Public Watchlist: Kenanga’s 1Q20 Investment Strategy

Malaysian equities are set for a better year in 2020 with the resumption of earnings growth after a 2-year hiatus thanks firstly, to subsiding external risks; secondly, to recovering commodity prices; thirdly, to the anticipated revival of mega infrastructure projects and finally, to the positive impact of trade diversion on investments and exports.

The recently concluded 3QCY19 corporate results point to the arrest of earnings decline with a turnaround in subsequent quarters starting to show. Having fallen 5% since the start of the year, the valuation for the FBMKLCI looks appealing now trading as it is on a 12-month forward PE of 15.7x which is below both the 5-year and 7-year averages. With forward dividends looking intact, its dividend yield of 3.8% now exceeds the 10-year MGS yield of 3.4% - an occurrence last observed 6 years ago. Our end-2020 bottom-up target level for the FBKLCI is 1,712, which happens to coincide with our top-down target derived by applying at 15.9x PE on 2021 EPS.

Overweight cyclicals (technology and plantation) and stay with the banks. Our top picks for 1QCY20 are AIRPORT (OP; TP: RM9.90), BAUTO (OP, TP: RM2.65), CIMB (OP; TP: RM6.45), GAMUDA (MP, TP: RM3.90), GENP (OP, TP: RM12.10), KLK (OP; TP: RM32.90), MAYBANK (OP; TP: RM9.70), MPI (OP; TP: RM14.00), PADINI (OP, TP: RM4.00) and PESTECH (OP; TP: RM1.75).


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Stock Name Ref Date Ref Price Price Diff Last Range Open Change Volume Note
AIRPORT 02-Jan-2020 7.61 5.58
BAUTO 02-Jan-2020 2.09 1.45
CIMB 02-Jan-2020 5.18 4.11
GAMUDA 02-Jan-2020 3.90 3.57
GENP 02-Jan-2020 10.58 8.82
KLK 02-Jan-2020 25.30 22.24
MAYBANK 02-Jan-2020 8.65 8.25
MPI 02-Jan-2020 11.44 39.00
PADINI 02-Jan-2020 3.24 2.88
PESTECH 02-Jan-2020 1.33 1.13

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