The local market has been on a strong run over the past month and the party does not seem to be stopping anytime soon. This is supported by the overall robust regional performance while internally the MYR has strengthened to the 4.00-level per USD and Crude oil price has recovered to just below the USD70/bbl-mark. Besides, the seasonal CNY rally factor coupled with expectations of GE14 in the near term are fuelling up market sentiment. Technically, FBMKLCI is supported at 1,800/1,793 while upside resistances are at 1,840/1,866. We reiterate on “Buy on Weakness” strategy with end-2018 Index Target of 1,860. Meanwhile, our OR tracker portfolio underperformed the benchmark index with average monthly return of 0.19% in December against FBMKLCI’s 5.16%. On the other hand, the average total returns between realised OR portfolio and unrealised OR tracker since inception of 27.58% is tracking behind the index for the first time with barometer index registering total returns of 29.76% for the same period.

A slow month. We released only two On Our Radar (OR) reports in December where we have a new Trading Buy on EWINT (FV: RM1.20-RM1.30) and a Not Rated note on NHFATT (Not Rated). We see opportunity in EWINT from the sell-down in early December which we believe was unwarranted. It had entered into a 70% JV with Willmott Dixon in UK which will provide investors with longer term earnings visibility beyond 2021. We like the project for its mass market positioning and attractive land prices. Meanwhile, earnings are expected to turn into the black in 2H18. We value EWINT at RM1.20-RM1.30. On the other hand, we believe valuation of auto parts maker NHFATT is already maximised at this juncture with limited earnings upside given the increasing cost of raw materials as well as the gestation period for its Indonesian operations. The stock is a Not Rated with fair value of RM3.40.

Ended the year with high note. The local market had a good month in December which saw the FBMKLCI closing the year at the year-high of 1,796.81 with the key index rising 78.95pts or 4.60% over the month. This was in line with the strong overall regional performance while favourable macro factors such as rising crude oil prices and the strengthening of MYR also helped to spur buying interests. Brent Crude oil prices were at its >2 years’ high while MYR against the greenback was at the 4.00-level, a level last seen in August 2016. In fact, foreign investors turned net buyers for the first time after four months with net inflow of RM960m from RM15m net outflow in November, bringing 2017 total net inflow to RM10.3b. For market movers, SIMEPLT (+19.76%) was the biggest gainer in December as investors rushed to snap up the index-linked stock after the demerger exercise. Meanwhile, buying were seen in banking stocks such as MAYBANK (+5.95%), CIMB (+8.10%) and PBBANK (+4.42%). On our OR Tracker Portfolio, the tracker portfolio, however, posted merely an average monthly return of 0.19%, which underperformed the benchmark index’s total returns of 5.16%, as the gains from FRONTKN (+17.95%), VITROX (+14.00%) and ROHAS (+11.93%) were offset by the losses from SASBADI (-16.18%), SUCCESS (-10.78%) and AZRB (-6.37%)

Tracker behind the index for the first time. With the new Trading Buy on EWINT last month, our OR tracker list with Trading Buy has been increased to 32 stocks. Together with 102 stocks in the realised portfolio, the average total return for the tracker stocks (+26.49%) and realised portfolio (27.92%) since inception in August 2012 is 27.58%, which underperformed the FBMKLCI’s 29.76% for the same period. VITROX (+292.82%) remains as the top performer under our OR unrealised tracker list followed by GKENT (+189.76%) and ELSOFT (+132.85%) while REACH (-42.25%), BPPLAS (-31.55%) and SASBADI (-0.21%) are the top three losers. VS (306.02%), PESTECH (+225.92%) and CAB (+166.74%) remained the top three realised gainers. On the flip side, EATECH (-68.29%) and K1 (-60.39%) and KNM (-45.45%) remain as the top three losers under the realised portfolio.

Source: Kenanga Research - 15 Jan 2018