HLIB Retail Strategy...Jan 09, 2020 · APB’s business is very dependent on global investment...

1 HLIB Research l www.hlebroking.com

9 January 2020

Retail Outlook: 1Q20

HLIB Retail Research PP 9484/12/2012 (031413)

Retail Strategy

Loui Low Ley Yee, MSTA [email protected] (603) 2083 1727

FBMKLCI 1589.10

Resistance 1620, 1660

Support 1,580, 1,550

52-W High 1732.3

52-W Low 1548.5

Picking the right cherry for 1Q20

Despite the ongoing cloudy scenes in the global (ongoing trade tensions and

rising geopolitical tensions) and local (WGBI review, domestic political noise)

fronts, we have decent catalysts to cherry pick stocks in 1Q20. We would look

into sectors/ stocks such as (i) plantation (firmer crude palm oil price) – MBL

and APB, (ii) construction (waiting for vibrant news flow in 1H20) – NADIBHD,

(iii) tech & telco (5G and NFCP implementation) – KRONO and TM, (iv) O&G

(improving crude oil price) - STRAITS and (v) property (potential OPR cut in

1H20) - MATRIX.

FBMKLCI vs FBM Small Cap

Sub-indices 4Q19 (%)

FBM KLCI 0.3% FBM ACE 9.1% FBM Small Cap 16.3% Plantation 15.1% Energy 12.5% Technology 8.7% Property 7.7% Utilities 2.3% Construction 2.1% Consumer Products & Serv ices 1.7% Financial Serv ices 1.0% Industrial Products & Serv ices 0.1% Transportation & Logistics -0.6% Healthcare -0.7% REITs -3.9% Telecommunications & Media -5.7%

Top picks for retailers 1Q20

Stocks S1 S2 R1 R2 MBL 1.25 1.30 1.43 1.53 APB 0.36 0.37 0.47 0.55 TM 3.63 3.80 4.00 4.15 KRONO 0.80 0.82 0.93 0.96 STRAITS 0.20 0.21 0.24 0.285 NADIBHD 0.275 0.28 0.32 0.34 MATRIX 1.83 1.87 1.95 2.02

HLIB Research

4Q19 market review

US – China: Partial trade truce, but still not settled. Despite US and China

reaching an agreement for Phase 1 trade deal (awaiting sign off in January) after an

18-month trade tension, business environment remains wary as market participants

await Phase 2, which affirmed by a tweet from President Trump in December; but his

impeachment status is another noise to the market.

Malaysia: Cautious tone in 2019 due to political noise... Malaysia (FBMKLCI

2019’s performance: -6.0%) is one of the underperformers in the ASEAN region,

decoupling from regional benchmark indices, with an outflow of 11.1bn by foreign

investors in 2019. This could be due to the local political noise amid PH’s declining

popularity and leadership continuity beyond Tun M.

Figure #1 Monthly foreign trade flow RM ‘bn(Mar 18-Dec19)

Bursa, HLIB Research

…but we anticipate a better outlook ahead. HLIB expects Malaysia to record

modest GDP of +4.4% YoY in 2020 (2019e: +4.5% YoY). Also, we believe several

local fresh leads may surprise the market to the upside in 2020 underpinned by (i)

recovery in commodities such as crude palm oil and crude oil prices (hovering above

USD60), (ii) clearer policies in Budget 2020 and (iii) recovering sentiment in

construction sector.

Retail outlook and strategy for 1Q20

Less negative sounding outlook in 1Q20. Although some cloudy scenes such as (i)

WGBI review (March 2020), (ii) domestic political noise, (iii) unsettled trade war may

persist in 2020 and (iv) rising geopolitical tension (US -Iran), market participants may

position themselves in 2020 for a more committed position given the partial trade

truce following the Phase 1 deal between US and China, clearer policies from Budget

2020 as well as decent recovery in our major commodity – firmer crude palm oil and

improving crude oil prices. Hence, we expect Malaysia will be exciting to monitor for

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PtsRMFBM KLCI vs FBM Small Cap

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mailto:[email protected]

