CEO Morning Brief

Stick to Fundamentally Sound and Liquid Plays Ahead of GE15, Says UOB Kay Hian

Publish date: Thu, 20 Oct 2022, 08:38 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Oct 19): UOB Kay Hian sees some trading opportunities tied to speculation surrounding the upcoming 15th general election (GE15). However, the foreign research firm advises investors to stick to fundamentally sound and liquid stocks.

UOB Kay Hian head of Malaysia research Vincent Khoo said its assessment assumes a base case for an Umno-led coalition winning a bigger majority in Parliament during GE15, taking cue from the results of several by-elections and three state elections since GE14.

"While this positively implies stability in politics/business policies, the market still lacks past elections' (before GE14) mojo of coinciding with major government contract awards. Instead, investment sentiment will continue to be swayed by global issues — stubbornly high inflation and the US' monetary policy contraction throughout 2022, the ongoing Russia-Ukraine war, and China's zero-Covid policy," he wrote in a strategy report on Wednesday (Oct 19).

UOB Kay Hian's top picks are large-capitalisation stocks such as government-linked banks CIMB Group Holdings Bhd, Malayan Banking Bhd and RHB Bank Bhd.

Khoo also likes Gamuda Bhd and MY EG Services Bhd (MYEG) as he expects the newly installed federal government to award the Mass Rapid Transit 3 Circle Line contracts by the first quarter of 2023 — for which Gamuda is a leading bidder for the tunnelling section — and to give the green light for MYEG to roll out the automated testing module for car driver licence.

"Citaglobal Bhd (formerly known as WZ Satu Bhd) could also appeal as a concept-driven trading play," he added.

Acknowledging that some investors would remain wary of GE15's dampening investment sentiment, the research firm is also recommending a list of defensive high yielders, which are not operating in politically sensitive sectors.

"These high yielders are also predicted to deliver market-outperforming absolute returns. They include Bermaz Auto Bhd, Hap Seng Plantations Holdings Bhd, Kim Loong Resources Bhd, Malakoff Corp Bhd, Matrix Concepts Holdings Bhd and Sunway Real Estate Investment Trust. Some of these companies are cash-rich and are likely to reward shareholders with special dividends, such as Bermaz. As Hap Seng's dividends are back-loaded, we expect chunky dividends to be announced [along with its results for the fourth quarter of financial year 2022]," said Khoo.

Khoo also projects that the benchmark FBM KLCI will continue to trend up towards the year end as US core inflation indicators would have peaked by then.

"However, there is downside risk to our end-2022 FBM KLCI target of 1,585 points should our base assumptions/hopes not all materialise — peak US inflation, the Russia-Ukraine war not worsening, and a not overly harsh winter season in the eurozone," he said.

At 2.50pm on Wednesday, the benchmark index traded up 10.98 points or 0.78% at 1,411.34.

The Parliament was dissolved on Oct 10, raising speculation that GE15 could be held on Nov 22.

Source: TheEdge - 20 Oct 2022

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Thank you for your good analysis.

Would you like to make a through study also on PT Resources: (The Frozen Seafood King.) ?

Its latest 1st quarter report ( May - Jul 2022) showed a net profit of more than RM7. 50 . So to me , its fair value should be at least RM0.60.

May I have your comments.?

2022-10-21 12:51


Good luck. GE15 uncertainties. Be careful lah

2022-10-22 06:37


Remember PT Resources, the true gem, is also known as the Frozen Seafood King as RHB analyst named it.

There must be reasons to cite such a name.

Ponder and think how impressive is the company to the outsiders/customers.

2022-10-22 07:02


Thank you UOB Kay Hian for your good analysis and for the opportunities given to the investors for discussions in this forum.

2022-10-22 07:08


Good morning.

Thank you for your concern.

No matter who is the winning party in the coming general election, businesses will be carried on as usual.

Everyone still likes seafoods.

The winning party will have plenty of seafood as one of their food items in the feast of celebrations

Don't you think so ?

2022-10-22 07:18


Based on the comments of UOB KAY HIAN, I will consider some of the "Election Theme Stocks" too .

2022-10-22 08:56

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