We continue advocating investors to Buy-On-Weakness to ride the potential reversal play in the market as trading sentiment could be boosted by the upcoming 11th Malaysia Plan (11th MP) this week. The plan could potentially provide some trading opportunities, especially in some big and mid-cap players. We have added 3k DIGI shares into our DIVIDEND YIELD portfolio and 5k CENTURY shares each into all three portfolios last week. On portfolio performance-wise, despite market sentiment remaining generally unchanged, all our portfolios went south last week and underperformed the FBMKLCI by 70-285bps WoW, no thanks to profit-taking activities. YTD, our portfolios still outperformed the benchmark index by 427- 1,645bps with GROWTH Portfolio remaining the top performer.

Bargain shopping continues. We continue to advocate investors to go for bargain hunting this week given that the FBMKLCI is now near to the key support zone at 1800/1780 level, although the 1,790 level remains our ideal Buy-on- Weakness window. In view of the benchmark index seen as trapped in a wide range bound mode in 2Q15, we do not discount a technical rebound to 1,830/45 this week. Highlight of the week is 11th MP, scheduled to be unveiled on 21st of May to outline the development expenditure until 2020. We believe any positive news flows (with regards to MRT2, LRT3, KL-Singapore High-Speed Rail and etc.) will benefit the usual suspects such as GAMUDA (MP, TP: RM5.29), and MMC (OP, TP: RM3.03) . For smaller players, we believe ULICORP (TB, TP: RM3.50), MITRA (TB, TP: RM2.37) and Gadang (NOT RATED) may benefit from the construction of MRT & LRT stations while HSL (OP, TP: RM2.02) could benefit from infrastructure plays in Sarawak. Technically speaking, the FBMKLCI almost stumbled into oversold territory following three consecutive weeks of technical correction. Thus, we are expecting a reversal play towards the 1,830/45 level should buying interest emerge strongly. This week’s key index-linked corporate events to watch out for include AXIATA, CIMB and KLK where their quarterly earnings will be released.

Listing of Malakoff failed to cheer the market. The debut of Malakoff, Malaysia’s biggest independent power producer last Friday failed to cheer investors as the group’s CEO was quoted by the press that they will explore opportunities to buy power assets, including 1MDB assets, thus raising some concerns. At last Friday’s closing bell, the FBMKLCI closed nearly flat at 1,807.65 or 0.24% WoW higher. PCHEM (+8.0%) was the biggest index leader last week followed by AXIATA (+2.0%) and CIMB (+1.2%). On Wall Street, a lower-than-expected reading on inflation as well as the weekly jobless claim buoyed investors last week as it signalled that the Federal Reserve could hold off for even longer on its interest rate hike. The positive trading sentiment sent the S&P 500 index to close at another record-high last Thursday.

Added DIGI and CENTURY into portfolios. We have added 3k DIGI shares into our DIVIDEND YIELD portfolio last Tuesday before its 1st interim dividend (6.1 sen) goes ex on 13-May. The recent share price weakness in DIGI is believed to be partially caused by the regulatory hiccup in the prepaid segment. Having said that, with the GST issue (in the prepaid segment) finally resolved, the current share price weakness could provide an opportunity for investors to accumulate the stock. We have a fundamental target price of RM6.87 for DIGI. Meanwhile, we were also adding 5k CENTURY shares each @ RM0.865/share on last Friday into all three model portfolios. This is to ride with the current rising warehousing demand trend, as well as the group’s capacity expansion plan and its undemanding valuations. We have a fair value of RM1.19 for CENTURY.

All Portfolios went south last week. All our model portfolios recorded negative growth last week as a result of some mild profit taking activities. GROWTH portfolio suffered the most with its fund value weakened by 2.6% WoW, which lowered its YTD total return to 20.96% vs. the FBMKLCI’s YTD total return of 4.51% after the 0.24% WoW gained last week. THEMATIC and DIVIDEND YIELD portfolios, meanwhile, saw their fund values reduced by 1.63% WoW and 0.46% WoW, lowering their YTD gains to 8.78% and 9.73%, respectively.

Source: Kenanga Research - 18 May 2015