• IOI Corp & SunCon In
  Star, Tan Chong, Eversendai & YNH Out
  Overall 35 In; 39 Out; 3 Delisted = 667

• SC has published the latest list of Shariah compliant securities under the new screening methodology for the November review, which will take effect from 27 November 2015.
• In short, 35 stocks were added to the list, 39 stocks were excluded from the previous list, while 3 stocks previously in the list were delisted. All-in-all, the SC Shariah list was reduced to 667 stocks (previously: 674 stocks).
• No change in SC’s guidance on timing for the disposal of securities which have been reclassified as Shariah noncompliant.

OUT

• Among notable stock under HLIB universe that was reclassified as Shariah non-compliant is Star (HOLD; TP: RM2.31), Tan Chong (SELL; TP: RM2.18), Eversendai (BUY; RM1.10) and YNH (SELL; RM1.49). The exclusion of Star and Tan Chong is well within market expectations. Please refer to Figure 1 for the full list.
• Other notable names are Amway (M) Holdings (Not Rated) and Hap Seng Consolidated (Not Rated).

IN

• As for those who were newly classified as Shariah compliant, two are under HLIB universe. They are IOI Corp (HOLD; TP RM4.00) and SunCon (BUY; TP: RM1.59). The inclusion of SunCon was within expectations as guided while classification of IOI Corp has always been a borderline case (issue on dividend income). See Figure 2 for the full list.
• Other notable names that were classified as compliant are Asia Brands (Not Rated) and Censof (Not Rated).

Comment

• We reiterate our BUY rating on SunCon as its new status as Shariah compliant could attract a wider spectrum of investors. SunCon has exhibited strong YTD job wins and is in prime spot to ride on the robust 11MP contract flows.
• Despite the exclusion from the Shariah list, we reiterate our BUY rating on Eversendai as it has recently secured a string of cont racts, which brings its YTD orderbook replenishment to RM1.5bn. Eversendai is also a beneficiary of strong USD as 73% of its orderbook is located in the Middle East. However, we note that Lembaga Tabung Haji is a substantial shareholder with a 5.2% shareholding.
• We are also keeping our Hold rating on IOI Corp despite potential share price strength on Shariah list inclusion. Its FFB production growth could weaken to 2-3% in FY06/16 affected by the lagged impact from severe dry weather in Sabah.

Source: Hong Leong Investment Bank Research - 30 Nov 2015