With the local market remaining tough, all our portfolios were still in the red last week. However, two of our portfolios are still outperforming the FBMKLCI by 17bps-140bps on a YTD basis as the THEMATIC and GROWTH Portfolios are only down by 2.5% and 3.7% respectively as compared to the loss of 3.9% in the KLCI for the same period. Meanwhile, the DIVIDEND YIELD Portfolio also narrowed its loss by +0.3% to an unrealised loss of RM2,751 or -4.1% for the YTD. We believe the market is likely to influence by results announcement. However, any earnings surprises would still be overshadowed by the continued election concerns in our view. As such, we expect the overall local market to continue to trade sideways until the election day is confirmed. This view is further reinforced by FBMKLCI's Daily Chart whereby the index seems to trace out a "triangle" pattern and the indicators have shown early sign of bottoming. However, the Weekly Dart has yet to reinforce this view, as the index has yet to prove its ability to climb back up above its long-term uptrend channel.

Still in a consolidation mode. Last week, the local market had another lacklustre week as election jitters continued to keep investors sidelined with the FBMKLCI losing its previous week's gain to close -5.85 points or -0.4% WoW lower to settle at 1622.08. Besides the election concerns, the lack of surprises in the corporate earnings released also did not help the market either. Last week, a total of 28 companies that we tracked released their results with 50% of them meeting expectations while the rest reported positive and negative earnings surprises in equal proportion. The weak market trend was led by DIGI (-25 sen), PBBANK (-28 sen) and KLK (-90 sen). This week, we expect the local market to remain in a consolidation phase as election jitters will continue to pressure the broader market. Meanwhile, this week is also the final week of the Feb reporting season and in which where we are not expecting any major surprises.

DIVIDEND YIELD Portfolio leads the gain. Against the benchmark index which lost 0.4% WoW for the week, two of our portfolios, namely the DIVIDEND YIELD and THEMATIC Portfolios, raked in 0.26% and 0.25% gains respectively in contrast. However, the GROWTH Portfolio posted a RM420 unrealised loss or -0.6% WoW, partly dragged down by REDTONE-LA (-5.7%) and HOVID (-3.9%). PUNCAK is the main mover for the THEMATIC Portfolio as it contributed a 5.5% WoW gain to the portfolio while UOADEV pushed our DIVIDEND Pportfolio higher by 2.9%. On the overall, the THEMATIC (-2.5%) and GROWTH (-3.7%) Portfolios have managed to outpace the FBMKLCI (-3.9%) on a YTD basis while the DIVIDEND YIELD (-4.1%) Portfolio underperformed the benchmark index by 25bps.

PUNCAK's newsflow continues. Bucking the weak market sentiment, PUNCAK continued to be in focus for the second week as the State Government of Selangor had made a fresh revised offer to take over the water assets in the state for RM9.6b. The new offer relating to PUNCAK's assets is estimated to be 20% higher than that of the last offer, which is fairly attractive. We believe the company is deeply undervalued and we have a target price of RM2.85 on the stock based on a SOP valuation. Meanwhile, HOVID, in which we have 30,000 shares in our GROWTH Portfolio, reported a disappointing set of 2Q13 results with its net profit falling 15% QoQ on higher operating expenses. We cut the stock's fair value to RM0.26 from RM0.30 previously after the results. However, we still the company's prospect as remaining intact, driven by its production lines and offshore expansions and hence, we are keeping our position in the stock.

All eyes on Telco results. All the listed companies that have not done so will be rushing to announce their respective 4QCY12 results this week. Out of these, we believe that the remaining two telco heavyweights' 4QFY12 results - MAXIS and Telekom Malaysia (TM) - may provide some clues on the market direction for next month given that both counters account for about 5.32% of the FBMKLCI Index weighting while the entire telco sector account for 18% of the weighting. We expect MAXIS' 4Q12 result, which is targeted to be released on Tuesday, to come in within ours as well as the consensus estimate (FY12 NP: RM2.1B). Meanwhile, TM has scheduled to release its 4QFY12 result on Wednesday, where we expect the group to record a full-year core PATMI of RM810m-RM830m with potentially another capital management plan being on the cards. We expect TM to declare another 30.0 sen special dividend (under its capital management plan) on top of an estimated 10.6 sen final dividend. Should this materialise, it will provide a positive surprise to the market given that the consensus is only expecting TM to declare a 10.0 sen final dividend.

Source: Kenanga