Japan hits by worst earthquake in over 100 years. The cost of reconstruction is estimated at USD161bn. The impact on Malaysia is generally limited given that Japan’s major ports and industrial areas have been spared. However, there would still be winners and losers among some sectors. For now, OSK maintain Buy into Weakness call on the Malaysian market with year-end target for KLCI of 1680 pts remain intact.
Oil & Gas Sector
During the 4th Economic Transformation Programme (ETP) update recely, the PM unveiled a further 9 Entry Point Projects (EPP)s worth over RM2bn, bringing the total to date at 60 projects under 46 EPPs. To date, the projects will produce RM95bn in investments and increase GNI by RM137bn.
With the ETP and theupcoming General Election as its twin catalysts, OSK remain Overweight on the Malaysian market with our 1680 pts year end target intact. Favourite sectors remain Banks, Oil & Gas, Property and Construction.
The 4th EPPs announced include:
Despite relatively strong results from a number of Blue Chips in February, the market still retreated and ended up in the red so far in 2011. Selling was largely attributed to concerns arising from political unrest in the Middle East but the risk is limited if this does not spread to Saudi Arabia.
With the 4Q2010 earnings results season over, OSK unveil new 2011 KLCI year-end target of 1680 pts, which is the average of the 2011 KLCI fair value (1648 pts) and that for 2012 of 1710 pts.
OSK continue to advocate Buying into Weakness for sectors such as Banking and to trade in O&G, Construction and Property plays. OSK also adding a slightly defensive flavor to our Top Buys for March. While the market remains volatile for now, OSK see an election driven rally towards year-end.
The table below are the target price for March 2011 top picks.
2010 proved to be a decent year for OSK’s Small Cap Jewels although their performance was eclipsed by the liquidity-infused rally, which benefited the bigger caps, particularly from 2H2010.
Of the 50 stocks profiled in handbook, half posted absolute returns in excess of 20%, with 49% outperforming the FBM Small Cap and FBM KLCI indices.
While the smaller caps are expected to bask in the glory their larger cap peers in 2011, investors should not ignore names with good longer term potential that are trading at attractive valuations.
OSK like small caps in the construction, property, oil & gas and consumer sectors as beneficiaries of the ETP, elections and earnings themes.
The table below are the 2010 performance of OSK Top 50 Small Jewels and performance since OSK’s Small Cap Jewels report released in April 2010.
We expect the market to rebound in February as fundamentals remain intact and the 4Q2010 results reporting season should see analysts upgrading their earnings again. We like the Banks, Oil & Gas and Consumption related sectors for February. Our Top Buys center on companies anticipated to display strong profitability (CIMB, AirAsia), laggards (KPJ) and rebounding stocks (Kencana, SP Setia).
The table below are the target price for February 2011 top picks.