Monday 18 March 2013

Kenanga Research - Our Portfolio - Market sentiment turns bearish


Despite the broader market sentiment turning weaker as the FBMKLCI Index lost 1.59% over the week, all our three portfolios extended their previous week’s gains as MPHB and GAB rose higher due likely to their dividend payments, which went ex-entitlement last week for MPHB while GAB is due this week. The local market turned bearish in the middle of last week after two weeks of good gains as GE13 draws closer. As such, investor switched their focus to stocks with dividend payments that were due to go ex-entitlement. The DIVIDEND YIELD Portfolio (+1.93% WoW) led the gains last week followed by the THEMATIC (+0.73 WoW) and GROWTH (+0.66%) Portfolios. The THEMATIC Portfolio (+3.40% total YTD unrealised profit) was the first portfolio to turn into black in the previous week after six weeks of losses. This was followed by the DIVIDEND YIELD and GROWTH Portfolios, which also turned to positive gains last Friday with total YTD unrealised returns of +1.00% and +0.97% respectively (vs. the benchmark index’s total YTD loss of -3.39%). Technically, the FBMKLCI has shown signed of weakening and small-cap stocks are likely to retrace for the coming weeks as well (please read our Weekly Technical Report for details).

Sentiment turns bearish. The local market reversed its 2-week gains after the FBMKLCI hit its 2-month high of 1,664 last Tuesday as investors locked in the previous week’s gains on UMW (-RM0.92) and BAT (-RM6.22) while banking heavyweights such as CIMB (-RM0.20), MAYBANK (-RM0.20) and PBBANK (-RM0.21) also saw selling pressure. However, buying interests in GAB (+RM1.48) and MPHB (+RM0.24) before their stocks went ex-entitlement for dividend last Thursday (14 Mar) and due today (18 Mar) lifted their share prices. The FBMKLCI index meanwhile declined 26.32pts or 1.59% WoW to close at 1,627.64. On the US market, the Dow continued its uptrend as encouraging economic data helped push banking stocks higher. This week, the key event to watch is on Thursday, where the largest non-Petronas oil & gas company, SKPETRO is expected to release its full-year FY13 merged results after the merger between SapuraCrest and Kencana Petroleum in May last year. We expect its FY13 net profit to be in line with our projection of RM496m. Meanwhile, technical indicators such as the FBMKLCI RSI and Stochastic indicators suggest that there will be further losses for the market in the coming days, although there could be some selective buying in heavyweights such as GENTING, UEMLAND and possibly in telco companies.

DIVIDEND YIELD Portfolio leads the gains. Following the THEMATIC Portfolio which turned back into the black in the previous week, the DIVIDEND YIELD and GROWTH Portfolios were also profitable again last week despite the FBMKLCI extending its losses. The DIVIDEND YIELD Portfolio posted the largest WoW gain of 1.93% (RM1,284), reversing its previous loss to record a gain of +1.00% (RM665) in total YTD unrealised profit, thanks largely to GAB as the stock soared 8.6% or RM1.48 WoW. MPHB, which jumped RM0.24 (+6.7%) WoW, helped to extend the THEMATIC Portfolio’s gain by +0.73% or RM611 to record a total YTD unrealised gain of +3.40% or RM2,836, while the GROWTH Portfolio posted a +0.66% or RM435 gain, turning the portfolio from a loss to a total YTD unrealised profit of RM639 or +0.97%. In contrast, the benchmark index registered a -1.59% loss last week, widening its total YTD loss to 3.39%.

Dividend payment counters in the limelight. PUNCAK dropped slightly by RM0.02 or 1.30% WoW after an impressing 4-week run. As such, it contributed RM160 or -1.30% in fund value loss for the THEMATIC Portfolio. However, the stock still made a total impressive gain of RM2,640 or 27.73% to the portfolio. As investors were looking for dividend payment stocks, GAB was the main gainer last week and it contributed RM1,184 or a +9.02% gain to the invested fund for the DIVIDEND YIELD Portfolio, bringing its total YTD unrealised gain to RM1,824 or 13.90%. Likewise, MPHB contributed RM956 in gains or +6.87% to our THEMATIC Portfolio for a total of RM1,600 (+12.05%) in YTD unrealised profits.

Market expected to be volatile. Besides MPHB, the shares of TOMYPAK also went exentitlement for dividend last Thursday. Although we had called for a Take Profit action on the stock in our On Our Radar report on 7 Mar, we have decided to keep our positions on the stock in the DIVIDEND YIELD (15,000 shares) and GROWTH (18,750 shares) portfolios for now. All in, the local market is expected to be volatile given the GE jitters. The news and progress of the election will lead the market direction in the next few months. Our house view of a “buy on weakness” at 1,610 and a “sell on strength” at 1,710 remains.

Source: Kenanga

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