Retail Strategy l Retail Outlook: 1Q20


buying opportunities. Several key themes may be seen as strong catalysts moving

forward:-

(i) Crude palm oil prices (+22-23% YoY and QoQ)

(ii) Crude oil prices (improving in 4Q19 above USD60)

(iii) Construction (increased development expenditure by 2.4% YoY)

(iv) Budget 2020 (clearer policies for technology industry)

(v) National Fiberisation Connectivity Plan towards 2023

(vi) Undervalued property stocks

(vii) Potential M&A in the making amid sluggish share prices

Cherry picking into 1Q20. Based on the abovementioned setup, we opine that

traders/ investors should cherry picked counters within plantation, construction

technology & telco, oil & gas and property sectors in order to sail through a potential

recovery sentiment in 2020 for local equities.

Plantation: Crude palm oil has been rallying strongly in 4Q, contributing to an

average price of RM2,588 in 4Q19 (QoQ: +22.4%, YoY: +22.7%). Should we put

everything status quo, we should expect positive impact in sector’s earnings in

February reporting season. Hence, we like MBL and APB under plantation sector.

Construction: With the improved development expenditure from Budget 2020,

coupled with a potential news flow driven quarter, we believe trading interest may be

seen within the sector. Under this segment, we like NADIBHD.

Technology and telecommunication: As we are entering into the 5G era, we opine

that connectivity and technology advancement will be crucial for 5G to be successful.

Hence, we anticipate cloud/ data centres services and telecommunication services to

boom throughout this shift of technology; we like TM and KRONO under this space.

Oil & Gas: With the recovering crude oil prices in 4Q19, we believe it will sustain a

good trading momentum for O&G stocks. Also, energy index has rallied strongly by

12.5% led by steady Brent oil price above USD60. We believe STRAITS fits into the

O&G pick as they are dealing with oil bunkering and trading in Malaysia.

Property: Despite lack of fresh leads for upward rerating on this sector, the potential

OPR cut in 1H20 may improve affordability (albeit marginally) of house ownership. We

like MATRIX for its defensive characteristic such as strong dividend yield, successful

township (affordable pricing) and strong take-up arising from affordable unit prices,

providing a sustainable earnings moving forward.

Figure #2 Top retail picks

Stocks Price

(8th Jan) S1 S2 R1 R2 LT TP Cut Loss

MBL 1.38 1.25 1.30 1.43 1.53 1.66 1.22 APB 0.41 0.36 0.37 0.47 0.55 0.725 0.355

TM 3.91 3.63 3.80 4.00 4.15 4.36 3.60 KRONO 0.845 0.80 0.82 0.93 0.96 1.05 0.765

STRAITS 0.23 0.20 0.21 0.24 0.285 0.335 0.19

NADIBHD 0.28 0.275 0.28 0.32 0.34 0.38 0.27 MATRIX 1.91 1.83 1.87 1.95 2.02 2.12 1.80

HLIB Research

Retail stock picks for 1Q20

Plantation: CPO upcycle to provide upward potential to the sector

From the rally of crude palm oil prices in 2019, we have turned more optimistic on the

sector compared to previous quarters. Given the 4Q19 average price of CPO stood at

RM2,588 (QoQ: +22.4%, YoY: +22.7%), plantation companies could reap more profits

in 4Q19 which will be reported in Feb. Hence, we may anticipate further upward

rerating of the sector by market participants.



MBL: Muar Ban Lee (lis ted in Oct 2009) is one of the global renowned turnkey manufacturer specialise in oil seed crushing machineries for palm oil industry , as well as engage in construction of biogas plant. Geographically , MBL’s products has gained global acceptance by customers from tropical countries in Indonesia, Thailand, Nigeria, Papua New Guinea, Central America and others. MBL has diversified its operating segment into edible oil mill ing industry with the acquisition of an Indonesia subsidiary operating a palm kernel crushing plant in 2015, generating additional future income and facili tating extensive R&D and testing on the oil seeds crushing machineries. Meanwhile, MBL has diversified into high-technology wastewater treatment system specially designed for palm oil mil l effluent (POME), as companies get more environmentally conscious and as the government beefs up its crackdown on waste water disposal.

