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Thursday, October 31, 2013

AmResearch: Great opportunities for stock picking post-Budget 2014

Published: Monday October 28, 2013 MYT 12:24:00 PM 
Updated: Monday October 28, 2013 MYT 12:27:29 PM

KUALA LUMPUR: AmResearch sees great opportunities for stock picking post-Budget 2014 while it reaffirms the fair value for the FBM KLCI at 1,770 for 2013.

In its Budget 2014 market strategy on Monday, it said without a turnaround in the earnings revision cycle, it doed not believe that the liquidity-driven rebound can hold in the face of elevated forward price-to-earnings (P/Es) of between 16 times to 17 times.

“We reaffirm our KLCI fair value of 1,770 for this year, and 1,880 for 2014. That said, post-Budget 2014 still provides some great opportunities for stock picking,” it said.

AmResearch said as for the Goods and Service Tax (GST) of 6% to be implemented on April 1, 2015, replacing the sales tax of between 5% and 10%.

“Cellular players may pass down taxes to consumers, given the elimination of the current 6% service tax – which is currently borne by the celcos for prepaid users,” it said.

“DiGi is the biggest beneficiary from this potential move given that it has the largest proportion of prepaid revenue compared to Celcom and Maxis. We upgrade DiGi to Buy from Hold with a higher fair value of RM5.70 a share,” it said.

AmResearch expects the Real Property Gains Tax (RPGT) to result in some moderation in speculative buying but the impact is not expected to be significant because RPGT is an exit tax. More importantly, the regulatory overhang is now removed, it said.

Under the Budget 2014, the RPGT would be raised be raised to 30% for a holding period within three years, 20% in Year Four and 15% in Year Five. 

The research house said it is “BUYers of Mah Sing, IJM Land and E&O”.

AmResearch expects E&O’s net asset value to more than triple to RM4.61 a share upon receiving regulatory approvals to start its reclamation for STP II.

Banks are no longer allowed to provide final funding for projects involved in the developers interest bearing scheme (DIBS).

However, the research house said this was already widely expected, with minimal impact as the loans from DIBS generally contribute about 2% to 3% of total loans.

It said Public Bank was its only BUY.

As for IJM Corp. it looked set to leverage on the rollout of two major projects, namely the West-Coast Expressway and the Kuantan Port expansion.

“IJM is our top pick in the sector,” it said.

As for Hock Seng Lee, it expected it to benefit as the Sarawak infrastructure agenda continues.

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