OSK still foresees potential for further market retracement, although a possible deep recession can probably be averted. However, OSK maintains 2012 KLCI fair value at 1466 pts seeing a slow recovery forward unlike in 2009.
OSK is recommending Telcos, Consumer, Healthcare and Media as defensive sectors. With the market approaching 1350pts non recessionary bottom, OSK believes some Bottom “Nibbling” would be reasonable, although aggressive bottom fishing is not recommended.
The table below is the OSK top 10 stocks for a bottom ‘nibbling’ including fair value, dividend yield & rating.
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August MPOB statistics were within expectations with stock levels easing off as production saw a weaker month. Going forward, ECMLibra expects that production and exports are going to pick up concurrently, hence leading us to maintain our Neutral call. ECMLibra do note that the recurrence of a La Nina and also supply concerns in the soybean market could be re-rating catalysts for the sector.
ECMLibra has Trading Buy calls on all stocks under coverage except KLK. These companies currently trade below their historical average P/E multiples while CPO prices are at the RM3,000/mt levels and improved production is giving rise to strong earnings.
Selected Oil & Gas Stocks Fair Value, Target Price & Dividend Yield.
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OSK believe that palm oil price is set for a counter trend rally and its price action in the past weeks supports their view. At the very least, the bearish forces which had caused palm oil price to dip below RM3,000 appear to be spent for now as inventory continues to ease.
The bullish soybean market has yet to help push up palm oil price but should eventually give it a lift if the former continues to move up in the next 2 months.
Malaysia’s weakening palm oil production is also supportive of higher palm oil prices in the immediate term, especially given its large USD246 discount to soybean oil
OSK continue to like the sector as a short term tactical play but wary of stronger production in 2012, especially with the possible resurgence of the La Nina weather conditions.
Below are the target prices and ratings for selected plantation stock.
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OSK remain OVERWEIGHT on the O&G industry and Buy calls on both Coastal and Dayang.
OSK like Coastal for its mergers and acquisition story. OSK re-iterate their view that it would be a matter of time before Coastal finds itself a suitable partner for M&A purposes.
OSK also like Dayang due to it’s stable, recurring income. This is because oilfield and platform maintenance are all-year-round jobs and having a slice of this business pie is always better than getting one-off jobs as they provide assurance of future earnings sustainability
Below are the target prices and ratings for selected Oil & Gas stock.
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The global sell-off in equities has definitely raised the risk of an early recession. While it’s still early days yet to say that a bear market is taking hold, OSK feel that it is prudent to highlight a list of alternative defensive stocks for the longer run that would benefit in the event a recession does set in early.
These stocks will benefit from a drop in incomes and commodity prices and are generally more inward looking as OSK believe domestic incomes should be more resilient.
The tables below are OSK’s alternative stocks which contains, target price, rating & the reason for the selection.
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