Investment Highlights

• We maintain HOLD on MyETF DJ Islamic 25 but tweak our fair value (FV) down slightly to RM1.29 (from RM1.32) based on our FVs (for stocks under our coverage) and consensus FVs (for stocks not under our coverage). It is at a premium of 15% to its NAV of RM1.12 (Exhibit 3).

• The FV adjustment is largely to reflect the downgrade in our FVs for glove makers Top Glove (-18% to RM3.66), Hartalega (-20% to RM6.87) and Kossan Rubber (-19% to RM2.96), and consensus FV for Comfort Gloves (-25% to RM1.95) on further de-rating of the glove sector as vaccination gains momentum globally.

• We maintain our view that the upside to glove stocks and the healthcare sector is now capped, on the back of Covid-19 vaccines’ rollout worldwide. This paves the way for the eventual end to the pandemic, and hence an end to the surge in demand for gloves.

• On the other hand, we are positive on the outlook for other key sectors tracked by the ETF, i.e. consumer goods, oil & gas and telecommunications (Exhibit 2). We believe consumer spending will be well supported by cash handouts during the pandemic and the recovery in the job market thereafter. Meanwhile, we believe oil prices will ride on the gradual recovery in global economy.

• Telcos are riding on a new wave of digitalisation of the economy. The price war among mobile telecommunications operators will be somewhat alleviated assuming the proposed merger between two key players is to materialise.

Source: AmInvest Research - 8 Jul 2021