MUAR BAN LEE GROUP BERHAD EARNINGS SUMMARY

FYE Dec FY16 FY17 FY18 9M19 Revenue (RM'm) 179.8 183.6 157.2 121.0 Core PATAMI (RM'm) 11.9 9.4 13.0 14.9 Issued shares (m) 107.2 107.2 107.2 107.2 EPS (sen) 11.1 8.8 12.1 - P/E (x) 12.4 15.7 11.4 - DPS (sen) 4.0 2.0 3.0 - DY (% ) 2.9 1.4 2.2 - Source: Bloomberg

PEERS COMPARISON

Stocks Price EPS (sen)

Remark P/E (x)

MBL 1.38 17.6 Trailing 7.8 CBIP 1.08 6.2 EPS20E 17.4 MBL vs peer -55%

Source: HLIB, Bloomberg

APB: APB Resources Berhad is involved in the fabrication of specialised design engineering equipment for petrochemical process industry , chemical industry , oil palm processing industry , paper mill industry and power generation industry , and the prov ision of non-destructive testing serv ices..

APB RESOURCES BERHAD EARNINGS SUMMARY

FYE Sep FY16 FY17 FY18 FY19 Revenue (RM'm) 89.3 59.4 73.9 64.7 Core PATAMI (RM'm) -7.1 3.8 -17.7 -1.2 Issued shares (m) 110.8 110.8 110.8 110.8 EPS (sen) -6.4 3.4 -15.9 -1.1 P/E (x) NM 12.1 NM NM DPS (sen) 6.5 3.0 3.0 - DY (% ) 15.9 7.3 7.3 - Source: Bloomberg

MBL – A good proxy to buoyant CPO prices The future “BioStar”. According to group CEO Chua Heok Wee, the POME wastewater treatment system, dubbed BioStar (selling price at least 50% lower compared with its European peers) is going to be its future growth engine. Market

potential is huge (targeting 500 customers by 2024, mainly from Malaysia, Indonesia, Thailand, Latin America and Nigeria) as companies get more environmentally conscious with governments beefing up crackdown on wastewater disposal. MBL

plans to capture a global market share of 20% of the 2,500 oil mills around the world within the next five years.

Undemanding valuation with LT technical target near RM1.66 (or 9.4x T12M P/E). The stock is trading at undemanding valuation of 7.7x trailing P/E (60% below its closest peer, CBIP), supported by solid net cash of RM0.22/share. Business

prospects remain favourable due to expanding customer base and market shares, thanks to the buoyant CPO prices amid brighter demand prospects (arising higher biodiesel mandate in Malaysia and Indonesia from 2020 onwards and spreading of

African Swine Flu outbreak). Figure #3 MBL weekly chart: Double bottom formation, with upside target at RM1.66

Bloomberg

Double bottom formation neckline breakout. Following the double bottom

formation neckline breakout, MBL’s mid to long term outlook has turned more positive.

A decisive breakout above all-time high of RM1.43 (Nov 2017) will spur prices higher

towards RM1.53 before reaching our LT goal of RM1.66. Key supports are RM1.30

and RM1.25 (200D SMA). Cut loss level set at RM1.22

APB – Enjoying the upcoming biodiesel mandate growth story

APB’s business is very dependent on global investment expansion. APB has

been always focusing in the O&G, oleo-chemical, energy and petro-chemical sector.

With the Phase 1 trade deal being passed through for now, it should provide positive

outlook towards the abovementioned sector for expansions in the future, which could

translate to increasing demand for process equipment to provide new capacity.

Biodiesel mandate by Indonesian and Malaysian governments. The mandate

done by these governments is expected to boost capital expenditure for capacity in

this area, where APB has built a strong reputation as a process equipment supplier.

Also, management foresees parallel expanding demand for edible oil and other oleo-

chemical products, especially in the emerging economies.

Turnaround after 4 quarters of disappointing earnings. APB has turned around in

4Q19, registering net profit of RM2.3m (vs. 3Q19: -RM0.9m and 4Q18: -RM12.5m)

and management’s tone has shifted from “the global process equipment industry for

the current year remains highly challenging ” to “the outlook of process equipment

industry is showing some signs of improvement ”. This should provide confidence into

their earnings moving forward.



