Lacking fresh major catalysts and further clouded by the uncertain volatile macro factors (i.e. crude oil prices and Ringgit against USD), the market is expected to continue consolidating within the range of 1,790 and 1,845. Last month, the 30- stock index ended disappointingly on profit-taking activities after seven consecutive weeks of uptrend. The benchmark index had undergone a correction to close at 1,818.27 after reaching a high of 1,862.58 in the last week of April, effectively wiping out all its MoM gain. As we stepped into yet another earnings results season, the 1QCY15 corporate earnings will be in the limelight and any unexpected surprises will dictate the direction of the market. Despite the flattish benchmark performance, our OR tracker portfolio’s total return still managed to outperform the FBMKLCI (+5.40% vs. -0.32%) on a monthly basis as well as since inception (+32.8% vs. 20.6%).

One and only Buy. In April, we started the month with a “Trading Buy” call on ULICORP at a fair value of RM3.50/share. To recap, we had earlier featured the leading cable support system manufacturer with a Not-Rated rating in July 2014. Post a company visit, we turned more positive on the company’s prospects due to its: (i) solid 21%-30% earnings growth prospects for FY15-FY16, (ii) RM49.7m net cash position, and (iii) attractive dividend yield of 4%-5% for the next two years. Since our “Trading Buy” report, ULICORP has risen 12%. On the other hand, subsequent to ULICORP, we issued a total of six other On Our radar (OR) stocks with all "Not Rated" rating in the month of April. This includes, FUTUTEC, LCTH, PARAMON, OFI, FITTERS and MCT.

Positive returns in April despite sluggish performance in FBMKLCI. Thus far, with a newly added “Trading Buy” call last month, we now have 16 stocks in our OR portfolio tracker list with Trading Buy recommendation. The overall portfolio recorded a 5.4% MoM gain in April, outperforming the benchmark index which declined 0.32% over the same period. Most stocks in our tracker list registered positive MoM gains, which were led by PRTASCO (+18.8%) and HHGROUP (+18.4%). PRTASCO garnered investors’ interest after the company bagged a road work contract worth RM58.0m in early April. On the flipside, top loser for the month was PW (-6.9%), followed by K1 (-2.0%). The FBMKLCI’s trading pattern remained choppy for the past two months as the index climbed to a high of 1862.58, the highest since September last year, before the technical correction wiped out the entire MoM gain in the last week of April to close at 1818.27. The local benchmark is expected to trade sideways while awaiting new catalysts to emerge even though the Ringgit seemed to be recovering from its low against USD and crude oil prices are stabilising its footing above USD60/bbl. The key focus for this month is the announcement of 1QCY15 corporate earnings results while prevailing uncertainties will continue to affect market sentiment.

MITRA the top performer. Summing up the 16 stocks in the OR tracker list, together with 61 stocks in the realised portfolio, the average total return since inception is 32.8%, improved slightly from its previous month of 32.0%. The overall portfolio still outpaced the FBMKLCI’s total return of 20.6% over the same period. Ever since we realised VS in March, MITRA has become the top performer with an unrealised gain of 146.2% and PIE (+92.1%) being the firstrunner up in the list. On the other hand, as there is no change in the realised position, PESTECH (+218.9%) remained the top realised gainer, followed by VS (+193.6%) and GADANG (+136.4%) while the top realised losers are still GUOCO (-23.9%), DELEUM (-22.3%) and RUBEREX (-19.3%).

Source: Kenanga Research - 7 May 2015