Tuesday, 5 March 2013

“On Our Radar” Tracker Review - Smooth sailing in a volatile market


The local market has continued its volatile trading range in the short trading month of February where the FBMKLCI breached the 1600 psychological level twice. The weak market sentiment led our On Our Radar tracker to underperform the benchmark index by 20 bps on a MoM basis. During the month under review, we recommended a buy on PESTECH shares at RM1.18 on 26 February with a target price of RM1.42. The stock has performed well with an 18% gain since then. On a YTD basis (as of 4 March 2013), our OR tracker portfolio, which comprised of stocks which we still have a Trading Buy recommendation on, recorded a +0.3% total return in contrast to the -2.8% return of the FBMKLCI. Meanwhile, the average total returns of both the realised and unrealised portfolios since inception stood at 8.6% as compared to the 1.2% gain in the FBMKLCI. Going forward, election jitters will continue to cap the upside to sentiment this month, and hence we may look to trim our open positions further to lock in our profits.

PESTECH is our new buy call in February. In the short trading month of February, we have released a total of four On Our Radar (OR) reports, where we focused on reviewing two of our earlier recommendations, namely HOVID and PWROOT, as well as recommending a new company – PESTECH INTERNATIONAL (“PESTECH”). PESTECH, a home-grown integrated electric power technology listed on Bursa in May last year, is currently trading at a fairly attractive FY13 PER of 5.8x with a 5.1% net dividend yield as opposed to the FBM Small Cap (FBMSC) Index PER of 7.4x. We like PESTECH for its: 1) profit margin expansion, 2) strong order and tender book and 3) huge business opportunities in both the local and regional markets. We had also issued a NOT RATED report on OSK Holdings, where we viewed the company to be potentially a cheaper proxy for entry into RHBCAP judging from the fact that the former’s 9.9% stake in RHBCAP was already worth more than RM1.93b, a 28.3% discount to OSK Holding’s market capitalisation of RM1.38b.

As for now, there are still 13 stocks in our OR portfolio tracker list with Trading BUY recommendations (from 12 companies as at end-Jan 2013). The overall portfolio recorded a 0.7% MoM total return for February, underperforming the FBMKLCI by 20 bps during the same period. The star performers during the month were PWROOT (+23%), PESTECH (+11%) and TOMYPAK (+7.0%) but they were partially offset by the weaker share price performance of SMRTECH (-11%); BONIA (-7%) and COLA (-6%). On a YTD basis (as of 4 March 2013), our OR tracker portfolio, which comprised of stocks which we still have a Trading Buy recommendation on, recorded a +0.3% total return in contrast to the -2.8% return of the FBMKLCI.

Our portfolio tracker still outperformed the market since inception. Our OR tracker portfolio has recorded an average total return of 8.6% since its inception in contrast to the +1.2% return in the FBMKLCI over the same period. The top three best performers (in terms of total return) in our OR tracker portfolio up to yesterday (4 March 2013) for which we still have Trading Buy ratings on was PWROOT (+56%), FABER (+52%) and TOMYPAK (18%). We are looking to review our positions on PWROOT and OCK soon as their share prices have already surpassed our target prices. Meanwhile, COLA (-20%), BONIA (-15%) and GUAN (-13%) were the top three worst performers in our OR tracker.

Best and worst of stocks sold. TWSCORP (+37%) and ADVENTA (+31%) remained as the top performer in our realised OR portfolio tracker list, where we closed our open positions on them in Sep and Nov 2012 respectively. On the flip side, MKLAND topped the worst performer list after we closed our open position on 29 Jan 2012 with a total realised lose of 13.4%.

Source: Kenanga

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