We were marketing our latest views on Malaysia to investors in London and Europe over the last week.
With the volatility in regional markets, Malaysia has gained attention because of its relative defensiveness. Over the last two months, the KLCI was has been flat compared to the ASEAN average of -7.2%, while the MSCI Asia ex-Japan declined -7.6%. Investors agreed that Malaysia looks expensive and bottom up stock picking was important.
From a top-down perspective, investors wanted to know whether there were any changes in the way the country is being governed since the May elections. Investors were worried about any potential leadership change at UMNO elections later this year. Also, there was a little disappointment in that there has been no concrete news of when the government will implement the GST and reductions in fuel subsidy, to reduce budget deficit and debt levels of the country.
Looking at the individual sectors, property gained the most amount of attention because of robust locked-in sales at many property developers, Malaysia's favorable demographic and more controlled property price appreciation. Recent government measures to rein in mortgage loans are not seen to be materially detrimental to the sector. Besides the two large caps UEM Sunrise ad SP Setia, there were also questions on Mah Sing, Sunway and IJM Land.
There was reasonable interest in Tenaga too because valuations are not demanding relative to the rest of the Malaysian market and its historical trading band. The government's plan to introduce fuel cost pass-through mechanism is also a potential catalyst. For 3QFY13 result to be announced on 18th July, we expect Tenaga to report stronger core NP of c RM1.0-1.1bn (vs 1QFY13’s RM1.04bn and 2QFY13’s RM880m).
The Iskandar story is not as well known as we initially thought. While most investors were aware of it, all wanted to know more details and updates. Our FITT report continues to be well received (see report dated 17 May, 2013 entitled High Speed Transformation). Unfortunately, there was a little frustration on the lack of stocks to buy for this thematic.
P/E valuations for the Malaysian market of 17-18x 2013E are not compelling relative to 8-10% EPS growth and hence bottom-up stock picking is important. Upcoming 2Q reporting season not expected to be exciting. Our top Buy picks in Malaysia are IHH, Maxis, SP Setia and Tenaga. With recent share price weakness in UEM Sunrise (Buy, TP of MYR 4.22), we believe that stock looks a lot more compelling. Our recent conversation with management in London sounded positive (see note issued by Aun Ling last week titled “UEM Sunrise - dbAccess Malaysia & Thailand Corporate Day Highlights”).
Source/Extract/Excerpts/来源/转贴/摘录: Deutsche Bank
Publish date: 16/07/13