The overall market continued to rebound in February despite a generally uninspiring 4QCY14 reporting season which was impacted by the sharp decline in crude oil prices following a disappointing 3QCY14 corporate earnings season. As such, our OR stocks also rebounded further by 8.61%, a faster pace than FBMKLCI’s 2.22%. In this shortened working month, we continued to review our existing tracker portfolio and reduced our portfolio to 17 stocks from 19 stocks. However, the reviewing exercise will not stop here as we will continue reviewing our tracker list and introduce new trading ideas in the coming weeks. The recently concluded 4QCY14 reporting season was yet another disappointment despite the market already made downwards adjustments and lowering expectations. In fact, we are lowering our end-2015 Index-Target to 1,865 from 1,905. FBMKLCI is trading at c.2% discount to consensus target of 1,860, which implied limited upside potential, in our view. Thus, we still prefer to adopt a “Buy-on-Weakness” strategy <1,800. Technically, with lack of fresh catalyst, the 30-stock index is expected to trade in a sideway range of between 1,780 and 1,835 in the immediate-term with downward bias.

A “reviewing” month. After a busy month in January in which we made big changes by closing eight positions and introducing five new stocks, we continued to review our existing retail coverage in the shortened-working month of February. Out of the five “On Our Radar” (OR) stocks, we only featured a new stock, namely KANGER which we have a Not Rated rating. On the other hand, we decided to Take Profit on MYEG which, in our view, had already raced ahead of fundamental with its near-term catalyst already priced in. We pocketed 22% gain from this stock. Just before the CNY holiday break, we removed KSL from our tracking list as we initiated coverage on the stock for our core institutional coverage with an OUTPERFORM rating at price target of RM2.76/share. We view KSL as a cheaper and safer entry to the property sector due to: (i) its superior margins and pricing flexibility, (ii) strong recurring incomes, (iii) severely undervalued investment properties, and (iv) compelling valuation vis-à-vis its peers. We have also reviewed two of our existing Trading Buy calls on PELIKAN (FV: RM1.55) and MITRA (FV: RM1.94).

On the mend. Our OR tracker portfolio continued to post gain in February following the recovery of market sentiment after the dismal 4Q14’s performance. The tracker portfolio registered an average gain of 8.61% in February, after a 14.20% gain in January, which was still better than the broader market as the FBMKLCI only rose 2.24%. MITRA (+34.17%) was the top monthly gainer as it started to gain investors’ recognition after strong FY14 results, which beat our forecast by 38% and also exceeded our job flows assumption by almost double to hit RM949m in FY14. In fact, we have raised our fair-value for MITRA to RM1.94/share in the recent review, from RM1.13/share, after an earnings upgrade. On the other hand, LONBISC rebounded strongly by 26.98% after months of sluggish performance while VS surged another 25.86%, after reporting sterling gain of 44.70% in January, following its venture into the solar-energy business in China, which was announced in early February. On the flipside, MNRB (-4.88%) was the monthly loser followed by K1 (-3.74%) and ECS (-2.90%).

VS still the best performer. With one Take-Profit call and one switch coverage from retail to institutional, our OR tracker list is now reduced to 17 stocks from 19 stocks. Together with 55 stocks in the realised portfolio, the average total returns for the tracker stocks and realised portfolio since inception is 32.24%, which improved from 30.40% in the previous month. This outperformed the FBMKLCI by 12.15% for the same period as the benchmark index posted total return of 20.09%. VS remained as the top performer under our OR tracker with an unrealised gain of 215.04% while MITRA (+118.98%) overtook PIE (+89.48%) as the runner-up after a strong performance in February. Meanwhile, PPHB (-13.68%), LONBISC (-12.57%) and MNRB (-9.31%) were the top three losers. On the other hand, as there was no major change in the realised position, PESTECH (+218.9%) is still the top realised gainer followed by GADANG (+136.4%) and MKH (+121.5%) while the top realised losers are still GUOCO (-23.9%), DELEUM (-22.3%) and RUBEREX (-19.3%). 

Source: Kenanga