Budget Preview Slim pickings in Budget 2015

by **Cals** Thu 18 Sep 2014, 21:50

Budget Preview Slim pickings in Budget 2015

Business & Markets 2014

Written by AllianceDBS Research

Thursday, 18 September 2014 10:13

KUALA LUMPUR (Sept 18): Budget 2015 will likely continue along with the federal government's fiscal reform agenda to reduce subsidies, widen revenue sources through GST and promote growth via investment in catalytic mega projects.
Continue to bear with short term pain. Amid the government's plan to put the nation on a firmer financial footing over the long term, rising cost-push inflation would affect domestic consumption as well as raise the cost of doing business.
Consumer and gaming sectors may be hit by sin tax hike. Besides the negative impact from inflation-induced consumption slump, the consumer sector may also be hit by sin tax hikes on tobacco and brewery sub-sectors as the government seeks to raise revenue. Gaming sector could also be hit if the government raises gaming tax after a long hiatus.
Construction and O&G remain favoured sectors. With the government's continued commitment towards Economic Transformation Programme (ETP), construction and O&G sectors will continue to benefit from investment driven demand. Our top picks include Gamuda, IJM, Sapurakencana, Dayang Enterprise and Coastal Contracts.
Utility sector to gain indirectly from subsidy rationalisation. As fuel subsidy accounts for the largest portion of the government's subsidy bill, rationalisation will indirectly benefit Tenaga Nasional as the government implements incentive based regulated return with full fuel cost pass through. This will provide improved earnings and cash flow visibility for Tenaga going forward. Meanwhile, Petronas Gas will benefit from growing gas volume from LNG.
Reprieve for the property sector? The slowdown in the property sector has been increasingly evident following the imposition of lending restrictions to curb excessive speculation. However, housing affordability among the lower income group and first time home buyers remain low. Therefore, any government incentives to promote first time home ownership will benefit developers such as MKH which focus more on affordable housing.