Market consolidation to spur companies

CGS-CIMB Research has trimmed its target price for Genting Malaysia to RM3.25 from RM3.30 previously.

PETALING JAYA: In anticipation of a market consolidation phase, UOB Kay Hian (UOBKH) Research has opted for companies, which will declare handsome dividends in the upcoming results season, to be its top alpha picks in February.

The research house said it will focus on high-yielding stocks with back-ended dividends as well as anticipated special dividends to deliver the alpha total returns.

Its alpha “buy” picks for February include Genting Malaysia Bhd, Hap Seng Plantations Holdings Bhd, Malaysia Airports Holdings Bhd (MAHB), My E.G. Services Bhd (MyEG), Yinson Holdings Bhd and British American Tobacco (M) Bhd (BAT).

The new additions are BAT and Hap Seng Plantations for their appealing respective dividend yields, said UOBKH Research in its latest strategy report.

The research house is expecting Hap Seng Plantations to declare a yield between 7% and 8% at the upcoming results season, on top of BAT itself being a dividend yielding counter. Genting Malaysia is also anticipated to announce a dividend yield of 4.5% or higher, it added.

Other dividend stocks that UOBKH Research has recommended for February are telecommunications firm TIME Dotcom Bhd and media giant Astro Malaysia Holdings Bhd, whereby the ringgit’s recovery will eventually provide a significant operational cost relief for the latter.

The research house also said it will continue to expect good near-term upside for the beneficiaries of China’s border reopening as well as the oil and gas (O&G) floating, production storage and offloading players.

Meanwhile, UOBKH Research noted its alpha picks in January were off to a strong start, having outperformed the FBM KLCI.

“All five of our alpha picks generated positive returns, with the portfolio gaining 8.6% month-on-month (m-o-m) in January, outperforming the FBM KLCI which was down 0.7% m-o-m,” it pointed out.

Among its picks for January, the research house said MAHB took top spot with a 10.5% appreciation in its stock price, followed by Yinson with a 10.2% rise and MyEG whose counter went up by 7.6%

The research house noted “The FBM KLCI’s modest 0.7% loss in January lagged the regional bourses’ rise, partly reflecting Jan 23’s foreign equity outflow of RM348mil.

“The market undertone remained cautious presumably due to lingering political uncertainties, with the state election the next test for the unity government.”

Overall for the first month of 2023, the outperforming sectors were selected oil and gas subsectors, technology, building materials, gaming and real estate investment trusts, while the biggest losing sector was gloves.

Zooming on its February selections, UOBKH Research analysts Vincent Wong and Jack Goh opined that with the tangible easing of lockdown restrictions globally, Genting Malaysia is well-positioned for strong gross gaming revenue and earnings recovery momentum from the fourth quarter of 2022 (4Q22) onwards.

This is driven mainly by a meaningful influx of international visitorship to Malaysia and Resorts World Genting.

They highlighted Genting Malaysia is one of the cheapest casino stocks globally. It is expected to provide a high dividend-per-share payout in 2022 and 2023, yielding 5.3% to 7.2%, putting the counter among the top-yielding listed companies on Bursa Malaysia.

Hap Seng Plantations, meanwhile, is expected to see strong cash flow generation on the back of high crude palm oil prices. The group is one of the most cost efficient plantation companies among its Malaysian peers.

“The company is also in a strong net cash position, translating to 62 sen per share as of Sept 2022,” said UOBKH Research analysts Leow Huey Chuen and Jacquelyn Yow.

They also predict an upcoming strong second interim dividend from Hap Seng Plantations, which may be equivalent to a yield of about 7% to 8%.

Notably, the research house removed Press Metal Bhd from its alpha picks in February, not because the counter has underperformed, but precisely because the aluminium group has consistently outperformed the market in recent weeks.

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