AmInvest Research Reports

MYETF DJ Islamic 25 - Bursa ETF Watch: Replacing Kossan with CTOS

AmInvest
Publish date: Mon, 19 Sep 2022, 09:36 AM
AmInvest
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Investment Highlights

  • We maintain BUY on MYETF DJ Islamic 25 (MYETFDJ) with an unchanged fair value (FV) of RM1.15, based on our FVs (for stocks under our coverage) and consensus FVs (for stocks not under our coverage and restriction). It is at a premium of 15% to its NAV of RM1.00 (Exhibit 3).
  • Following a quarterly review by the index’s manager i-VCAP Management, Kossan Rubber Industries has been replaced by CTOS Digital, which has a minimal NAV weighting of 1% currently. Hence, the stock constituent change did not have any significant FV impact.
  • However, NAV composition has changed with the weighting of the technology sector increasing by 0.6%-point to 7.8% against the glove’s drop of 0.4%-point to 3.1%.
  • With the changes in stock prices from 1 September 2022, the NAV weighting of the plantation sector has risen by 0.7%- point, technology 0.6%-point and autos 0.5%-point while oil & gas declined by 0.8%-point and industrial products & services down 0.4%.
  • Despite crude oil prices trading below US$100/barrel, 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-middownstream operators. Hence we like constituent stocks such as Petronas Chemicals Group, Petronas Gas and Dialog Group.
  • The technology sector continues to enjoy robust global semiconductor demand growth despite supply chain disruptions from the Russia-Ukraine conflict and China’s zero-Covid policy. Hence we continue to favour Inari Amertron and MPI.
  • We are neutral on the glove sector as the average selling price downcycle could be tapering towards the bottom amid heightened inflationary costs. We have HOLD ratings for Top Glove and Hartalega.
  • Our positive outlook for the ETF is partly tempered by our UNDERWEIGHT rating on the plantation sector, with a weighting of 17.8%, on expectations of lower crude palm oil prices in 2H2022 against the backdrop of potentially higher production.

 

Source: AmInvest Research - 19 Sept 2022

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