Sectorial stocks to drive Malaysian equity scene

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KUALA LUMPUR: The Malaysian equity scene is set to be driven by stocks in industries including sectors such as technology (tech), construction, building materials, oil and gas as well as the robust insurance sector.

In a recent interview with The Borneo Post, HwangDBS Investment Management Bhd (HwangDBS IM) chief executive officer Teng Chee Wai said favoured equity portfolio stocks of the company were cyclical in nature.

Teng, who is also HwangDBS IM’s executive director, pointed out that the technology space was set to witness a hive of activities going forward.

“We think that the first quarter will be a great time for the tech sector. We particularly favour Unisem (M) Bhd which is trading at six times price earnings when the peers in the industry are trading at between 10 and 15 times multiple in the region. We like the tech space and think there will be a lot of momentum and orders coming through,” he opined.

“We also like the construction sector and building material sectors because under the Greater Kuala Lumpur plan, the government will probably incur a great deal of spending on construction and subsequently there will be an increase in demand for building materials,” he added.

The largest independent asset management company preferred cement over steel as cement stocks had performed very well last year. It also favoured some of the big construction stocks as it felt that given the huge jobs to be awarded out the capacity within the industry would be very much utilised so there was enough to go around for everyone.

“The other sector was oil and gas and we have been building up position in oil and gas. There is a lot of dynamic playing out in this sector and our favourite is Dialog Group Bhd (Dialog) that is something that we have been holding on to over time.

“We think that with the opening up of the marginal oil fields for the local players on condition that they tie up with the big foreign players indeed gives room for a lot of the oil and gas companies to skill up in their business, so that is the big excitement of the industry as it develops.

“Unfortunately for us, a lot of the oil and gas players in Malaysia are too small. They need to scale up or consolidate and have a bigger balance sheet to play the game so we hope some consolidation soon,” Teng added.

Favoured counters were Dialog, Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), SapuraCrest Petroleum Bhd and Dayang Enterprise Holdings Bhd in the case of Sarawak with speculation that it would secure another RM1 billion contract soon.

Other stocks included Media Prima Bhd, something that HwangDBS IM had held on for a long time. He observed that the new team since the consolidation of New Straits Times Press (NSTP) was doing a good job to turn around NSTP especially the Malay paper, which had witnessed increased advertisement space aimed at the lower end group which was a great strategy, according to him.

“We also like Allianz Malaysia Bhd – a portfolio that we have held for many years – again I am a fan of  owning insurance company stocks, as I am from that background. I love the insurance business which is a very long term business.

“Once you put in the right formula, you will never stop growing. It just keeps saving your money for your children’s education, retirement, coverage, protection till death and I have seen that over the years despite the comment that Malaysians could be over-insured, the penetration is very high.

“I have seen insurance companies’ premiums growing year after year. Currently Allianz yield is not great, but once it sorts out its tax issues it will be able to pay great dividends over time,” Teng concluded.