Monday, 11 March 2013

Kenanga Research - On Our Portfolio - Market sentiment remains positive


The local market continued its increased optimism last week despite the Sabah Lahad Datu crisis as investors continued to pick up defensive names with UMW and GENTING gaining on corporate news. In line with the positive sentiment in the overall market, all our three model portfolios recorded WoW gains with the THEMATIC and GROWTH Portfolios beating the FBMKLCI by 186-461bps. However, the DIVIDEND Portfolio underperformed the benchmark index by 69bpt. The THEMATIC Portfolio has turned into a net gain position after its last week’s strong performance with YTD unrealised profit of RM2,271 or +2.72% vs. the FBMKLCI’s -1.89%, GROWTH Portfolio’s -0.03% and DIVIDEND YIELD Portfolio’s -1.20% respectively. Technically, the indicators have turned bullish from the middle of last week and they should remain positive this week, although election jitters may continue to cap the upside for prices.

Overall sentiment remains supportive. The local market continued its uptrend last week after the benchmark index staged a breakout in mid-week as technical indicators showed bullish signs. The FBMKLCI index rose 16.52pts or 1.01% WoW to settle at 1,653.96. The main index movers were UMW (+RM1.14), BAT (+RM5.00) and GENTING (+RM0.24). Investors chased after UMW after renewed news on the listing of its oil & gas unit while GENTING gained after its maiden move to Las Vegas for its first casino in the US. On the international front, US markets continued to trend higher on earnings surprises and strong economic data. This week, the key events to watch are the Jan 2013 Export and IPI data, where we expect them to be weaker MoM and YoY, while BNM will be releasing its 2012 Annual Report. We expect BNM to announce the 2013 GDP growth forecast at 5%-6% against our in-house forecast of 5.3%. Technically, the FBMKLCI chart remains bullish this week and it is likely to test 1659-1673 in the days to come. However, election jitters again may cap the upside for prices.

THEMATIC Portfolio is the top gainer. After six weeks of losses, the THEMATIC Portfolio is the first portfolio to turn back into the black while the other two portfolios and the FBMKLCI narrowed their YTD losses. The THEMATIC Portfolio reported a 2.74% gain WoW or RM2,285 in unrealised profit over the week, turning the portfolio from a YTD unrealised loss position of RM514 to a YTD unrealised profit position of RM2,271 or +2.72% last week. The DIVIDEND YIELD Portfolio’s fund value rose 0.94% or RM630 WoW, narrowing its YTD total unrealised loss to RM799 or -1.20%. The GROWTH Portfolio’s YTD unrealised loss fell to RM21 or -0.03% as the portfolio gained 1.31% or RM870 WoW last week. The FBMKLCI index posted a 1.01% gain over the week, narrowing its total return lost 1.89%.

PUNCAK topped the gainer list again. Water player, PUNCAK continued to be in the spotlight for the fourth week after the offer from the State Government of Selangor earlier to take over the water assets in the state for RM9.6b. On the deadline of Acceptance last Tuesday, PUNCAK has decided not to accept the offer but said it is still open for discussion. Last week, our 8,000 shares in PUNCAK contributed RM1,520 in gains or +14.07% to our THEMATIC Portfolio for a total of RM2,800 (+29.41%) YTD. Despite the handsome gain, we believe that there is more upside from here as the stock is deeply undervalued based on our SOP valuation of RM2.85 vs. its current price of RM1.54. Meanwhile, the other major stock movers were UOADEV and FABER. Investors continued to favour yield stocks like UOADEV, which rose further. The stock helped to increase our DIVIDEND YIELD Portfolio’s fund value by RM200 (+5.20%) last week, bringing the YTD gain to RM800 (+11.56%) while FABER contributed RM480 (+4.00%) WoW or RM1,040 to the (+9.09%) YTD value of the THEMATIC Portfolio. Our Alpha stock REDTONE-LA was the main drag as it contributed a RM285 loss (-3.23%) to the THEMATIC Portfolio, RM200 loss (-2.86%) to the GROWTH Portfolio and a RM140 loss (-2.86%) to the DIVIDEND YIELD Portfolio last week.

GE13 is still the deciding factor. Last Thursday, we called a Take Profit move on TOMYPAK in our On Our Radar series. However, we are keeping our position on this stock in the DIVIDEND YIELD (15,000 shares) and GROWTH (18,750 shares) Portfolios for now for its upcoming 2 sen in NDPS which will be going ex-entitlement this Thursday (14 Mar). All in, the Lahad Datu crisis has complicated the uncertainties from the impending 13th GE, which may finally be called at the end of this month. The news and progress of the election will provide the early indications for the market direction in the next few months.

Source: Kenanga

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