The FBMKLCI is likely to test its immediate psychological resistant of 1,900 this week, after closing at an all-time-high of 1,883.34 last Friday. After 1,900, the next resistant level is 1,930-1,935. All eyes are now trained on incoming results, especially the planters which are expected to post strong earnings growth due to stronger CPO prices. We are currently at the final-leg of the 1QCY14 earnings reporting season. All our three portfolios outshone the benchmark by 15-283bsp WoW and this is the first time in seven weeks the DIVIDEND YIELD Portfolio managed to beat the barometer index. This is largely thanks to the newly included small cap MITRA as its share price surged 12.10% over the week. On YTD basis, all our three portfolios also outpaced the key index by 101-255bsp with THEMATIC Portfolio being the top performer.

Index to test 1,900 psychological level this week. As the barometer index closed at record high last Friday, the local market is now in an uncharted territory with immediate psychological resistant of 1,900 and a higher support level of 1,865. Should it break through this immediate psychological barrier, the key index may test the 1,930-1,935 level. As there is no key corporate event expected in this week besides the earnings reports, all eyes may focus on plantation companies, such as IOICORP, KLK and FGV, as they are scheduled to release their earnings later this week with expectations of strong YoY earnings as CPO prices have risen 16% over the year. We are now entering the final-leg of 1QCY14 earnings reporting season. Earnings releases thus far were generally satisfactory with the only key disappointment coming from MAS, which is not really unexpected anyway.

Late buying pushed FBMKLCI to all-time-high. Although the local market started the week with a quiet session prior to the Wesak holiday last Tuesday, the local bourse traded at an uptrend last week with the benchmark index hitting the all-time closing high last Thursday. Last Friday, the FBMKLCI traded mostly in the negative territory but late buying on IOICORP (+5.37% WoW) and KLK (+2.04%) ahead of their expected strong results releases this week pushed the key index to close at all-time-high of 1,883.34. The key index movers were IOICORP, AXIATA (+1.74%) and TM (+4.20%) as the FBMKLCI inched up 0.89% or 16.62 pts over the week. On Wall Street, the US stocks surrendered their earlier gains subsequent to both the Dow and S&P 500 indexes hitting fresh high during mid-week on persistent selling in small caps while Wal-Mart’s results were disappointing.

All portfolios outperformed the market. After weeks of lacklustre performance, this time the small caps rebounded and helped all our three portfolios to beat the market. This is especially so for DIVIDEND YIELD Portfolio, which outperformed the key index for the first time in seven weeks for both WoW and YTD performance, thanks principally to MITRA (share price +12.10% WoW) which we had just included in the portfolio the previous week. The income portfolio is the top performance last week with 3.73% weekly gain and YTD total returns of 4.79% as compared to FBMKLCI’s weekly gain of 0.89% and YTD total returns of 3.78%. THEMATIC Portfolio is still the best YTD performance with 6.33% total returns after raking in 1.04% over the week while GROWTH Portfolio gained 1.32% WoW, which extended its YTD total returns to 5.73%.

… thanks to the small caps. The 25,000 shares of MITRA, which we added in DIVIDEND YIELD Portfolio on 6 May had grown 12.26% in value over the week but there is still 28% upside to our fair value of RM1.13/share. With its strong order book of RM1.2b which is 3.3x to its FY13 revenue and RM1.75b tender book, MITRA one of the jewels in the construction and civil engineering sector. Besides MITRA, TSH (share price +5.15% WoW) and FIBON (+5.38%) were the small caps and big cap IJM (+4.42%) which contributed to the improved performance of our model portfolios. However, performance of the two alpha stocks- RHBCAP-CR (-2.44%) and REDTONE-WA (-2.02%) remained lacklustre.

Source: Kenanga