Investment Highlights

• We maintain HOLD on MYETF DJ Islamic 25 but raise our fair value (FV) by 25% to RM1.41 (from RM1.13) based on our FVs (for stocks under our coverage) and consensus FVs (for stocks not under our coverage). It is at a slight premium to its NAV of RM1.35 (Exhibit 3).

• The FV upgrade is driven largely by upgrades in our FVs for glove makers Top Glove (+28% to RM25.69) and Hartalega (+31% to RM16.23), on the back of upward earnings revisions on higher glove selling price assumptions and for longer as the Covid-19 pandemic rages on with a number of countries reporting record daily new cases.

• Post-pandemic, we believe the outlook for the glove sector will remain favourable given the higher hygiene standards and practices of global population. However, as in the past pandemics, we are mindful of an expected temporary slump in sales as end users run down their stock holding.

• Meanwhile, we maintain our views on other key sectors tracked by the ETF, i.e. consumer goods, oil & gas and telecommunications (Exhibit 2). Despite the dented consumer confidence in the aftermath of the Covid-19 pandemic, sales of consumer goods will be supported by the inelastic demand for consumer staple items (particularly, food items). For consumer discretionary items, we see a bright spot in automobiles, driven by the sales tax holiday under the shortterm Economic Recovery Plan (Penjana).

• Meanwhile, we believe oil prices have found support with the gradual recovery in demand from China as it reopens its economy, while Opec+ continues to exercise production restraint. Telcos are riding on a new wave of digitalisation of the economy, partially offset by rising mobile competition amidst escalating capex requirements

Source: AmInvest Research - 23 Jul 2020