Investment Highlights

• We maintain BUY on MYETF DJ Islamic 25 (MYETFDJ) with a slightly lower fair value (FV) of RM1.15 (from RM1.21) 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 15% to its NAV of RM1.00 (Exhibit 3).

• The FV reduction stems from: i) a 47% drop in Hartalega’s FV to RM2.46; ii) 10% decline in Petronas Chemicals Group’s FV to RM10.13; iii) 11% decrease in Press Metal Aluminium’s consensus FV to RM6.26; iii) 17% fall in Sime Darby Plantation’s FV to RM3.65; and iv) 12% reduction in IOI Corp’s consensus FV to RM3.55.

• The ETF registered a 20% YoY drop in 1H2022 loss of RM21.4mil, largely due to a 23% YoY fall in fair value loss to RM23.4mil. Also, 1H2022 expenses decreased by 30% YoY to RM444K due to a 32% YoY drop in manager’s fee.

• Notwithstanding the slight valuation adjustments, we remain OVERWEIGHT on oil & gas, which accounts for the largest weightage of 26% 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 8% 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 now makes up 3% of NAV, as the average selling price downcycle could be hitting the bottom amid heightened inflationary costs. Our positive outlook for the ETF is partly tempered by our UNDERWEIGHT rating on the plantation sector, which now accounts for 17% 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 - 2 Sept 2022