APB recent quarterly results (4Q18-4Q19)

Bloomberg

Telekom Malaysia: TM is the largest fixed telco in Malaysia.

TELEKOM MALAYSIA EARNINGS SUMMARY FYE Dec FY18 FY19E FY20E FY21E

Revenue (RM'm) 11,819 11,295 11,424 11,956 Core PATAMI (RM'm) 632 997 938 1,067 Issued shares (m) 3,765 3,765 3,765 3,765 EPS (sen) 16.8 26.5 24.9 28.3 P/E (x) 23.3 14.8 15.7 13.8 DPS (sen) 2.0 11.8 12.2 14.5 DY (% ) 0.5 3.0 3.1 3.7

Source: HLIB

Figure #4 APB Weekly chart: Bottoming up with improving technical indicators

HLIB Research, Bloomberg

Bottoming up as technicals are improving. We could have seen the bottom of the stock after the emergence of a significant trading volume in December. The indicator

is recovering and we anticipate trend change moving forward. The resistance will be set around RM0.47-0.55, with the LT target set around RM0.725. Support will be set around RM0.36-0.37, with a cut loss set around RM0.355.

Tech and telco – Short term trade truce and 5G shift to lift the sentiment

We see that Malaysia could be preparing for the 5G shift with the 5G test services

(expanded in selected states in Malaysia) and implementation of National Fiberisation

Connectivity Plan (NFCP), which will cost RM21.6bn from 2019-2023. In addition, the

short term trade truce may provide healthy trading interest to technology stocks.

TM – A prime beneficiary of 5G rollout Operational momentum to gain strength. HLIB maintains BUY call on TM with higher DCF-derived fair value of RM5.03. We are particularly positive on its cost optimization measures which now yielding impactful outcome. TM’s 9M19 core

PATAMI of RM811m (+54% YoY) exceeded expectations. HLIB has a BUY call on the back of DCF-derived fair value of RM5.03

5G rollout and NFCP beneficiaries. Leveraging on its extensive fibre reach, TM is definitely a prime beneficiary of 5G rollout. Other catalysts include the awards of NFCP and 5G airwaves.

Figure #5 TM Daily chart: A positive triangle breakout


Potential sideways consolidation breakout. After tumbling 29% from 52-wk high of RM4.68 (23 July) to a low of RM3.30 (10 Oct), TM has gradually trending upwards

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KRONO: Kronologi Asia Berhad (KRONO) is a regional enterprise data management (EDM) solutions prov ider, which specialises in data assurance and protection. Solutions and serv ices that Krono prov ides include:- (i) on-site and off-site data backup and storage, (ii) data recovery and restoration, (iii) technical support and (iv) consultancy on process improvement for data assurance, data protection and disaster recovery. KRONO has presence in Malaysia, Singapore, Thailand, Philippines, Indonesia, India, Hong Kong, Taiwan and China, with clients l ike Toshiba, Cebu Pacific, Jollibee Foods and etc…

KRONOLOGI ASIA BERHAD EARNINGS SUMMARY FYE Dec FY16 FY17 FY18 T12M Revenue (RM'm) 81.3 144.4 163.1 208.1 Core PATAMI (RM'm) 7.2 12.1 16.3 20.4 Issued shares (m) 462.1 462.1 462.1 462.1 EPS (sen) 1.5 2.6 3.5 4.4 P/E (x) 54.5 32.4 23.9 19.2 Source: Bloomberg

STRAITS: STRAITS is involved in oil bunkering i.e. mobile petrol kiosk for maritime industry by refuelling Marine Fuel Oil (MFO ~RM14bn market size in Malaysia) and Marine Gas Oil (MGO ~RM6bn market size in Malaysia) through own vessels to other ocean faring vessels and trading of oil -related products. It is one of the leading and licensed bunker operators in Malaysia with an estimated over 30% of the legal market share. Today, it has a spectrum of full licenses to prov ide bunkering serv ices at 15 ports in Malaysia (actively operating only 9 - Pasir Gudang

and completed its tail-end sideways consolidation on 20 Dec. As technical indicators are on the mend, share prices are likely to inch up further towards RM4.00

psychological barrier and RM4.15 (61.8% FR) levels before reaching our LT objective at RM4.36 (76.4% FR). Supports are pegged at 3.80 (lower BB) and RM3.63 (23.6% FR) levels. Cut loss is RM3.60.

