· The recent selldown in Bursa Malaysia with market retracing 27% has created investment opportunities in liquid large caps last seen early 2006. We are excited about the market and advise investors to accumulate despite the near term uncertainties which are largely sentiment driven by political uncertainties.
· We like companies that have invested in capital expenditure prior to the raw material price increases as they would be well position to acquire market share with lower cost of production. Companies with a proven track record and high management competence will be able to steer through these uncertain times and emerge even stronger especially those with strong balance sheet and recurring income.
· Construction companies with locked in contracts and regulated assets/concessionaires will deliver locked in earnings and strong recurring cashflow over the medium to long term. However, one must be careful to avoid those with older contracts priced before raw material cost increases while concessionaires face increasing regulated risks. Property investment companies with prime office/retail space and MNC tenants with low default risk also generate consistent recurring earnings.
· Lastly, the "sin" sectors, gaming, NFO, tobacco and breweries continue to do well and sell down by foreign institutional investors have resulted in attractive yields of 5% to 8%.
· Our top picks are
BAT (HOLD; RM40.75; TP: RM46.25),
Resorts World (BUY; RM2.54; TP: RM4.84),
SP Setia (BUY; RM3.02; TP: RM5.68),
KLCC Property Holdings (BUY; RM2.74; TP: RM4.37),
Telekom Malaysia (BUY; RM3.36; TP: RM4.20),
UMW Holdings (BUY; RM5.70; TP: RM8.00),
IOI Corporation (BUY; RM5.50; TP: RM8.15),
QL Resources (BUY; RM2.58; TP: RM3.60),
LCL Corporation (BUY; RM4.90; TP: RM8.65), and
Coastal Contracts (BUY; RM2.15; TP: RM3.48).
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