For November, given the previous month’s sharp rally, OSK expects some pullback in global markets, with Malaysia being no exception.
Barring the announcement of a General Election, OSK remains defensive on the Malaysian market and would advocate a BUY only if the KLCI retraces towards 1,300 pts, while we may call a SELL if the market heads towards 1,533 pts. Maintain NEUTRAL for now.
The table below is the target price for OSK’s November 2011 top picks.
While the destruction arising from the floods is undoubtedly major, it may indirectly benefit some Malaysian companies. Companies involved in tourism and healthcare in Malaysia may benefit from traffic diverted from Thailand, a trend that may continue even after the flood waters recede. Consumer companies may get a short term lift from increased exports to Thailand.
On the other hand, automotive and technology companies are the biggest losers.
Below are the target prices/fair value and ratings for stocks to benefit.
OSK, maintains their UNDERWEIGHT call on the Technology sector as we expect sub par growth in the seasonally sturdy 3Q of the year. Although valuations have retraced to as low as below net book value for some, we believe it is still premature to attempt bottom-fishing with firm recovery unlikely until 2012 given the current global macro outlook.
Despite the recent sharp spike in USD against RM which could help to lift earnings given the export nature of local technology manufacturers, OSK upholds their negative view on the sector due to the weakness in end-consumer demand for HDDs amidst rising demand for solid-state drives and the impact from floods in Thailand where these companies presences.
Below are the target prices/fair value and ratings for selected technology stocks.
2012 budget is focussing more on the ‘Rakyat’ rather than infrastructure development. OSK see this as being unexciting for the Malaysian equity market. Measures to assist the lower income group include one-off cash payments, the abolishment of school fees and a hike in civil servant wages. Elsewhere, the re-imposition of income tax on shipping companies and the hike in RPGT should hit the shipping and property sectors mildly.
Potential beneficiaries mainly in education, finance and Sin stocks. In terms of beneficiaries, given Budget 2012’s somewhat subdued impact on the broader market, OSK see winners in Brewery & Tobacco companies, which did not get slapped with a tax hike, and education companies given the incentives offered for more schools and vocational training.
Below are the target prices and ratings for top 5 stocks to benefits from 2012 budget..
Prestariang Berhad (PRESBHD, 5204) was incorporated in 2003 as an Information and Communication Technology Services company, focussing on professional training and certification.
Currently, it offers 40 certification courses from various technology and software vendors and organizations, including Microsoft, IBM, Oracle, CompTIA, Autodesk, EC-Council, Adobe and others.
Prestariang was listed on Bursa Malaysia’s Main Market on 27th July 2011 win an IPO price of 90 sen. Unfortunately, due to listing timing, the share price performed badly since the listing day. The price drop to lowest of 47.5 sen on 19th September. It was close at 55.5 sen on 5th October.
The management has set a dividend policy of up to 50% for the next 3 years. Based on forecast earnings by OSK Research, it translates into a lucrative dividend yield of >10% for both FY11 and FY12 given the recent weakness in the share price. OSK Research also estimates, the target price or fair value of Prestariang at 92 sen representing 66.8% up site potential from 5th October closing price.