KRONO – Growing bigger with the EDM trend

Sandz Solutions (Singapore) Ptd Ltd acquisition. The group had completed the

acquisition (IT infrastructure solution services provider) which came with a warranty

that Sandz would achieve a PAT of USD1.5m for FY19 and has already contributed

positively towards its earnings. Hence, we believe it would contribute to decent 4Q19

earnings that will be announced in Feb 2020.

Booming trend in cloud data storage, machine learning, automation, AI and data

analytics. In the US, web services provider like Google, Amazon and Microsoft are

still having decent double-digit growth. This may provide confidence for KRONO as an

EDM solutions provider to organically grow with its strong presence in Asia. Figure #6 KRONO Daily chart: Long term trendline breakout


Triangle breakout with strong volumes. KRONO has surged strongly above the

upper band of the triangle formation last week. With the positive technicals suggested by our indicator, we expect the next resistance will be located around RM0.93-0.96, with a LT target located around RM1.05. Support is set around RM0.80-0.82, with a

cut loss set around RM0.765. As KRONO has rallied strongly over the past few trading days, we believe traders should sell into rally. However, should there be any pullback towards the support near RM0.80-0.82, we opine it is good for accumulation.

O&G – Spiked in oil prices should lift trading sentiment in O&G stocks

With the recovering crude oil prices in 4Q19, and the recent spike following the US-Iran geopolitical tension, we believe it will contribute to decent trading momentum on O&G stocks. Also, energy index has rallied strongly by 12.5% in 4Q19 led by steady

Brent oil price above USD60.

STRAITS – Benefit from international regulations by IMO and rising bunker price From baby to adult. STRAITS widened its vessels from 2 vessels (max loading capacity of 1m litres/RM96m pa) in 2017 to 11 vessels (22m litres/RM2.1bn pa) in Jan 2020, serving both domestic and international markets in the MFO (High sulfur/very

low sulfur fuel oil which is used by commercial vessels such as container, cruise and general cargo ships) and MGO (very low sulfur oil used by all river and ocean going vessels/oil rigs) segments (from merely local market in the MFO category in 2017).

Huge untapped markets. Given the government’s intention to transform Malaysia into a premium bunker hub for vessels (estimated 80,000 vessels p.a.) passing

through the busy Straits of Malacca (an industry currently dominated by Singapore



Port, Tanjung Pelepas Port, Kuantan Port, Kemaman Port, Kuala Terengganu Port, Labuan Port, Miri Port, Lumut Port and Bintulu Port) and has international coverage to Hong Kong, China and Taiwan.

STRAITS INTER LOGISTICS BERHAD EARNINGS SUMMARY FYE Dec FY18 FY19E FY20E FY21E

Revenue (RM'm) 256 680 1,129 1,305 Core PATAMI (RM'm) 4.0 10.0 19.0 25.0 Issued shares (m) 650.7 650.7 650.7 650.7 EPS (sen) 0.6 1.5 2.9 3.8 P/E (x) 37.4 15.0 7.9 6.0 Source: Bloomberg

PEERS COMPARISON

Stocks Price EPS (sen)

Remark P/E (x)

STRAITS 0.230 2.9 FY20E 7.9 WPRTS 4.100 19.9 FY20E 20.6 BPORT 4.550 36.7 Trailing 12.4 MISC 8.270 42.8 FY20E 19.3 MAYBULK 0.505 N/A Loss N/M

Average 17.4 vs peers -55%

Source: HLIB, Bloomberg

with an estimated market size of c.RM80bn – based on the official data from Maritime and Port of Authority Singapore), the outlook is indeed promising for STRAITS.

Assuming Malaysia’s addressable market for the bunker business should be 25% of Singapore market size, it will be about RM20bn (MFO ~RM14bn/ MGO ~RM6bn) of oil bunkering market in Malaysia.

