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Author: kltrader   |   Latest post: Wed, 5 Aug 2020, 9:21 AM


Budget 2019 – See MQ Research’s Top Stock Picks

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With the tabling of Budget 2019 last Friday, Macquarie Equities Research (MQ Research) summarized what this means for Malaysian companies in their research report dated 3 November 2018. Key big-picture positives are the government’s commitment to asset disposals and related expansion in private sector participation.

MQ Research’s top picks include AirAsia, Inari and Telekom, among others.


  • Budget 2019 was a good balance of tactical measures aimed at steadying a stressed fiscal situation, and structural initiatives aimed at improving long-term fiscal and economic resilience. In particular, repeated commitments to reverse the crowding out of private investment and sell non-core assets (e.g. stakes in non-strategic companies, land) reinforces MQ Research’s view, per “Khazanah 2.0: suggested priorities”, that GLC Reform (i.e. restructurings, disposals; top picks are Tenaga, Telekom, Axiata, CIMB) will accelerate, while Petronas’s RM30bn special dividend commitment could potentially see higher dividends/ stake rationalisation at its subsidiaries – related top picks are PCHEM, MISC.


  • Macro: fiscal deficit forecast for 2018 was raised to 3.7% (highest since 2013), from 2.8% (2019: 3.4%). While Petronas’ dividend commitment to the government will jump to RM54bn in 2019 (2018: RM26bn), RM30bn of this is a special dividend to be used to pay goods and services tax (GST), income tax refunds owed (a sizeable stimulus). While gross domestic product (GDP) growth is to slow to below 5% (2018/2019 forecast at 4.8%/4.9% respectively), the government debt/GDP ratio is to rise only slightly, to 51.8% in 2019 (mid-18: 50.7%) – coupled with sustained current account surpluses (2-3% of gross national income (GNI)), bond market and Ringgit reaction should be muted.
  • Key micro measures: belt-tightening was evidenced by reduced cash transfers and lower civil servant bonuses, while fuel subsidy rationalisation/targeting was clarified. There were no changes to personal or corporate tax rates, with the focus on tapping new revenue streams i.e. imported services (including digital), departure levies (outbound tourism), a sugar tax and reinstatement of real property gains tax (RPGT) – an ongoing review of existing tax relief/capital allowances may have a large impact on capital-intensive corporates. There were significant concessions for first-time home buyers, including a world’s first re a proposed P2P Property Crowdfunding exchange – another first would be a proposed airport REIT aimed at both raising funds and reducing government capex burden.
  • Directly impacted stocks: BAT will benefit if the government delivers on its intention to raise an additional RM1bn tax revenues by curbing smuggling; AirAsia and MAHB will see volume drag from the departure levy, while Gent(M) has been cut to UP.


  • Besides the aforementioned GLC and Petronas stock picks, MQ Research favours banks (Maybank, RHB), transport (AirAsia, MAHB), exporters (Inari, Vitrox) and consumer (Padini, MyNews). IHH remains MQ Research’s top non-consensus UP.

Source: Macquarie Research - 5 Nov 2018

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