AmInvest Research Reports

MyETF DJ Islamic 25 - Bursa ETF Watch: Lower valuation from index changes

Publish date: Fri, 23 Jun 2023, 10:26 AM
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Investment Highlights

  • We maintain HOLD recommendation on MyETF DJ Islamic 25 with a lower fair value (FV) of RM1.06 (from RM1.12) based on our FVs (for stocks under coverage) and consensus FVs (for stocks not under our coverage). Our FV currently offers a 9% upside to the ETF’s NAV of RM0.97.
  • Following the latest quarterly review by the index’s manager i-VCAP Management, the weightings of the stocks in the fund have changed even though no stock was added nor removed. This took effect after the close of trading on 16 June 2023.
  • NAV composition has changed with the weighting of the oil & gas sector decreasing by 2%-point to 19%, rivalling the telecommunication industry which experienced a 1%-point weightage increase together with the technology segment.
  • The FV dip stems from:
    i) 33% drop in a petrochemical company’s consensus FV to RM6.66/share;

    ii) 25% reduction in Inari Amertron’s valuation to RM2.80/share due to softer smartphone demand as well as weaker contribution from optoelectronics unit;

    iii) 22% decline in V.S. industry FV to RM0.82/share; and

     iv) 11% decrease in Malaysian Pacific Industries to RM25.10/share.

  • Notwithstanding the slight valuation adjustment, we remain overweight on the oil & gas sector with BUY calls for Dialog Group and Petronas Gas on expectations of stronger crude oil prices.
  • However, against a backdrop of softer palm oil prices in 2H2022, we are neutral on the plantation sector which accounts for a relatively stable 18% of the ETF’s NAV since our last report on 21 March.
  • Our neutral recommendation also remains on telecommunication as higher opex from Digital Nasional’s fixed 5G annual wholesale capacity charge on telcos could more than offset escalated data demand and easing competition from the recent consolidation of Celcom and Digi.

Source: AmInvest Research - 23 Jun 2023

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