JF Apex Research: "Over a medium to long term outlook, we are cautious on the FBM KLCI performance as it still treads below the 100- and 200-day moving averages at 1,650 and 1,700 points respectively."
KUALA LUMPUR: Kenanga Investment Bank Research has lowered its targets for the FBM KLCI for end-2016 and for next year after the disappointing corporate results in the quarter ended Sept 30, 2016 and lower earnings ahead.
In its market strategy released on Friday, it reduced its end-2016 KLCI target to 1,682 from 1,715 while end-2017 target was trimmed to 1,732 from 1,755 previously.
“It continued to be another disappointing quarter with nearly one-third of the results missed expectations. This reinforced our earlier view that a broad-based earnings growth story is still missing.
“The underperformers came from the power utility, oil & gas, gloves, gaming as well as media sectors. We now expect FBM KLCI earnings growth of -4.0%/+6.0% in FY16/FY17 from RM+1.6%/7.2% previously,” it said.
Kenanga Research said as the KLCI was trading near its ideal "buy on weakness" levels of less than 1,625, it believed the underlying reward-to-risk consideration was getting attractive.
It also released a report on structured warrants where it sees FGV-C14 (TP: 16.5 sen; stop loss: 6 sen) as a leveraging exposure to FGV (market perform; TP: RM2) which appears poised for a relief-rebound from the recent heavy sell-down.
“This is on the back of FGV being an election play while there is potential earnings turnaround from the recent finances woes,” it said.
A near-term recovery towards FGV’s R2 of RM1.81 could translate to 66% gain in FGV-C14 to 17 sen.
Kenanga Research also issued a study visit note from its recent visit to Australia of three Malaysian developers -- EcoWorld (Outperform; TP: RM1.58), SP Setia (Outperform; TP: RM3.53) and UEM Sunrise
(Underperform; TP: RM1) with their projects there.
“Generally, property house prices in Australia has risen 2% on-quarter in 2Q16, from a 0.2% decline in 1Q16. Overall, these three Malaysian developers have fared well in terms of take-up rates for most projects that were launched over the last few years.
“They are aggressively looking for land bank particularly in Sydney and Melbourne. We keep our neutral rating on the property sector,” it said.
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