Analysts pick budget beneficiaries and losers

Published: Tuesday October 29, 2013 MYT 12:00:00 AM 

Updated: Tuesday October 29, 2013 MYT 9:16:22 AM

BY LEONG HUNG YEE

Both airport operator and airlines stand to benefit. – EPA

PETALING JAYA: The construction, aviation, brewery, tobacco and telecommunication industries are the notable Budget 2014 winners, according to analysts.

An analysis of the potential corporate beneficiaries and losers by research houses following the annual tabling of the budget suggested the losers include the property and consumer industries.

Maybank Investment Bank Bhd said in a report that the budget had a “higher-than-expected hike in real property gains tax (RPGT); doubled the minimum value of property that can be purchased by foreigners to RM1mil from RM500,000; and prohibited developers interest-bearing scheme (DIBS).

Property stocks came under selling pressure in a knee-jerk reaction with Mah Sing Group Bhd lower by six sen at RM2.35, UEM Sunrise dropped 10 sen to RM2.50,Glomac Bhd slid three sen to RM1.16 and Tropicana Corp Bhd lost three sen to RM1.45.

Kenanga Investment Bank Bhd research head Chan Ken Yew believed Budget 2014 was generally neutral on most industries apart from positive for certain industries. “These sectors are building materials and construction, education, logistics and transportation including aviation, multi-level marketing, and telecoms especiallyTelekom Malaysia Bhd.

“As there is no hike in taxes for the brewery sector, we also deem this to be a positive for the sector,” he said.

Chan saw a clear-cut winner – Censof Holdings Bhd – with the implementation of the goods and services tax (GST) as it was one of the major accounting solutions providers for government agencies.

Meanwhile, Maybank said the brewery and gaming sectors were spared from tax hikes despite the pre-budget 14% increase in excise duties on cigarettes on Oct 1.

Analysts said the Government had “reaffirmed” its support on major infrastructure and investment projects as there was no mention of any deferment or rescheduling.

The consumer sector may also be hit when GST comes into force in 2015 as consumer sentiment may be dampened due to higher selling prices.

RHB Research analyst Ngo Siew Teng said retailers were likely to be affected by GST since most goods are currently not taxed. “This means consumers would need to pay a tax on top of the original price. Sales volume might be lower in the short term due to the higher selling prices which may potentially weaken margins,” said Ngo.

AmResearch said Petronas’ Refinery and Petrochemical Integrated Development project were among a few oil and gas projects that were reafirrmed during the budget speech, although guidance on its latest timeline was not given.

The West Coast Expressway (WCE), Kuantan Port expansion and Gemas-Johor Baru electrified double tracking are among the major projects set to be implemented in 2014.

“IJM Corp has emerged as a major beneficiary of the budget as it is a frontrunner for two major projects highlighted – WCE and Kuantan Port expansion. IJM’s order book is set to almost triple to around RM8bil with the imminent implementation of both jobs next year,” the AmResearch analysts said.

On the aviation sector, Kenanga’s Chan said the announcement of the RM700mil allocation for a new air traffic management centre came as a surprise but the RM312mil allocation to upgrade several airports was well within expectation.

“Generally, both the airport operator and airlines would benefit from the centre as it would reduce the turnaround time for airlines and the airport could handle more landings.”

CIMB Investment Bank Bhd analyst Raymond Yap retained the “overweight” rating on the aviation sector as the largest market capitalisation stock, Malaysia Airports Holdings Bhd (MAHB), remained its top “outperform” pick. “MAHB stands to benefit the most from this budget as it pays the highest taxes and will gain from a 1 percentage point drop in the corporate tax rate. The Government’s proposed air traffic control centre will raise MAHB’s long-term earnings potential.

“MAHB may also try to lobby for the equalisation of tariffs for KLIA and KLIA2 to be embodied in the new National Aviation Policy,” Yap said.