Thematic play on Bursa

by **Cals** Mon 20 Apr 2015, 02:08

Thematic play on Bursa

Saturday, 18 April 2015
BY: TEE LIN SAY

REVIEW: There’s a party happening in Kuala Lumpur, and it’s in the least anticipated hotspot in town – Bursa Malaysia.
With full realisation that the rally on the FBM KLCI is in full throttle, new themes have emerged throughout the week. Most evident were the thematic play on logistics and small-cap tech stocks.
Volumes continue to surpass the RM2bil mark, with lower liners hogging much of the limelight.
The likes of ManagePay Systems Bhd, IFCA MSC Bhd, Pesona Metro Bhd and Frontken Corp Bhd dominated the volumes list.
The rise of IFCA MSC, the maker of cloud-based software for property companies has been phenomenal. It is the top performer of Bursa Malaysia, having jumped 14-fold over the past 12 months to its current price of RM1.68.
Meanwhile, recovering crude oil prices further fuelled the rally, and the once severely beaten down oil and gas stocks have started to show some semblance of life.
WTI crude oil closed at its highest level on Wednesday after a lower than expected build-up of crude oil stocks in the United States. Crude inventories rose by 1.29 million barrels to 483.69 million barrels in the week to April 10, the US Energy Information Administration said.
Oil and gas stocks such as SapuraKencana Petroleum Bhd, Perisai Petroleum Bhd and KNM Group Bhd started to attract interest.
Word on the grapevine was that funds which had underperformed the market in the first three months of the year, were scrambling to find new stock ideas. Coupled with the fact that foreign funds were now net buyers of the market, many feel the market will have legs for quite a while.
On Friday, the market was down 2.08 points to 1,845.86 on volume of 2.58 billion shares.
Major developments over the week included news that Eco World Development Group Bhd is acquiring 299.64 acres of leasehold land in Batu Kawan, Penang for RM730.93mil to build residential and commercial properties.
Eco World received the letter of award from the Penang Development Corp for its proposal to undertake the project. This will transform the company to become a major property developer in the state.
Meanwhile Tan Sri Quek Leng Chan has ceased to be a substantial shareholder in mid-cap fabricator TH Heavy Engineering Bhd effective April 14.
STRATEGY: Kenanga Research says that chart-wise, the local bourse is still trading sideways to settle near its mean-regression level. Key indicators such as stochastic and relative strength index are back on their respective overbought levels.
“We believe that investors could take this opportunity to take profit on any gains after seeing the lack of excitement on the market over the past week. With that, we deem Thursday’s rush hour surge to be short-lived and remain firm that the FBM KLCI would continue trading sideways,” said Kenanga Research.
Alliance DBS noted that the benchmark index made a new high on April 16 after registering new lows for six consecutive days.
“The action of late buying of selective blue-chip stocks indicated the intention of some market participants to move the benchmark index away from the immediate risk of breaking below the 1,837 support. Following the higher close on April 16, the benchmark index is seen ready to test the 1,850-hurdle. Indicator-wise, the moving average convergence divergence is marginally below the 9-day moving average line,” said Alliance DBS.
MIDF Research in its strategy report said it was noteworthy that the amount raised in the primary market via rights issuances continued rising unabated during the past three years in spite of net foreign capital outflows from the Malaysian equity market totalling RM6.9bil last year, heightened volatility and the relative underperformance of the market.
“In view of the above, MIDF reckons the healthy market stamina points towards no shortage of latent, mainly domestic, investment capital and a continued confidence with regards to the growth prospects of the economy.
“Thus we reiterate our FBM KLCI 2015 year-end target of 1,900 points, which is equivalent to a 2.8% gain from current levels, and 17.3x price-earnings ratio (PER) multiple of 2015 earnings,” it said.
MIDF expects the 2015 earnings revisions going forward to be generally flat or even upward-biased. Hence the resultant PER valuation of its 2015 year-end target may turn out to be lower than 17.3x.