EQ8 DJ ISLAMIC 25 - Bursa ETF Watch: Narrower Potential Upside

Date: 
2024-06-18
Firm: 
AmInvest
Stock: 
Price Target: 
1.12
Price Call: 
HOLD
Last Price: 
1.06
Upside/Downside: 
+0.06 (5.66%)

Investment Highlights

  • We downgrade EQ8 DJ Islamic 25 to HOLD from BUY as th share price has risen nearer to our unchanged fair valu (FV) of RM1.12 based on our FVs (for stocks under ou coverage) and consensus FVs (for stocks not under ou coverage). Our FV currently only offers a 5.7% upside to th ETF’s market price. MYETF DJ Islamic 25 has changed i name to EQ8 DJ Islamic 25, announced on 26 Mar 2024.
  • After the 1Q2024 results season in May, the 13% rise Press Metal’s consensus valuation of RM5.82 (previous RM5.17/share) and Petronas Dagangan’s RM22.76/shar (+3%) was offset by FV declines in Petronas Chemica Group to RM6.22/share (-6%), Mr DIY to RM2.17/share 16%), Top Glove to RM0.71/share (-17%) and Frontken Cor to RM3.20/share (-17%).
  • Oil and gas (O&G) sector remains the largest component o NAV, which account for 21% NAV weightage. We continu to like the sector due the strong momentum in offshor developments and FPSO upcycle amid an unchange 2024F Brent crude oil price of US$85/barrel. We see a tigh supply market towards the end of the year from voluntar production cuts by OPEC+ of nearly 2.5mil bpd.
  • However, we are neutral on telecommunications, whic contributes the second highest sector weightage at 16% We expect a softer growth in this sector due to hig operating cost resulting from higher 5G wholesale charge from Digital Nasional Bhd, ongoing tech refresh and si modernisation, along with lack of growth drivers.
  • We are also neutral on the plantation sector, whic represents 15% of the ETF’s NAV. Based on MPOB dat palm inventory inched up to 1.75mil tonnes and is expecte to exceed 2mil tonnes in 2H2024 as oil palm trees ente peak production period. We foresee that the upcomin peak palm production period would cap upside to CP prices with average 2024F estimate at RM4,000/tonne.
  • Our in-house economist projects 2024F GDP growth 4.5%, driven mainly by resilient domestic expenditure wit some support from an expected export recovery.

Source: AmInvest Research - 18 Jun 2024

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