Relaxation of MCO, vaccine good for market

CGS-CIMB rsearch: Our top-three stock picks continue to be Inari-Amertron Bhd, Public Bank Bhd and Telekom Malaysia Bhd (TM). ”

PETALING JAYA: The relaxation of the movement control measures will be viewed positively by the market as it 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 yesterday.

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

The government had earlier indicated it expects 2.7 million doses of the Pfizer vaccine to arrive in the first-half of this year.

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

“We are keeping our FBM KLCI target of 1,759 points (12-month forward price-to-earnings of 16.2 times). Our top-three stock picks continue to be Inari-Amertron Bhd, Public Bank Bhd and Telekom Malaysia Bhd (TM), ” it said.

It has an “add” call for Inari-Amertron 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 earnings per share (EPS) compounded annual growth rate of 32% for financial year 2020 (FY20)-FY23, ” it said.

As for Public Bank, it has an “add” call with a target price of 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 33 basis points in FY20 was the lowest in the sector.

The research house said it has an “add” call also for TM, with a target price of RM6.80. TM is its top Malaysian telco pick due to its robust estimated FY21/22/23 core EPS growth (+15%/+9%/+21% year-on-year), driven by higher Internet and data services revenue, plus cost containment.

“Its forecast FY21 enterprise value over 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 announced that Selangor, Johor, Penang and Kuala Lumpur will exit the movement control order (MCO) and enter the conditional MCO (CMCO) effective today 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 the Covid-19 vaccine to inoculate around 398,955 people (two doses required per pax). In total, it has secured access to 66.7 million doses of Covid-19 vaccines from five producers, ” CGS-CIMB Research said.

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