Last month, the 30-stock FBMKLCI managed to reverse its downtrend with a technical rebound on the last day of the month to clinch a 1.0% MoM gain despite concerns arising from a cabinet reshuffling, ringgit hitting a low of RM3.83, and the on-going 1MDB saga. Going forward, the market is expected to range-bound within 1,685-1,750 in the near term while awaiting fresh catalysts. As we are entering the 2QCY15 reporting season, we believe attention will again revert to quarterly corporate results, more so as the current reporting quarter is the first full quarter post-GST implementation. Meanwhile, our OR tracker portfolio also moved in tandem with the benchmark index, capturing a MoM growth of 3.1% last month. The portfolio’s total return continues to beat the market on both YTD basis (11.3% vs. -0.69%) as well as since its inception (28.8% vs. 14.9%).

Four Trading Buys. In July, we kept our idea momentum in full force and released a total of seven OR reports, including three new trading ideas (PWROOT TP: RM2.58, PRLEXUS, TP: RM3.15 and SUNCON, TP: RM1.40), one upgraded call (SASBADI, TP: RM2.68) and two NOT-RATED pieces (FIAMMA and FAVCO). We added two consumer stocks, namely PWROOT and PRLEXUS into our OR tracker list due to their attractive valuations and solid business fundamentals, catering for investors seeking exposure to defensive and resilience sectors. Similarly, we have upgraded SASBABI to TRADING BUY from NOT-RATED with TP of RM2.68 on the back of its stable EBITDA margins of c.25% and favourable earnings growth prospect of 14%- 29% for FY15-FY16. On the other hand, we decided to Take Profit on PIE which, in our view, was trading in line with the industry average valuation and bagged a gain of c.45% within two years.

Continued to outpace the market. With additional four new TRADING BUYs included in the festive month, we now have 27 OR stocks in our OR portfolio tracker list. The overall portfolio registered a 3.1% MoM gain in July, beating our benchmark index by 2.1%, mainly attributed to XINHWA (TP: RM1.02) which debuted on the local bourse at end-June with an extraordinary MoM gain of 48.8%. On the flipside, SUNCON (TP: RM1.40) which was first traded on 28 July settled below its IPO price of RM1.20 by month-end. Meanwhile, clouded by on-going concerns over the 1MDB-related issues, weakening ringgit and crude oil prices as well as continuous foreign funds’ outflow, the FBMKLCI trended down coupled with gloomy market sentiment. However, underpinned by bargain hunting in the banking stocks, our local index experienced a strong technical rebound of nearly 1.4% on the final day of the month to close at 1,723.14, hence, avoiding a MoM loss. Having said that, we believe the barometer index is likely to trade sideways within 1,685-1,750 with minimal upside bias. The key focus for this month is the 2QCY15 corporate earnings results, especially when it is deemed as the initial indicator to assess the impact of GST implementation.

HHGROUP remains the top performer. Summing up the total 27 stocks in the OR tracker list, with 63 stocks in the realised portfolio, the average total return since inception is 28.8%, sliding slightly from its previous month of 29.02%. This still outperformed the FBMKLCI’s total return of 14.9% over the same period. HHGROUP remains the best performing stock under our OR tracker with an unrealised gain of 83.3%, followed closely by XINHWA (82.9%) which replaced PIE as 1st runner up and ULICORP (57.7%) while K1 remaining the top loser with a widening loss of 44.1% since inception. Meanwhile, PESTECH (+218.9%) is still the top realised gainer, followed by VS (+193.6%) and GADANG (+136.67%). On the contrary, GUOCO (-23.9%), DELEUM (-22.3%) and RUBEREX (-19.3%) remained as the top three losers.

Source: RHB Research - 4 Aug 2015