For the past one month, Malaysia equities staged a strong rebound as investors went into bargain hunting ahead of the year end window dressing. However, we believe equities market is likely to stay volatile in the near term because of turbulent global markets and this will offer opportunities for investors to buy on weakness. For this round, Naga Warrants focus on selected companies from various sectors, including Property Developer, Industrial, Finance, Trading/Services and Power Utility. These 8 structured call warrants are BURSA-C7, KSL-CA, KSL-CB, MATRIX-CC, MYEG-CG, PETGAS-CL, WPRTS-CH and YTLPOWER-CO.

Kenanga Research has rated one of the underlying counters as Trading Buy (KSL, TP: RM6.63), two stocks as OUTPERFORM (MATRIX, TP: RM3.48; YTLPOWR, TP: RM1.70) and three others underlying counters as MARKET PERFORM (BURSA, TP: RM8.60; WPRTS, TP: RM3.13, PETGAS, TP: RM21.24). Meanwhile MYEG (Not Rated) is not under the coverage of the research team.

Equities Derivatives & Structured Products (EDSP) team favour KSL and MATRIX because both property developers could be the beneficiaries from recently announced 2015 Budget based on the Youth Housing Scheme, especially both companies main focus on developing residential properties, which are priced below the RM500,000 mark and have good exposure in Greater Klang Valley.

Despite Kenanga Research has recently downgraded BURSA to MARKET PERFORM, the EDSP team believes BURSA is a good proxy and a likely beneficiary of the ongoing rollout of the Economic Transformation Programme. On top of that, Bursa might also benefit from favourable 4Q14 and 1Q15 as both quarters tend to be seasonally stronger.

For MYEG, the EDSP team reckon that its earnings for the next few years are likely to remain strong due to positive news flow like impending rollover of the custom services tax monitoring project for the government and on-going testing of the road safety diagnostic system.

Source: Kenanga