On Our Portfolio - Volatility rose for the week

With the market experiencing strong volatilities last week and tumbling 2.3% WoW, all our portfolios are now recording negative  YTD total returns although they still outperformed the benchmark FBMKLCI by 93bps-184bps on a YTD basis. The Growth portfolio was the most resilient portfolio. It recorded a negative 1.4% YTD total return as compared to the benchmark FBMKLCI higher loss of 3.3%. The other two portfolios, namely Thematic and Dividend Yield, posted YTD unrealised losses of 2.2% and 2.3% respectively. Most of our stock selections were down on a week-on-week basis (WoW), in line with the weak market sentiment with the exception of Tenaga National Bhd (+0.9% WoW) and MPHB (+1.5% WoW). In the week under review, we added 4,000 MPHB shares into our Thematic portfolio. 

A strong selldown. The market had an unpleasant week, which saw the FBMKLCI succumbing to a strong single-day selldown of 41 points or a 2.4% drop last Monday to 1635.65 points on increasing fears over the uncertainties of the forthcoming 13^th  GE. The benchmark index subsequently dropped another 33.5 points to an intraday low of 1602.12 intraday before it recouped some grounds and closed at 1637.13 on last Friday. As we have already expected the FBMKLCI to experience some hiccups ahead of the GE, we are hence sticking to our B.O.W. (Buy-on-weakness) strategy,  preferably when the index approaches 1610 and below. In view of the GE concerns and uncertainties, we believe the mainstream investment choices will still be the names with high-dividend yields and those that have consistently delivered positive total returns. The key event to watch out for this week is the upcoming Public Bank’s 4Q12 results, where we are expecting the result to come in within ours as well as the street’s estimate. 

Growth Portfolio was the most resilient portfolio. All our portfolios experienced some hiccups last week as a result of the higher-than-expected volatility seen in the market. Our Growth portfolio was the most resilient portfolio under the current volatile investment climate with RM935 of unrealised loss for the YTD or a -1.4% total return registered as of last Friday. This also explained why the Thematic (-2.2% YTD) and Dividend Yield Portfolio (-2.3% YTD) were not able to outperform the Growth portfolio as investors are believed to have opted for a balance portfolio to ride out the weak market. Tenaga National Bhd (“TNB”) was our star performer (in terms of percentage gains in the share price) in our portfolios last week as it rose 0.9% WoW as a result of its stronger-than-expected 1Q13 results led by a lower coal cost as well as higher-than-expected fuel compensations. UOA Development Bhd (“UOADEV”), on the other hand, was our worst performer last week as investors might have started to lock in some profits after its handsome YTD gain of 7.5% (as at 18 January). 

Retaining REDtone-LA despite hitting our cut loss level. Our alpha generated stock - REDtone-LA hit our initial cut loss level of RM0.165 last Tuesday as a result of the panic selldown in the overall market. Nonetheless, we decided then to keep the stock given that the fundamentals of the company remained intact. We subsequently issued an initial coverage report on REDtone Bhd last Wednesday with a target price of RM0.56 based on a targeted FY13 PER of 11x. The target price suggests that REDtone-LA could be fairly valued at RM0.22, implying  a potential 33% capital upside from here. 

Adding MPHB in the Thematic Portfolio. We added 4,000 shares of MPHB at RM3.32 last Tuesday into our Thematic Portfolio when the stock hit its 6-month low amidst heavy selling in the broad market. The share price of MPHB also came under pressure from news that the listing of MPHB Capital could be delayed for three months from end-Jan/early-Feb after the SC approved the new listing with conditions, such as requiring the company to revalue its property value. We believe that the issue would be  solved eventually and that the current weakness in the share price offers a great opportunity to accumulate the stock. The stock closed at RM3.37 on Friday or RM0.05 higher as against our entry price of RM3.32.

Source: Kenanga