Investment Highlights

• We maintain HOLD recommendation on MyETF DJ Islamic 25 with a higher fair value (FV) of RM1.10 (from RM1.06) based on our FVs (for stocks under coverage) and consensus FVs (for stocks not under our coverage). Our FV currently offers an 11% upside to the ETF’s NAV of RM0.99.

• FV inched upwards due to:
  I. 26% increase in Inari Amertron’s valuation to RM3.53 on the back of improved prospects on its radio frequency segment, leveraging on the growing 5G technology.
  II. 8% rise in Frontken Corp’s consensus FV to RM3.65;
  III. 4% rise in KL Kepong’s FV to RM23.85;
  IV. 3% rise in My EG’s consensus FV to RM1.05; and
  V. 2% rise in Dialog Group’s FV to RM3.36.

• The weightings of the fund’s stocks have altered after the recent quarterly review. There were 3 new stocks added (Dagang Nexchange, Gamuda, and Petronas Dagangan) whereas 3 stocks were removed (D&O Green Technologies, Malaysian Pacific Industries and V.S. Industry) effective on 15 September 2023.

• The NAV composition shifted with an increase in the weighting of the oil and gas sector by 5%-point to 24%, which remains the largest weightage. The sector recorded strong earnings due to higher oil prices against the backdrop of uncertain geopolitical tensions and ongoing energy transition policies. Therefore, we like constituent stocks such as Petronas Gas, Dialog Group and Petronas Chemicals Group.

• Meanwhile, the telecommunications and plantation sectors individually account for 18% of NAV. The weightage for both sectors was relatively stable since our last report on 23 June 2023. In view of falling palm oil exports attributable to weaker external demand and rising production in 2H2023, we remain neutral on the plantation sector. Based on latest Malaysian Palm Oil Board (MPOB) data, palm inventory rose by 9.6% in September due to weaker exports and higher production.

• Similarly, our neutral recommendation remains for the telecommunication sector as higher operating expenses from Digital Nasional's fixed 5G yearly wholesale capacity fee and softer subscriber affordability on inflationary pressures may dampened cellular operators’ forward earnings trajectory.

• Our in-house economist projects a stronger ringgit of RM4.50/US$1 by end-Dec 2023 and RM4.25/US$1 by end-FY2024. This could underpin a long-awaited semblance of normalcy and positive market inflection point as local institutions reposition on window-dressing, ample local liquidity and stronger year-end corporate earnings.

Source: AmInvest Research - 12 Oct 2023