Kenanga Research - In a range-bound mode

The local market continued to trade in a range-bound mode ahead of an impending GE and with a short trading period last week. All our three portfolios recorded a positive return last week, thanks to some positive corporate developments in some of the stocks held as well as renewed buying interest in the flexible packaging sector that led to TOMYPAK’s share price gaining 4.0% WoW. Our GROWTH and DIVIDEND portfolios meanwhile recorded a +1.3% and +1.2% gains during the week although for the YTD, they still saw -3.1% and -4.4% in losses (vs. FBMKLCI’s -3.8%), respectively. Meanwhile, the THEMATIC portfolio gained +0.9% WoW and continued to OUTPERFORM the FBMKLCI on a YTD basis. This week, we expect investors to continue to stay on the sidelines with the key focus being on the quarterly financial results to be released by the corporates.    

    

In a range-bound mode.  The FBMKLCI traded in a range-bound mode during the short trading period last week and gained +4.13 points or +0.25% WoW to settle at 1623.80. On a YTD basis, the prolonged political risk premium caused by the general election concerns led the benchmark index lower by -3.61%, the worst performance among the Asia-Pacific region indices. PBBANK (+16 sen), PCHEM (+15 sen) and Genting (+17 sen) were the leading index movers last week albeit their gain being partially offset by another leading financial services provider, CIMB group (-10 sen). Moving forward, we  believe that investors are likely to continue to stay on the sidelines ahead of GE13, causing the broad market to continue to remain in a range-trading mode. This week, the key  events to watch are AMMB, IOI, Maybank, UEMLand and Axiata’s 4QCY12 results, which may potentially affect the already weakened market sentiment should their results fail to meet market expectations.   

All our OR portfolios reported gains in the previous week. Despite the range-bound trading mode in the market last week, some positive corporate developments in some of the stocks in the portfolio holdings led all our OR portfolios to report a WoW gain. The renewed buying interest in the flexible packaging sector led to TOMYPAK’s share price gaining 4.0% WoW. As a result, our GROWTH and DIVIDEND portfolios recorded +1.3% and +1.2% gains in the previous week, although for the YTD, they are still down by -3.1% and -4.4% losses, respectively. Meanwhile, some positive corporate developments in Puncak Niaga and MultiPurpose Bhd sent the Thematic portfolio to gain RM730 or +0.9% last week. For the YTD, the portfolio is still losing RM2,024 or -2.4% vs. the benchmark FBMKLCI’s total return of - 3.8%. A gross 2.75% coupon from REDtone-LA went ex. last week and provided some cushions to our portfolios during the current volatile market.

A gross 2.75% coupon from REDtone-LA  went ex. on 13 February last week with a payment date of 4 March 2013. Our Thematic, Growth and Dividend portfolios have 57k, 40k, and 28k REDtone-LA shares, and are set to receive RM205.73, RM144.37 and RM101.06 in incomes, respectively. Post the coupon received, our average REDtone-LA investment cost will be lowered to RM0.171/share from RM0.175/share previously.    

Puncak Niaga (“PUNCAK”) and Multi-Purpose (“MPHB”)  were among the best performers last week.  PUNCAK’s share price shot up by as much as 12% intraday last Thursday and closed at RM1.27 (+3.3%) last Friday.  We believe this was led by the overnight news that Selangor will apply for a judicial review if the federal government does not respond to its letter regarding the takeover of the water concessionaries by Monday. We believe the company is deeply undervalued and we have a target price of RM2.85 on it based on a SOP valuation. The group’s water assets alone are already worth RM2.17/share based on our DCF calculation. Meanwhile, its Oil & Gas arm is worth at least RM0.68/share should we apply a conservative PER of 7.0x. On other developments, the Security Commission had last week approved MPHB plans to demerge its gaming and non-gaming businesses, but on condition that the company undertakes a fresh revaluation of its properties to a date of not more than six months from the date of the listing prospectus. We view this development positively. Based on our estimates, MPHB’s gaming-only assets are worth RM2.94/share, or 87% of its current share price. On top of that, investors also stand to get a one-off capital repayment of RM0.48/share post-listing of MPHB Capital (MPHB’s non-gaming outfit). We have a fair value of RM4.31/share based on RNAV methodology and suggest that mediumterm investors accumulate the stock on any share price weaknesses.

Source: Kenanga