Investment Highlights

• We maintain BUY on MYETF DJ Islamic 25 (MYETFDJ) with a slightly lower fair value (FV) of RM1.21 (from RM1.22) based on our FVs (for stocks under our coverage) and consensus FVs (for stocks not in our coverage and under restriction). It is at a premium of 21% to its NAV of RM1.01 (Exhibit 3).

• The FV dip stems from: i) a 38% reduction in MR D.I.Y.’s valuation to RM2.60 mainly due to a 1-for-2 bonus issue late last month; ii) 7% drop in Press Metal Aluminium’s consensus FV to RM7.00; iii) 4% decline in KL Kepong’s FV to RM21.55; iv) 3% drop in Digi.Com’s consensus FV to RM3.96; and v) 2% drop in MyEG Services to RM1.26.

• Notwithstanding the slight valuation adjustments, we remain OVERWEIGHT on oil & gas, which accounts for the largest weightage of 25% of the ETF’s NAV. This is given expectations of an extended upcycle from years of underinvestment globally which will re-catalyse capex rollouts for service providers as well as the entire value chain of up-mid downstream operators. Hence we like constituent stocks such as Petronas Chemicals Group, Petronas Gas and Dialog Group.

• The technology sector, which accounts for 7.3% of NAV, continues to enjoy robust global semiconductor demand growth despite supply chain disruptions from the RussiaUkraine conflict and China’s strict zero-Covid policy. Hence we continue to favour Inari Amertron and MPI.

• We are neutral on the glove sector, which makes up 4.9% of NAV, as the average selling price downcycle could be hitting the bottom amid heightened inflationary costs.

• We have HOLD ratings for Top Glove, Hartalega and Kossan. Our positive outlook for the ETF is partly tempered by our UNDERWEIGHT rating on the plantation sector, which now accounts for 16.6% of the ETF’s NAV, on expectations of lower crude palm oil prices in 2H2022 against the backdrop of potentially higher production.

Source: AmInvest Research - 28 Jul 2022