With the market still stuck in a lacklustre mode, two of our
portfolios have outperformed the benchmark FBMKLCI by 88bps-161bps on a YTD basis. The Growth portfolio
registered a 0.7% total return against the loss of 0.9% for the FBMKLCI. The
other two portfolios, namely Dividend Yield and Thematic, posted YTD unrealised
losses of 0.1% and 1.1%, respectively, with the former still ahead of the FBM
KLCI. The three portfolios were dragged down by the loss in the Alpha stock
chosen i.e. REDTONE-LA. This week, we expect
the market to continue to trade sideways as profit-taking activities are
expected to continue. We are making no changes to our portfolios as we believe
our stock selections still fit well with the respective portfolio investment
themes to achieve their targeted returns.
Profit taking to
continue this week. The FBMKLCI fell another 0.3% WoW to close the week at
1676.44, bringing the YTD loss to 1.0% as investors continued to unlock their
earlier gains in Telcos while a string of negative news sent plantation stocks
lower. However, this was mitigated by gains in TENAGA and UEMLAND. Elsewhere in
the US, the market was fuelled by positive economic data and
better-than-expected earnings reports. Looking into this week, we expect the market
to continue to trade sideways due to a lack of catalysts amidst the GE13
drawing closer. The announcement of the Dec CPI this mid-week will be the key
economic data to watch where we expect it to post a lower YoY growth of 1.4%,
bringing the full year 2012 CPI growth to 1.7%. TENAGA is expected to report
its 1Q13 results this Wednesday night, where we expect a slight improvement in
its earnings as compared to 4Q12 as its fuel costs are likely to stay flat.
Growth Portfolio was
the best performer. The previous week’s best performer, the Thematic portfolio
came in last for the current week with a RM785 unrealised loss for the YTD or a
-1.1% total return registered as of last Friday as the weak market sentiment
did not fare well with the portfolio theme. This also explained why the Growth
Portfolio (+0.7% YTD) was able to outperform the benchmark index as investors
may be looking more for a balance portfolio to ride out a weak market. On the
other hand, continued profit-taking activities in telco stocks like TM, which
lost 3.7% WoW, pulled down the Dividend Yield Portfolio by 5.7%, resulting in
the overall performance of this income portfolio to be down by 0.1% YTD or with
an unrealised loss of RM36. Our new purchase last Tuesday (15 Jan), REDTONE-LA
lost RM0.005 or 2.9% WoW to close at RM0.17 from our purchase price of RM0.175.
This brought down all the three portfolio performances especially that of the
Thematic portfolio as the stock made up 10% of the total invested fund in that
portfolio.
UOADEV led the gain.
The top three stock performers (in terms of percentage gains in the share price)
under our portfolios were: 1) UOADEV, 2) TOMYPAK and 3) GAMUDA. UOADEV extended
its gain last week by 5.8% WoW or with a total YTD gain of 8.1% in our Dividend
Yield portfolio while TOMYPAK added 3.2% WoW to our Growth portfolio from its
flat performance earlier. Meanwhile, GAMUDA contributed 1.6% WoW (as well as
for the YTD) each to the Growth and Thematic portfolios. Even with their
outperformance, we still like these stocks and continue to hold them in our
model portfolios. TM and REDTONE-LA were the two worst stock performers last
week. TM pulled down both the Dividend Yield and Thematic portfolios by 3.7%
WoW and 5.7% YTD each
while REDTONE-LA contributed a 2.9% YTD lost each for all
three portfolios.
Alpha generated
stock. Although REDTONE-LA was the culprit last week, we still believe in
its turnaround story. The stock has experienced a strong technical breakout
last week which we believe was mainly led by the positive development on its 10-year NSA agreement inked with MAXIS
last July to fast-track their 4G LTE roll out. To ride on the company’s future
prospect, we have decided to invest in REDTONE-LA instead of the underlying
share given that the former provides a better upside and interest. REDTONE-LA
is a 10-year 2.75% (payable annually in arrears in March each year) ICULS and
can be converted into ordinary shares of RM0.10 each at any time from 4 March
2010 to the maturity date of 4 March 2020 at the rate of 10 ICULS for 4 ordinary
shares. REDTONE’s share price closed at RM0.445 while REDTONE-LA ended at
RM0.175 on last Monday. This provided a small arbitrage opportunity given that
an investor could buy 10,000 REDTONE-LA @ 0.175 each and subsequently convert
them to 4,000 ordinary shares. On top of that, REDTONE-LA also offers a 2.75%
interest due to in March 2013 that could provide some buffers to its share
price. We have classified REDTONE-LA as our Alpha-generated stock and allocated
10.0%, 7.0% and 4.9% of the funds in Thematic, Growth and Dividend Yield
portfolios respectively to invest in the loan stock. Our immediate price target
for REDTONE-LA is set at RM0.20 while the cut loss level is at RM0.165.
Source: Kenanga
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