The local market experienced lacklustre trading in the month of February with the FBMKLCI consolidating in the last three weeks after it took a dip at the beginning of the month following a decent rally prior to the CNY holidays. As at 28th of Feb, the barometer index raked in a 1.75% gain MoM after a 3.37% contraction in the previous month. Even then, our On Our Radar (OR) tracker still registered a 6.02% gain for the same period. Looking into the month of March, with the new geopolitical tension emerging in Ukraine coupled with the upcoming FOMC meeting later this month, which is the first meeting for the new chairlady, investors may hesitate to take fresh position. For the FBMKLCI, although it ended the month above the 1,833-resistance at 1,835.66, the directional bias is expected to gravitate downwards due to the string of disappointing results from the recently concluded reporting season which could lead to a downgrade in the key index target and/or market valuations.

Only one new Trading BUY stock. We had released only three OR stocks in February with merely one new Trading Buy stock, i.e, HARBOUR (FV: RM2.00/share) which we believe is a unearthed gem in Bintulu for its new property venture while existing core business should benefit from the SCORE initiative. On the other hand, we are pleased to switch one of our OR stocks, PESTECH, to core coverage for institutional clients. One could have had made a whopping total return of 219% buying the stock since our first Trading Buy report a year ago, making it the best ever OR stock. However, we continue to recommend investor to hold on to this stock, although it is longer under our retail coverage, as a niche, alternative power play with explosive earnings growth. Officially, on 20th Feb, PESTECH is rated an OUTPERFORM stock with a new target price of RM4.10/share. We had also issued a NOT RATED piece on MAICA with an upside potential of 48% to its fair value of RM2.38/share. MAICA is an RNAV play currently undergoing transformation into a property play from its wood manufacturing business.

OR stocks bucked lacklustre trend. Despite a lacklustre performance of FBMKLCI with just a 1.75% MoM gain, our OR tracker portfolio registered better returns than the 30-stock index at a monthly gain of 6.02% on average. Out of the 24 OR Trading Buy stocks in the tracker portfolio list, five stocks, namely MKH (+27.0%), SBCCORP (+21.3%), HOHUP (+21.0%), ASIAFLE (+19.9%) and INARI (+19.9%), raked in impressive monthly gains. In fact, all these stocks, except SBCCORP (which was released in Jun-13), were introduced less than three months ago in December last year. Despite the impressive rally, we still believe there are still upsides of 15%-44% to their fair values. On the flipside, BJAUTO (-9.8%) and RUBEREX (-7.4%) were the top two losers with the former facing heavy profit-taking activities following a good run in Jan-14, the first month when we introduced the stock.

PESTECH the best ever OR stock. The average returns between realised OR portfolio and unrealised OR tracker since inception is 23.1% against the total returns of 17.2% for FBMKLCI. This includes the unrealised gain of 13.6% and realised gain of 30.9%. PESTECH is top in the realised gain list with total returns of 218.9% within a year of investment horizon, replacing FABER (+104.7%) and followed by PWROOT (total: +91.4%; +67.8% in Mar-13 & +23.5% in Jul-13). On the flipside the worst performers since inception were BONIA, MKLAND and COCOLND, with -17.1%; -13.5% and -12.2% returns, respectively. Given the recently concluded reporting season, we expect revision on existing Trading Buy stocks in the coming weeks, while at the same time we are looking for new ideas to share with our investors. Stay tuned.

Source: Kenanga