Although the local market had experienced lacklustre trading post-CNY in early February until recently, the 30-stock index trended upwards during the final week of March, showing some upbeat momentum. Hence, the key index may retest its all-time high of 1,882 in the near-term, underpinned by ample domestic liquidity and the return of foreign funds, should the 1,850 key resistance-turn-support level is surpassed convincingly. The overall sentiment led by a higher index should help the small caps; the main focus of On Our Radar (OR). Overall, our unrealised OR tracker portfolio and realised OR portfolio are still outperforming the general market performance. In the month of March, our OR tracker portfolio posted 8.80% monthly gains as opposed to the 0.99% gain for FBMKLCI. Our average returns of 29.3% for realised OR portfolio and unrealised OR tracker is higher than the benchmark index of 18.4%.

A busy month in March. After a two-month quiet period in January and February, we returned full-force and issued a total of seven OR reports in March. We released five Trading BUY reports, of which four reports were reiterated calls with one new featured stock PRTASCO. We have a fair value of RM2.25 for the stock which has a compelling growth story for its road maintenance concessions besides the growing property business and new venture in O&G to support its future earnings growth. We have upgraded our fair valuations for KIB (FV: RM0.68), YEELEE (FV: RM2.06), ASIAFLE (FV: RM7.82) and PIE (FV: RM9.20) as their prices rallied and surpassed our previous fair valuations on PER expansion, which was inline with small cap valuations. On the other hand, we took profit on DAYA at RM0.36 after the company reported dismay 4Q13 results with gloomy earnings prospects. At one point, this stock soared to RM0.45 from RM0.34 when we first issued our Trading Buy call in August last year. We also featured a new stock, namely LYSAGHT with a NOT RATED view as we believe the stock is fairly priced for now. However, LYSAGHT has a consistent margin track record and strong dividend payout which warrants a re-look if its valuation falls to more attractive levels.

OR stocks again bucked the lacklustre trend. Despite a flattish performance of the FBMKLCI with just a 0.99% MoM gain, our OR tracker portfolio performed better with a monthly gain of 8.80% on average. Out of the 23 OR Trading Buy stocks in the tracker portfolio list, there were five stocks returning more than 20% monthly gain, namely INARI (+44.1%), KIB (28.7%), MKH (+25.6%), YEELEE (+22.3%) and ENCORP (+20.4%). In fact, INARI and MKH already had an impressive rally in the previous month. On the other hand, the five Trading Buy calls released in March also reported considerably good run in their stock prices. However, the top two monthly losers, BJAUTO (-6.5%) and RUBEREX (-5.2%) continued to face selling pressure. The decline in the share price of BJAUTO was inline with other consumer stocks while investors sidelined RUBEREX after it called off an acquisition plan.

Still outperformed the market since inception. The average returns between realised OR portfolio and unrealised OR tracker since inception is 29.3% against the total returns of 18.4% for FBMKLCI. This includes the unrealised gain of 26.2% and realised gain of 30.0%. With only one Take Profit on DAYA (+5.9%) in March, PESTECH remains at the top of the realised gain list with total returns of 218.9% with a one-year investment horizon, followed by FABER (+104.7%) and 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. As we still anticipate a better 1H14 than the 2H14, we still expect some upside in 2Q14. In addition, the healthy correction from its peak of 1,882 in early-1Q14 also offers some bargain hunting opportunities for heavyweights, and this should help sentiment for small caps which our OR is focusing on.

Source: Kenanga