ECONBHD 0.515+0.045 

TOP ARTICLES

1. 火中取栗拼油气(下) 菜鸟必学7招/冷眼 【冷眼专栏】漫漫投资路
2. 当遇上基本面投资法(上) “反向”战略非唱反调/冷眼 【冷眼专栏】漫漫投资路
3. Stocks on Radar - AirAsia Group (5099) AmInvest Research Reports
4. FPI FY19 revenue growth expected to hit 15% FPI 2大因素前景看好台灣聯友今年再 尋突破
5. [转贴] 真实还原97亚洲金融风暴,韩国从暴富到破产仅用时7天! Good Articles to Share
6. Stocks on Radar - Elsoft Research (0090) AmInvest Research Reports
7. THE PERCEPTION OF P/E or: How I learned to fear my Wife the bursa journey that worked for me. 2000-2019
8. JAKS Resources Berhad - RM25.5m P&L Hit PublicInvest Research
Partners & Brokers