Undemanding valuation with LT technical target at RM0.335 (or 11.6x FY20 EPS). STRAITS is a beneficiary of rising crude oil prices as the bunker prices (MFO

and MGO) move in tandem with the oil prices. Currently, the stock is only trading at 7.5x FY20 P/E (57% below industry peers), supported by robust earnings growth of 84% EPS CAGR for FY18-21) amid soaring O&G activity in Malaysia and increasing

MGO demand from the planned implementation of International Maritime Organization’s (IMO) global sulphur cap in 2020, coupled with the t ighter enforcement on illegal bunkering activities (make up about 70% of the addressable market share of

RM20bn). Figure #7 STRAITS Weekly chart: LT uptrend intact; Trending above 200W SMA

Bloomberg

Figure #8 Marine Fuel Oil prices

Bloomberg

Uptrend intact. The stock has been trending above 200W SMA (RM0.205) and

higher to close at RM0.225 on 3 Jan after hitting a low of RM0.115 in June 2016.

Uptrend remains relatively intact to gain more grounds towards RM0.24 (100W SMA),

RM0.285 (2 Apr 2019 high) before reaching our LT objective at RM0.335 (upper

channel), supported by bottoming up indicators. On the flip side, failure to hold above

RM0.21 may trigger weakness towards RM0.20. Cut loss at RM0.19.

Construction: Likely to be flushed with more news flow

From Budget 2020, the development expenditure has increased by 2.4% YoY, which

could provide some cushion towards the construction sector. In addition, we anticipate

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800 Asia Fuel Oil 180cst FOB Singapore Cargo SpotAsia Fuel Oil 380cst FOB Singapore Cargo SpotLQM Petroleum VLSFO Bunker Fuel Spot Price/SingaporeLQM Petroleum VLSFO Bunker Fuel Spot Price/RotterdamLQM Petroleum VLSFO Bunker Fuel Spot Price/Fujairah



NADIBHD: Gagasan Nadi Cergas Berhad involved in several business segments, namely (i) construction - CIDB and PKK Grade G7 certified that allow the Group to tender for projects with unlimited value as well as Bumiputera allocated projects and competent in design & build, IBS and BIM, (ii) concession – to prov ide financing, design, development and construction, and maintenance of s tudent hostels and related facil ities at tertiary campuses, (iii) util ities – implementation of modern utili ty management applications such as Chilled Water Supply and Electricity Distribution to optimise and reduce overall electricity usage and (iv) property development.

GAGASAN NADI CERGAS BERHAD EARNINGS SUMMARY FYE Dec FY16 FY17 FY18 9M19 Revenue (RM'm) 227.9 212.5 300.1 215.4 Core PATAMI (RM'm)

73.6 49.8 32.6 20.9

Issued shares (m) 753.0 753.0 753.0 753.0 EPS (sen) 9.8 6.6 4.3 2.8 P/E (x) 2.9 4.2 6.5 -

Source: Bloomberg

PEERS COMPARISON

Stocks Price Trailing 12M

EPS (sen) Trailing 12M

P/E (x) NADIBHD 0.280 3.4 8.3 WIDAD 0.605 1.2 49.9 GFM 0.285 2.3 12.4 AWC 0.590 7.5 7.9 EDGENTA 2.860 18.3 15.6

Average 21.5 vs peers -62%

Source: Bloomberg

MATRIX: Matrix involves in property development and construction businesses primarily focus in Negeri Sembilan and Johor. Bandar Sri Sendayan (BSS) and Taman Seri Impian (TSI) are its flagship township projects.

MATRIX CONCEPTS HOLDINGS EARNINGS SUMMARY FYE Mar FY19 FY20E FY21E FY22E Revenue (RM'm) 1,046 1,098 1,355 1,443 Core PATAMI (RM'm) 218.2 235.4 265.3 281.1 Issued shares (m) 893.1 893.1 893.1 893.1 EPS (sen) 24.4 26.4 29.7 31.5 P/E (x) 7.8 7.2 6.4 6.1 DPS (sen) 12.8 12.8 14.4 15.3 DY (% ) 6.7 6.7 7.5 8.0 Source: HLIB

several news flow for mega infrastructure projects should be able to lift the

construction outlook and sentiment for 2020.

