budget

On Friday 15th October 2010, Prime Minister, Datuk Seri Najib Tun Razak tabled a RM212-billion budget for 2011 centred on four key strategies designed to transform Malaysia into a developed and high-income nation by 2020 with sustainable development, spearheaded by the private sector as well as focus on the well-being of the people.

The following are Budget 2011 highlights for Personal Finance and Investment.

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investments

We always heard that many people are saying high risk investment come with higher return. But how do we know which investments have higher return with higher risk and vice versa.

There are 3 level of investments risk namely conservative, moderate and aggressive with potential return ranging from 3 percent and up to 20 percent. The most commonly type of investments from lowest to highest potential returns are government securities, fixed deposits, bonds, investment linked insurances, equities and options/warrants.

The chart below illustrates the risk and potential return of the common types of investment products.

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petronas

Petronas Chemicals Group Berhad (PCGB) is looking to raise as much as US$4 billion (RM12 billion) in its initial public offering (IPO) in Bursa Malaysia. This is exceeding the earlier estimates of over US$2 billion (RM6 billion) as it hopes to tap strong global investor demand for Asian stocks.

Last month, Petronas filed a draft prospectus for an IPO of its petrochemical business.

Petronas Chemical Group’s IPO is one of two offerings to be launched by government-run Petronas in response to Prime Minister Najib Razak’s call to reduce state ownership in the private sector and boost liquidity in the stock market when unveiling NEM early this year.

PCGB which owned by state oil giant Petroliam Nasional Bhd (Petronas), could become the largest share offering in the country, exceeding Maxis’ US$3.3 billion (RM10 billion) listing last year.

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construction

While the fundamental outlook remains pretty much unchanged, we do note that the positive news flow surrounding the sector has been accelerating of late. We believe this will help further re-rate valuations of contractors upwards. Implementation of the mega projects under the ETP should serve to maintain the momentum of positive news flow. In short, we think there is potential for some irrational exuberance to set in. News flow aside, the 59.4% increase in domestic contact awards will serve to drive earnings growth over the next few years. With the KLCON now trading at its long term average of 15x, we see further room for rerating, potentially up to one standard deviation above mean (μ+1σ) level of 19.3x.

We are upgrading our sector call from Neutral back to OVERWEIGHT as we expect the positive news flow in the coming months to rerate valuations upwards. Our top picks are Mudajaya (BUY, TP: RM7.22) and Sunway (BUY, TP: RM2.52). Both our top picks are backed by strong earnings growth with a 3 year CAGRf of 33-37%. For the small caps, we like Ahmad Zaki (BUY, TP: RM1.27) which has witnessed very strong orderbook wins over the past 12 months. We also like Gamuda (TRADING BUY, TP: RM4.31) for the euphoric MRT play. In our view, investors should position themselves for the thematic Sarawak play fuelled by the upcoming state elections; pick Naim Holdings (BUY, TP: RM5.10).

Below are the target price for construction sector.

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structured investments

In the last posts, we look at main features and benefits of Structured Investments. The most notable feature of Structured Investments is that can give you potentially higher return than fixed deposits. However it comes with potentially higher risks too.

If you are unsure to choose whether to invest in Structured Investments or Fixed Deposits and would like to know the difference, this post is right for you. The table below illustrate the main difference between Structured Investments and Fixed Deposits.

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