Headline Stay defensive on expectation of more pressure on stocks MediaTitle The Edge Date 04 May 2020 Language English Circulation 25,910 Readership 77,730 Section Corporate Page No 22,23 ArticleSize 1300 cm² Journalist N/A PR Value RM 67,149

Stay defensive on expectation of more pressure on stocks T*P hpnrhmark index FTSE Bursa KLCI has rebounded since March 19, but analysts say there could

^sSnoS^Shrust. With the uncertainty over Covid-19 and how the worlds economy, respond post- pandemic, what should investors do when it comes to investing in the local stock market.

BY KAMARUL AZHAR

t has been a tumultuous four months for Malaysian equities, and analysts warn of further volatility ahead as a possible recession looms, caused by the Move- ment Control Order (MCO) and cautious consumer sentiment. Investors are ad- vised to stay defensive and invest in stocks that have defensive earnings qualities and strong fundamentals. Imran Yusof, senior analyst at MIDF Research,believes the FBM KLCI will face some downward pressure, given that sen- timent is likely to be hit by weak econom- ic data and corporate earnings, which are scheduled for release in the next couple of months following nearly two months of economic stagnation. "Therefore, there might be another downward thrust in the direction of the FBM KLCI. In addition, a bear market gen- erally follows a three-wave pattern, where- by the downward thrust (which we saw in March) would normally be interrupted by -19) at a department store in Seoul, South Korea April 30, 2020. an intermittent rebound and subsequent- People wear masks to avoid the spread of the coronavirus disease (COVID ly followed by another downward thrust," Imran tells The Edge via email. Dialog has only seen a 3.5% erosion of its 1,440 points target, given the likelihood of The benchmark index kicked off the FBM KLCI share price, ending last Thursday at RM3.33. further earnings downgrades through 2021. year at 1,611.38 points, but had plunged How attractive are their valuations at Given the heightened uncertainty and 1700 24.3% to 1,219.72 as at March 19,the second present? volatility in the market, Imran suggests 1,615.67 day of the MCO. TNB is trading at a trailing 12-month investors consider stocks that are more de- 1600 However, the index has since gained (T12M) price-earnings ratio of 15.37 times, fensive, regardless of the status of the MCO. some lost ground, and finished last Thurs- slightly higher than its 14.22 times 10-year These include those that have been day at 1,407.78 - a tad higher than MIDF's 1,407.78 average PER. somewhat overlooked in favour of glove year-end target of 1,400. IHH is still trading at relatively high val- counters, especially as the country moves 1400 Currently down 12.6% year-to-April 30, uations, at 83.53 times T12M PER - higher towards normalisation post-MCO. the FBM KLCI is faring better against its than its 66.44 times 10-year average PER. Imran points to Bhd 1300 regional peers, although, to be fair, it was At last Thursday's price, is trad- and IHH Healthcare Bhd, which have solid ing at 26.46 times T12M PER, which is low- lagging behind the region prior to the 1200 fundamentals and defensive earnings, as Covid-19 pandemic.The Indonesian market er than its 10-year average of 32.34 times. well as counters that may not be defensive is currently down 25.4%; Thailand, 18.8%; Dialog's 30.95 times T12M PER is also at first glance but have some defensive Data compiled as ot April 30,2020,5pm BLOOMBEB slightly lower than its 10-year average of , 18.6%; , 19.97%; and the earnings qualities, such as Dialog Group Philippines, 27%. 31.76 times. Bhd and Axiata Group Bhd. Vincent Khoo, head of research for Other than these, large caps that have "While demand growth will be negative- er call frequency and duration as well as Malaysia at UOB Kay Hian, is of the view been badly battered, such as Genting Bhd, ly impacted by the MCO, the bulk of TNB's increased data consumption during the that the market will be firmer towards the Genting Malaysia Bhd and Public Bhd, regulated earnings are on a revenue-cap MCO, which would help to partially support year end but foresees a consolidation period are also good candidates for consideration basis. This means that TNB is technically ailing voice revenue and further accelerate in the nearer term for two main reasons — based on their valuations. compensated for any shortfall in demand," data revenue growth. first, there has been a significant rebound Ivy Ng, head of Malaysia research at Imran says. Post-MCO, Axiata could get more busi- of the index and, second, the market is like- CGS-CIMB, says these are the FBM KLCI IHH could be a beneficiary should the ness as companies set up remote working ly to reflect a sluggish post-MCO domestic constituent stocks that the research house MCO be lifted, he says, as there could be a systems for their employees under a "new consumption trend. has an "add" call on as "we feel the decline return of non-urgent and non-essential normal". "The market should firm up towards in share price more than reflects the po- medical procedures and services as well as a Year to date, TNB has fallen 7.7% to year end as consumption strengthens and tential loss in earnings due to the MCO". revival of medical tourism — segments that RM12.24 while IHH had lost 4% as at last amid expectations that a cure or vaccine for Areca Capital Sdn Bhd CEO Danny Wong have been practically halted by the MCO. Thursday's close of RM5.25.At RM3.94,Axia- Covid-19 would by then be near," he says, also believes gaming stocks and are In Axiata, he sees the potential for high- ta's share price was 4.8% lower. In contrast, adding that UOB Kay Hian is reviewing its Headline Stay defensive on expectation of more pressure on stocks MediaTitle The Edge Date 04 May 2020 Language English Circulation 25,910 Readership 77,730 Section Corporate Page No 22,23 ArticleSize 1300 cm² Journalist N/A PR Value RM 67,149

