Investment Highlights

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

• The tepid growth in FV stems from: i) 9% increase in CelcomDigi valuation to RM4.80/share (previously RM4.40/share), driven by higher subscriber base and cost cutting synergies, and ii) 6% rise in both valuations of Sime Darby Plantation (FV: RM4.55/share) and KL Kepong (RM25.20/share)

• Following the recent quarterly review, Fraser & Neave (F&N) replaced Gamuda in the index, effective on 15 December 2023.

• The NAV composition has changed with a slight drop in oil & gas (O&G) sector by 1%-point to 23%, which remains the largest weighting. We continue to like the sector, which benefits from elevated oil prices against the backdrop of OPEC+ supply cuts amid governmental energy transition policies. This includes Petronas Gas, Dialog Group and Petronas Chemicals Group.

• We remain neutral on the plantation sector, which accounts 18% of asset value, largely unchanged since our last report on 16 October 2023. We foresee flattish sector upside as CPO prices are expected to be constrained by increased palm oil supply in Malaysia and Indonesia.

• The telecommunication sector slid by 1%-point to 17%. Our neutral stance on the telecommunication sector remains in view of higher opex from Digital Nasional's fixed 5G annual wholesale capacity charge, tepid revenue growth prospects and limited subscriber affordability as inflation may rise as the government aims to introduce targeted subsidy rationalisation.

• By end-2024F, our in-house economist projects a stronger MYR against the USD, closing at USD:RM4.50 (USD: RM4.65 in end- 2023F). Also, we foresee a stronger corporate earnings growth of 13% in 2024F, supported by positive catalysts from Madani economic initiatives under a stable administration and reinvigorated project rollouts. However, this may be offset by rising global macro headwinds as US recessionary concerns intensify in the aftermath of a 500bps interest rate hike cycle since 2022.

Source: AmInvest Research - 20 Dec 2023