News

• SC has published the latest list of Shariah compliant securities under the new screening methodology for the May review, which will take effect from 29 May 2015.
• In short, 19 stocks were added to the list but 13 stocks were excluded from the previous list, increasing the list to 674 stocks.
• Overall, the SC has maintained its guidance on timing for the disposal of securities which have been reclassified as Shariah non-compliant.

OUT

• Among notable stock under HLIB universe that was reclassified as Shariah non-compliant is IOI Corp (HOLD; TP: RM4.14). The exclusion is well within market expectations. Please refer to Figure 1 for the full list.
• Other notable names are HL Industries (Not Rated) and Selangor Prop (Not Rated).

IN

• As for those who were newly classified as Shariah compliant, two are under HLIB universe. They are Bumi (BUY; TP RM1.54) and SKPetro (HOLD; TP: RM2.85). Again, the inclusions were also within expectations as guided. See Figure 2 for the full list.
• Other notable names that were classified as compliant are Malakoff (Not Rated) and MCT (Not Rated), both newly listed stocks.
• Star (BUY; TP RM2.73) who warned (during its analyst briefing) that it may be excluded due to the cash ratio, retained its Shariah status. We believe this is reasonable given that it is easier to satisfy the cash ratio by placing cash in Shariah deposits vis-à-vis companies who failed due to the debt ratio.

Comment

• We reiterate our BUY rating on Bumi given its new status as Shariah compliant could attract a wider spectrum of investors.
• We also reiterate our BUY rating on Star as it retain its Shariah status, mitigating potential weakness from selldown due to change in status.
• We are also keeping our Hold rating on IOI Corp despite potential share price weakness but saving grace is that the exclusion is widely expected which could have prompted actions ahead of SC’s May review.

Source: Hong Leong Investment Bank Research - 29 May 2015