Relaxation of MCO, vaccination positive for market


Public Bank is its top pick for Malaysian banks as the research house believes it is the most defensive against the credit risks arising from the Covid-19 outbreak. Its credit charge-off rate of 33bp in FY20 was the lowest in the sector.

KUALA LUMPUR: The relaxation of movement control measures will be viewed positively by the market as this reduces corporate earnings risk concerns, CGS-CIMB Equities Research says.

“The start of the Covid-19 vaccination drive is also positive as this could help reduce the risk of new infections over time.

"We are of the view that a successful vaccination programme will re-rate and shift interest to stocks that will benefit from the economic recovery, ” it said in its strategy report on Thursday.

CGS-CIMB Research said investors will likely closely follow the arrival of vaccine supplies and achievement of vaccination coverage set out under each phase of the programme against its target.

The government earlier indicated it expects 2.7 million doses of the Pfizer vaccines to arrive in 1H21.

“We believe a successful execution of the National Covid-19 immunisation programme will be key to lifting market sentiment.

“We keep our KLCI target of 1,759 (12 months forward price-to-earnings of 16.2 times). Our top three stock picks continue to be Inari, Public Bank and Telekom Malaysia, ” it said.

It has an add for Inari-Amertron Bhd with a target price of RM3.90.

CGS-CIMB Research expects Inari-Amertron’s earnings growth momentum to continue, on the back of its new SiP line capacity expansion and robust demand for new 5G smartphones.

"We project a three-year EPS CAGR of 32% for FY20-23F," it said.

As for Public Bank, it has an add with TP RM5.20. Public Bank is its top pick for Malaysian banks as the research house believes it is the most defensive against the credit risks arising from the Covid-19 outbreak. Its credit charge-off rate of 33bp in FY20 was the lowest in the sector.

The research house said it has an add also for Telekom Malaysia, TP RM6.80. Telekom is its top Malaysia telco pick due to its robust FY21F/22F/23F core EPS growth (+15%/+9%/+21% yoy), driven by higher Internet and data services revenue, pluscost containment.

"Its FY21F eneterprise value/ operating free cashflow (EV/OpFCF) is also at 0.8 standard deviation below its 13-year mean and at a 22% discount to the Malaysian mobile average," it said.

On March 2, the government Malaysia announced Selangor, Johor, Penang and Kuala Lumpur will exit the movement control order (MCO) and enter the conditional MCO (CMCO) effective March 5 (Friday) till March 18.

During this period, inter-state travel remains prohibited; while inter-district travel will be allowed in all states, except Sabah.

Meanwhile, Malaysia received its first 312,390 doses and the second batch of 185,520 doses of the

Covid-19 Pfizer-BioNTech vaccine on Feb 21 and 23. The first batch of the Sinovac vaccine arrived on Feb 27, which will be processed into more than 300,000 doses.

On March 2, Malaysia granted conditional approval for the use of vaccines made by UK firm AstraZeneca and China's Sinovac. It had earlier granted conditional approval for the Pfizer vaccines.

“In total, we estimate Malaysia currently has 797,910 doses of Covid19 vaccine to inoculate around 398,955 people (two doses required per pax). In total, it has secured access to 66.7m doses of Covid-19 vaccines from five producers, ” CGS-CIMB Research said.

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