The overall market rebounded last month after a dismal 4Q14 which was impacted by the sharp decline in crude oil prices and disappointing 3QCY14 corporate earnings. Similarly, our OR stocks also rebounded by 14.2% in January, stronger than the key index which gained 1%, as our selected stocks are small caps. Within the month, we did a kitchen sinking exercise by issuing eight Trading Sells while introducing five new stocks. We expect to continue to trim our OR tracker list and feature new trading ideas in the coming weeks. Meanwhile, we are now in the reporting season again but for this round the results are likely to be in line after a few rounds of downwards earnings revisions. In fact, the first batch of report cards was deemed satisfactory. With Chinese New Year just around the corner, February is expected to be a seasonally good month for the equity market. This is further supported by the stabilisation of crude oil prices and the recovery of MYR. Technically, the FBMKLCI is expected to trade in a range bound within a band of 1,800-1,850 in the immediate term with an upward bias.
A busy month. In the first month of 2015, we implemented a big change in OR tracker in which we closed eight positions and introduced five new stocks to retail investors. We first issued two Not Rated stocks, namely BRAHIMS and TEKSENG, in the early part of the month. This was followed by three Trading Buys, such as PW (FV: RM1.58), HHGROUP (FV: RM0.51), and K1 (FV: RM0.63). In the last week of January, we issued a Trading Sell on DELEUM which we realised a loss of 22.3% since our first report in September 2014 due to the volatile prospects of oil & gas sector, especially for small caps, following the recent sharp decline in crude oil prices. We ended the month with an update on property small caps with seven Trading Sell calls, of which two stocks provided realised gains (GOB, +0.9% and SBCCORP, +31.4%) while five stocks suffered realised losses (GLOMAC, -5.1%; TITIJYA, -17.2%; GUOCO, -23.9%; IWCITY, -14.9%; and, MKLAND, -6.3%), following our negative view on the overall property sector given the tighter lending liquidity and potential sector de-rating risks arising from the implementation of GST.
A better month. Our OR tracker portfolio posted an average gain of 14.2% in January, the first gain since last October, thanks largely to the recovery of market sentiment after the dismal 4Q14 performance. In fact, the recovery of our OR stocks, which are mainly small caps, was faster than the broad market as the FBMKLCI only inched up 1.1% in the first month of 2015. All our OR stocks still with open positions registered gains except LONBISC, which remained at RM0.64. In fact, all the eighth Trading Sell stocks that were released last month ended their open positions with higher prices than the previous month. VS was the monthly gainer with share price surging 44.7% on expectations of solid 1Q15 earnings and stronger dividend in the pipeline. To recap, we had raised our fair value on VS to RM3.56 from RM3.16 at the end of last December based on the above-mentioned catalysts. On the other hand, MITRA and PIE also rebounded strongly by 22.4% and 20.7%, respectively.
VS the best performer. With three new Trading Buys and eight Trading Sell calls in January, our OR tracker list is now reduced to 19 stocks. Together with 53 stocks in the realised portfolio, the average total returns for the tracker stocks and realised portfolio since inception is 30.4%, which improved from 27.7% in the previous month. This outpaced the benchmark index by 13.4% for the same period as the 30-stock index posted total returns of 17.0%. VS remained as the top performer under our OR tracker with an unrealised gain of 150.3% followed by PIE (+101.1%) and MITRA (+63.2%). Meanwhile, LONBISC (-31.1%), PPHB (-26.8%) and PRTASCO (-13.1%) were the top three losers. GUOCO (-23.9%) and DELEUM (- 22.3%) became the top two realised worst performer following our Trading Sell calls last month, followed by RUBEREX (- 19.3%). The top realised gains list remained unchanged with PESTECH (+218.9%) topping the list followed by GADANG (+136.4%), MKH (+121.5%).
Source: Kenanga