NADIBHD – Solid orderbook and recurring income

Solid orderbook of RM577.4m and tenderbook of RM1.4bn. NADIBHD’s orderbook

stood at RM577.4m (cover ratio of 2.1x of FY18’s construction revenue), which

consists a good mix of public and private projects (tertiary institution and hospitals)

and may provide earnings visibility until 2021.

Strong recurring income. In its facility management services and utilities segments,

NADIBHD has in total 4 20/30-year concession contracts, providing the Group with

strong foundation for sustainable earnings. These segments contributed c.61%

towards group PBT.

Undemanding valuations with 30% dividend payout policy. The stock is trading at

undemanding valuations at trailing-12-month P/E of 8.3x (62% below peers’ average)

and providing a healthy 30% dividend payout policy to reward shareholders.

Figure #9 NADIBHD Daily chart: Supported along RM0.27


Forming a good support around RM0.27. NADIBHD has breakout above RM0.27

with strong volumes and our indicators are suggesting that the uptrend is intact. We believe the stock could rally further towards RM0.32-0.34, followed by a LT target of RM0.38. Support will be set around RM0.275-0.28, with a cut loss set around RM0.27.

Property – Could be bottoming up as property stocks are near GFC valuations

Despite lack of fresh leads for upward rerating on this sector, the potential OPR cut in

1H20 may improve affordability (albeit marginally) of house ownership, especially in

the affordable housing segment.

MATRIX – Solid growth with superb dividend yield A safe bet. Despite the cautious property sector outlook, we like MATRIX, riding on affordable housing theme within its successful townships on the back of cheap land cost and sustained property sales. Also, it is supported by superb dividend yield of

6.7-8.0% for FY20-22 (one of the highest in the sector and in Bursa Malaysia), supported by undemanding FY20-22 P/E of 7.3x-6.1x and FD EPS CAGR of 9%.

Decent earnings visibility with HLIB RNAV-based TP of RM2.25. Management is cautiously optimistic that the company will report steady earnings growth (with full FY20 sales target at RM1.3bn), driven by its township in BSS and Chambers KL.

Earnings visibility will continue to be supported by new sales and unbilled sales of 1.2x cover. HLIB has a BUY rating with RNAV-based TP of RM2.25.



Venturing into Indonesian market. MATRIX partnered with one of the Indonesian

major property players (i.e. the Salim Group and the Agung Sendayu Group) to develop the Menara Syariah with GDV of ~USD250m in the Islamic Financial District located in Pantai Indah Kapuk 2 (PIK 2).

Figure #10 MATRIX Weekly chart: Pending a triangle breakout


Pending a triangle breakout. After locking within RM1.87-2.00 levels in the last six months, we believe the stock is at the tail-end sideways consolidation, as technical

readings are on the mend. A successful breakout above RM1.95 (downtrend line) will lift prices higher towards RM2.02 (200W SMA) and our LT objective at RM2.12 (61.8% FR). Supports are pegged at 1.87 and RM1.83 levels. Cut loss is RM1.80.

Hong Leong Investment Bank Berhad (10209-W)


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Stock rating guide

BUY Expected absolute return of +10% or more over the next 12 months.

HOLD Expected absolute return of -10% to +10% over the next 12 months.

SELL Expected absolute return of -10% or less over the next 12 months.

UNDER REVIEW Rating on the stock is temporarily under rev iew which may or may not result in a change from the prev ious rating.

NOT RATED Stock is not or no longer within regular coverage.

Sector rating guide

OVERWEIGHT Sector expected to outperform the market over the next 12 months.

NEUTRAL Sector expected to perform in-line with the market over the next 12 months.

UNDERWEIGHT Sector expected to underperform the market over the next 12 months.

The stock rating guide as stipulated above serves as a guiding principle to stock ratings. However, apart from the abovementioned quantitative definitions, other qualitative measures and situational aspects will also be considered when arriv ing at the final stock rating. Stock rating may also be affected by the market capitalisation of the indiv idual stock under rev iew.

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