The key index FBMKLCI closed the year strongly near its fresh record high, gaining 10.5% YTD to 1,866.96 after hitting two record highs in the last five trading days of 2013. The local positive sentiment was generally in line with the regional markets and Wall Street, which had witnessed a spate of record breaking sessions recently. Despite the continued window-dressing activities which resulted in the FBMKLCI performing remarkably well (+3% MoM) in December, our radar tracker, however, merely recorded a relatively flat return due mainly to the lack of retailers’ participation and continued profittaking activities in the mid-and-small-cap stocks. On a YTD basis, the average total return of 15% for the tracker portfolio still outperformed the barometer index by 79bps. Technically speaking, the FBMKLCI is now mildly biased to the downside, though we reckon that any profit taking activities would merely represent a healthy pullback in an overall uptrend. The 1,850 level should provide a near-term floor, though a more concrete support level can be found at the former resistance-turned-support at 1,826. Meanwhile, overhead resistance remains unchanged at 1,889, and the 1,900 psychological level further up.

Recommended four new stocks in December. We issued six On Our Radar (OR) reports last month, including four new stocks namely ASIA FILE (FV: RM4.61); INARI (FV: RM2.10); MKH (FV: RM3.05); and HO HUP (FV: RM1.55). Of which, we have one Take Profit recommendation on Yoong Onn (FV: RM1.01) after the group’s share price had advanced by more than 20% and approaching our fair value since we first highlighted the stock in late October 2013. Meanwhile, we have lowered our fair value of KELINGTON to RM0.52 from RM0.58 previously after the group reported a disappointing 3Q13 financial result as a result of: (i) slower attainment of new jobs in Malaysia, China and Taiwan and (ii) lower margins under its current project mix. Nevertheless, despite the disappointing 9M13 result, KELLINGTON could potentially be a turnaround story in FY14 underpinned by the hefty order and tender book. Management remains optimistic in securing the RM35m Taiwan Biodiesel’s contract by January 2014. Should this contract materialise, it could boost the group’s total order book to c. RM200m, 37% higher than the expected contract value of RM146m that was secured in FY13.

FBMKLCI boosted by window-dressing activities in December. We have 21 Trading Buys in our OR tracker portfolio list after Taking Profit on Yoong Onn and adding four new Trading Buy last month. Against the market where the barometer index posted a strong 2.99% MoM gain as a result of the continued window-dressing activities on blue chips, our OR tracker portfolio recorded a slight negative average total monthly return of -0.6% in December. We believe, the key culprit was mainly due to the lack of retailers’ participation and continued profittaking activities in the mid-and-small-cap stocks. On a YTD basis, our OR tracker portfolio reported a total return of 15.0%, which beat the FBMKLCI’s total return of 14.5%. This is mainly attributable to the strong gain on PESTECH (+165.5%), PIE (+56.6%) and FIBON (+76.1%). On the flip side, ENCORP (-14.7%), KELLINGTON (-11.8%) and GLOMAC (-11.1%) are the three main underperformers.

FABER remains the top realised gainer. Our OR tracker portfolio posted an average total return of 20.1% since its inception, which beat the total return of FBMKLCI (+19.3%) by 79bsp. In fact, our total realised gain of 24.2% alone is already more than the key index’s gain, as all of our realised stocks after the month of March had recorded more than 30% total return. In all, FABER remains the top in the list of realised gain with 104% total gain, followed by PWROOT (+68%) and GHL (+63%). On the flip side the worst performers since inception were BONIA, MKLAND and GCB, with -17%; -13% and -12% returns, respectively.

Source: Kenanga