As we are half-way through the 2014 FIFA World Cup, which is more exciting, and with the fasting month just started, the local equity market is likely to remain quiet, at least in term of trading volume. Our strategist had released the 3Q14 Strategy Report two days ago which highlights a cautious mood for 3Q14 and a short-term pullback in the market is also not ruled out. Thus, we will be more selective in featuring new trading ideas and at the same time we may review our trading positions. However, any pullback could be good buying opportunities; thus we prefer to Buy-on-Weakness should the benchmark index fall below 1,835. In June, the FBMKLCI posted a monthly improvement of 0.50% from 0.10% in May. But our OR tracker had a better monthly gain of 2.79%. The average returns between realised OR portfolio and unrealised OR tracker since inception is 34.1% which outpaced the 30-stock key index’s total returns of 21.6% for the same period.           

Added three new Trading Buys. We had another busy month in June, looking out for new trading ideas, where we released three new Trading Buys out of a total of seven On Our Rader (OR) reports released last month. We featured new stocks such as IBHD (FV: RM4.13), TITIJAYA (FV: RM2.95-RM3.32) and SKPRES (FV: RM0.57) which we believe to have value. In fact, the share price of SKPRES has risen 13% merely three trading days from the report dated 26 Jun-14 before wrapping up for the month. The company is backed by a turnaround story thanks to new orders from Dyson. Our analysts are onto the group to check out its factory in Johor this week and we should be able to update investors soon. Meanwhile, we had also reviewed three of our calls on MITRA (FV: RM1.13), BAUTO (FV: RM2.82) and HOHUP (FV: RM1.55) after their share price rose 10%-35% since our last reports. We also featured a new stock DNEX with a NOT RATED label. Formerly known as Time Engineering Bhd, DNEX could be an international play as a member of Pan Asian e-Commerce Alliance. However, due to its rich valuation of 23x PER for FY15, we believe there is limited upside on DNEX for now.

Still outperformed the market. The local equity market had another slow month in June despite the FBMKLCI improving with 0.50% monthly gain from 0.10% monthly gain in the month of May. However, our OR tracker portfolio still registered a better capital monthly returns of 2.79% in June, from +2.53% in May, which is still slightly better than that of small cap index monthly gain of 2.74% (vs. +0.27% in May). This is mainly driven by SCGM which posted another impressive monthly gain of 39.6% after the 11.6% gain in May while SKPRES is another contributing OR stock as mentioned above with 13.3% gain. Meanwhile, BAUTO also registered a 14.5% monthly gain after reporting strong 4Q14 results on impressive auto sales. However, KGB is the biggest loser last month contracting 12.2% over the month as investors took profit after the share went “ex” for bonus issue in mid-June.

SCGM leads the OR tracker list. With three new Trading Buys in June, we now have 25 stocks in our OR tracker list. Together with 33 stocks in the realised portfolio, the average total returns for the tracker stocks and realised portfolio since inception is 34.1%, up from 33.3% in May, which beat the FBMKLCI total return of 21.6%. SCGM has now overtaken PIE (+96.9%) as the best performer under our OR tracker with 104.5% unrealised gain in June. INARI (+95.1%) remains in the top three list. Meanwhile, as we did not close any position last month, PESTECH still topped the realised gain list with total returns of 218.9%, followed by GADANG (+136.4%) and MKH (+121.5%). On the flipside, the realised worst performers since inception were BONIA (-17.1%), MKLAND (-13.5%) and COCOLND (-12.2%). Given that we are cautious for 3Q14 and do not rule out a short-term pullback, we will be more selective in featuring new trading ideas and at the same time taking some profit off the table for the OR stocks which have registered handsome unrealised gains in the past months.

Source: Kenanga