On Our Portfolio - Volatility rose further for the week

After a sharp correction in the previous week, the local market continued to trade sideways last week ahead of the impending GE. This was counter to the regional markets’ strong performance in the week. All the three portfolios are still showing negative YTD returns with two of them still outperforming the benchmark FBMKLCI by 81bps-165bps. The Growth portfolio and Dividend Yield portfolio widened their losses by 1.5% and 1.7% WoW as compared to the FBMKLCI, which lost 0.6% in the week. On a positive note, the previous week’s loser, the Thematic portfolio reversed its previous loss to record a 0.4% gain WoW. This week, we expect another gloomy week ahead as investors are likely to stay on the sidelines as well ahead of the coming CNY break and amidst the continued uncertainty from the GE.   

Another disappointing week.  The FBMKLCI extended its loss by another 10 points  or 0.6% WoW which saw it closing the month of January 65 points down or -3.8% YTD to settle at 1627.55. The decline was led by heavyweights with high foreign shareholdings, such as PBBANK (-16 sen), AXIATA (- 7 sen) and YTL (- 8 sen). We believe that investors are likely to stay on the sidelines ahead of the GE13 and the upcoming CNY break. Technically, the range-trading mode will likely persist this week. As such, we will continue to adhere to our Buy-on-Weakness strategy in this uncertain time, preferably when the index breaks the 1,610-mark and below. On the international front, the Dow did well thanks to encouraging corporate earnings that beat estimates. This week,  the key event to watch is DIGI as its 4Q12 results is expected to be released on 6 Feb after the morning trading session. We expect the full year reported net earnings to come out in line with ours as well as the market consensus of RM1.30b and RM1.31b respectively.

Thematic Portfolio reversed its previous week loss. The uncertainties in the market last week continued to impact our model portfolios, which saw two out of three of our model portfolios namely the Growth portfolio and Dividend Yield portfolio extending their losses by 1.5% WoW and 1.7% WoW. UOADEV continued to face selling pressure as investors locked in earlier profits, resulting in an unrealised loss of RM240 or down by 3.5% WoW. For the YTD, it made a total loss of RM120 or -1.7% in the Dividend Yield Portfolio, which itself reported an unrealised YTD loss of RM2,650 or -4.0%. Meanwhile, TOMYPAK was the main culprit which brought down the invested fund value  by -4.8% WoW for both the Growth Portfolio and Dividend Yield Portfolios. On the contrary, the Thematic portfolio reported an unrealised gain of RM315 or up by 0.4% WoW, narrowing its unrealised YTD loss to RM1,805 or -2.2%, led mainly by the rise in FABER on its positive concessions contracts.    

FABER was one of our best performers last week. It rose 2.1% WoW underpinned by its announcement of three 10-year new Hospital Support Services (HSS) concessions for the northern region of Peninsular Malaysia (comprising Perak, Pulau Pinang, Kedah and Perlis) as well as Sarawak and Sabah from the government.  We understand that the new full contract concession for Peninsula Malaysia was awarded to the group with a 5.8% increase in the service fee (from the 2011 service fee) and a further RM16.6m p.a. for the sustainability program. For both the Sabah and Sarawak zones, the group will only have a 40% stake each in the concessionaires for both states. The company will also enjoy a 7.8% and 8.1% (including the sustainability program) increase in  service fees for the Sabah and Sarawak service areas respectively. All in all, we are positive on the group’s outlook and expect the stock price to outperform in the foreseeable future. 

TOMYPAK’s share price was hit by profit taking activities and it tumbled 4.8% WoW. Despite the weak share price performance last week, there is no change in our view on TOMYPAK, where we believe the group could potentially benefit from the renewed interest in the flexible packaging sector. The stock is currently trading at 6.4x FY13 PER, which is undemanding as compared to the recent proposed acquisition of GW Plastics by Scientax that valued the former at 11x FY13 PER. As such, with TOMYPAK currently trading at a relatively much cheaper valuation in contrast to its peers coupled with its attractive dividend yield of 6.6%, we believe the stock is one of the jewels on Bursa Malaysia and will attract buying interests when market sentiment improves later.

Source: Kenanga