The local market experienced sea-saw trading sessions last week where there was a lack of follow-through buying in the blue chips after a relief rally post the GE13, but rotational plays were seen in oil & gas counters. Buying interest was also seen in penny stocks. Despite last week closing with a 0.22% WoW loss, the month of May in fact ended with its fifth straight monthly gains. All our three model portfolios performed fairly well and outperformed the FBMKLCI by 321-639bps WoW and 482-1398bps on a YTD basis. Last Friday, we added 4,000 shares each of DIGI and PUNCAK into our DIVIDEND YIELD and THEMATIC portfolios respectively. On the technical outlook, the key index should see its losses being capped at the 1,763/65 levels. The overhead resistance remains at the 1,800 psychological level where a successful breakout should see it targeting 1,826 next. 

 

In the consolidation phase. Although the key index stayed flattish last week, buying interest was still seen in penny stocks and some oil & gas rotational plays. Last week was also the last week of the 1QCY03 reporting season, where the corporate earnings came in generally within expectations. Out of the 127 companies under our stock universe coverage, 112 companies had released results, which were largely in line with expectations (66%) while 9% of the company reported earnings, which came in above and 25% missed expectations. At the closing bell, the FBMKLCI fell 3.84pts WoW or 0.22% to settle at 1,769.22. However, the key index closed the month of May with a 3.0% monthly gain, its fifth straight monthly gains since Dec last year. The week’s key index leading movers were CIMB (share price -2.7% WoW), AXIATA (-2.5%) and IOICORP (-2.9%).  

 

 

THEMATIC portfolio remains as the top performer. While the benchmark index registered a 0.22% WoW loss last week, all our three model portfolios posted commendable performance with the THEMATIC portfolio being the top performer with a 6.17% gain followed by the GROWTH (+4.98%) and DIVIDEND YIELD (+2.99%) portfolios. This was mainly attributed to the Alpha stock – REDTONE-LA, which jumped 42.9% in value for each of the three portfolios. On a YTD basis, the THEMATIC portfolio remained as the top performer with a total return of 20.2% against the FBMKLCI’s 6.25% total return. The GROWTH portfolio recorded a total YTD return of 18.7% while the DIVIDEND YIELD portfolio posted a total YTD return of 11.07%.  

 

The Alpha stock is the main driver.  Share price of REDTONE-LA rallied 39.0% WoW last week after it announced the disposal of its controlling stake in one of its subsidiary Redtone Network Sdn Bhd to the Royal family of Johor where the company had already been shortlisted (one of the three) by MCMC for the digital terrestrial television broadcast (DTTB) infrastructure contract in Nov 2012. It was reported earlier that the whole DTTB is likely to cost RM1.0b. On the other hand, share price of MPHB took a dive after it went ex-entitlement for the 1-for-2 Offer for Sale of MPHB Capital share last week. However, the value of the MPHB-OS which worth RM1,240 is more than the RM1,080% WoW decline in MPHB value last week. We will subscribe to the 2,000 MPHBC share entitlements at RM1.00 a piece which the share will be listed on 26 Jun later.  

 

Adding DIGI and PUNCAK to our portfolios. Last Friday, we have added 4,000 shares of DIGI at a cost of RM4.75 each to our DIVIDEND YEILD Portfolio. The outlook for the country’s smallest telco remained intact in our view given that its EBITDA margin is expected to improve gradually from 2Q13 onwards and on track to achieve its full-year target of c.46%. Meanwhile, we understand that the group is still exploring the business trust model, although no timeline has been committed. The business trust is to house its assets and extract more cash from its free cash-flow model to further reward shareholders. We have also added an additional 4,000 shares of PUNCAK to the THEMATIC portfolio as we believe the stock will benefit from the ongoing water assets restructuring in the Selangor state. 

 

Market is likely to take another pause. After a flattish performance last week, the broader market is expected to take another breather before trending higher. In view that the reporting season has just concluded, we expect more research  houses to issue their market strategy reports in the coming weeks. This should give a clearer direction to investors since the market had already rallied fairly well since GE13. Technically, the FBMKLCI should see its losses being capped at the 1,763/65 levels. The overhead resistance remains at the 1,800 psychological level where a successful breakout will see it testing 1,826 next.

 

Source: Kenanga