BUYs
1. Resorts –The company has over RM4bn cash to embark on acquisitions and it will focus its attention on Macau casinos. P/B valuations are lower than Sars period. We believe the sell down due to the recent acquisition is overdone.
2. Telekom Malaysia – Imminent repayment by TMI and likely capital management to follow, in addition to its generous dividend yield of 8%.
3. YTL Power – We like YTL Power for its defensive earnings qualities, potential M&A opportunities given its huge RM7bn+ cash hoard and attractive dividend yields of close to 10% (including share dividends).
SELLs
1. IOI Corp – It is the proxy for the plantation sector given its size and liquidity. We are underweight on the plantation sector due to steep valuations and CPO price risks.
2. Maybank – The proposed 9-for-20 rights issue is the first cash call in 18 years and will dilute EPS by 25%. The RM6bn cash call is larger than expected and double the requirement.
3. SP Setia – The property sector is in for very tough times ahead due to dampened demand and surging cost pressures. SP Setia remains the key proxy for the sector.
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