As the much anticipated 13th general election draws near, OSK see the Government dishing out more contracts to create a “feel good” climate in the run-up to the polls.
News relating to mega projects such as the KL MRT, WCE, EDT and potentially SCORE, should gain traction and hence present investors – who are increasingly becoming more upbeat – with trading opportunities aplenty.
As such, OSK upgrade our sector call from Neutral to OVERWEIGHT as the rush of positive news in the next few months is likely to fire up the sector to new highs this year.
Below are the target price, market capitalization and rating for selected stocks in construction sector.
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OSK maintained NEUTRAL on the construction sector despite expectations of stronger contracts in 2012. The elevated portion of the MRT SBK line would already make up for all domestic jobs awarded
last year.
Given that the construction sector has a relatively high beta, OSK advised to remain cautious for now. In the last three major market down cycles in 1997-98, 2000-01 and 2008-09, the KLCON Index underperformed the KLCI by 11-15%. OSK’s top large cap pick is Gamuda (BUY, FV: RM3.94) while for the small caps is KimLun (BUY, FV: RM2.15).
Below are the target price, market capitalization and rating for selected stocks in construction sector.
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OSK has a Neutral outlook on the Malaysian market going into 2012 as the combination of uncertain growth outlook in the US and Asia coupled with a possible recession in Europe cloud the prospects for strong earnings growth locally.
OSK advises investors to stay cautious into mid 2012 and focus on Defensive sectors such as Consumer, Telco, Healthcare and Media with KLCI fair value of 1466 pts.
Investors are advised to Trade on Cyclical sectors such as Banks, Oil & Gas and Construction as the market dips or rallies strongly. The trading strategy to adopt is, buy when the KLCI falls towards the 1300 pts and sells when the KLCI rises towards the 1500 pts.
The tables below are OSK’s top Big/Mid/Small Caps Stocks with the target price & rating for 2012.
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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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OSK expect will better in 2H and maintain OVERWEIGHT to the sector. Despite the weak numbers on domestic contract flows in 2Q, OSK remain bullish on the sector. The KLCON has underperformed the KLCI by 4.3% YTD as investors have probably gotten impatient on the momentum of awards.
OSK views this as an opportune time to load up on the sector as contract awards should pick up in 2H as major projects such as the MRT, LRT and River of Life kick off.
The sector should also benefit from a potential early General Elections which we expect to be held this year.
Below are the target price for selected stocks in construction sector.
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