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likely to recover post-MCO. But he is of the services provider Dialog had lost a mere view that there are more interesting names 3.5% of its value as at last Thursday, in large beyond the constituent members. part sheltered from the crude price plunge "We are focused on two themes — because of its storage facilities. bashed-down stocks and those that will Other players have been battered far be in a stronger position in the post-MCO/ worse. Yinson Holdings Bhd is 20% down Covid-19 world, for example, digital/tech- year to date to RM5.18, and T7 Global Bhd nology trends. These are long structural is 21% lower at 36 sen. trends that now look likely to be further According to MIDF's Imran,the outlook accelerated post-Covid-19," he says. "Our for the oil and gas sector for 2020 in general picks are technology stocks and stocks is negative as a low oil price environment offering deep value." tends to result in cuts to capital expenditure Genting was trading at RM4.17 last relating to development and production. Thursday, having lost 30.8% of its market A bright spot in the sector appears to value, while its subsidiary, Genting Malay- be Dialog. sia, was RM2.37, or 28% lower. "In the current low oil price environ- At these prices, Genting is valued at a ment, companies like Dialog, that have mere 8.1 times T12M PER while Genting defensive business segments, are preferred Malaysia is valued at 10.09 times — signifi- and we believe that Dialog will be able to cantly lower than their 10-year average PER weather [this] ...environment and emerge of 18.65 times and 15.85 times respectively. with a minimal impact on earnings," says At last Thursday's close of RM16.38, Imran. Public Bank had lost about 15.9% of its val- "Due to the oversupply of crude oil cur- ue and is trading at 11.54 times T12M PER, rently in the market, storage has become a against its 14.57 times mean 10-year PER. crucial part of the value chain as the mar- ket anticipates a recovery of the oil price Will oil and gas stocks come into play? post-Covid-19." Although the largest petroleum-produc- Khoo of UOB Kay Hian says some oil and ing countries have agreed on a production gas companies should still benefit from cut, the outlook for the oil and gas market Petroliam Nasional Bhd contracts. is still based on how the global economy has maintained its 2020 domestic capital performs post-Covid-19 lockdowns. Howev- expenditure plans but its spending is likely er, the winding-up of shale producers will to accelerate only when oil prices regain help support the price of crude oil. significant momentum, he says. The equilibrium between oil demand Despite the gloomy outlook for the sec- and supply will determine the direction of tor, Areca Capital's Wong is confident oil oil and gas stocks the world over, including and gas counters will come in for bargain in Malaysia. Owing to a significant over- hunting once the MCO is lifted. "2021 will supply, made worse by the coronavirus' be the year of strong global economic re- wrecking of economies, oil and gas stocks covery. Long-term investors should look have crumbled. beyond the current situation and take a Oil and gas integrated technical position on stock weakness now." • VALUATOR

Company(Brand) Mention Tone ROI Areca Capital Sdn. Bhd. (Areca Capital Sdn. Bhd. ) 2 0 RM 0 Axiata Group (Axiata Group) 2 0 RM 0 Bernama - MREM (Bernama - MREM 6) 7 0 RM 0 Bursa - CIMB (Bursa - CIMB) 5 0 RM 0 Bursa Malaysia Berhad (Bursa Malaysia Berhad) 12 0 RM 0 CGS-CIMB Securities Sdn Bhd (CGS-CIMB Securities) 1 0 RM 0 CIMB Group (CIMB Group) 1 0 RM 0 CIMB Investment Bank Berhad (CIMB - Economy News) 3 0 RM 0 Covid- 19 - Malaysia (Covid- 19 - Malaysia) 18 0 RM 0 Dialog Telekom Ltd (Dialog Telekom Ltd) 2 0 RM 0 Genting Berhad (Genting Berhad) 1 0 RM 0 (Genting Malaysia Berhad) 3 0 RM 0 Hibiscus Petroleum Berhad (Hibiscus Petroleum - Dialog Group) 2 0 RM 0 Ministry of Communications and Information (MCI) (Singapore Top 1 0 RM 0 Petroliam Nasional Berhad (PETRONAS) (PETRONAS) 2 0 RM 0 (Public Bank Berhad) 2 0 RM 0 RAM Bursa Malaysia (RAM Bursa Malaysia) 2 0 RM 0 Shell Industry News (Shell Industry News) 1 0 RM 0 Singapore-Malaysia Relations (Singapore-Malaysia Relations - 1 0 RM 0 Star Reacher - Coronavirus (Star Reacher - Coronavirus) 9 0 RM 0 T7 Global Berhad (T7 Global Berhad) 1 0 RM 0 Tenaga Nasional Berhad (TNB) (Tenaga Nasional ) 4 0 RM 0 The Edge Communications Sdn Bhd (The Edge ) 1 0 RM 0 UOB Group (UOB Group) 3 0 RM 0 UOB Kay Hian Holdings (UOB Kay Hian) 1 0 RM 0 Yinson Holdings Bhd (Yinson Holdings Bhd) 1 0 RM 0