Shariah-Compliant Securities Semi-Annual Review
Islamic Capital Markets Strategy
The Securities Commission (SC) is expected to publish its semi-annual review of Shariah-compliant securities at the end of November. Of the 169 stocks under our coverage universe, 121 are currently designated as Shariah-compliant. We have identified three stocks that we believe will be designated as non-compliant in the coming review. They are IOI Corp, Perdana Petroleum and SapuraKencana Petroleum.
Dayang Enterprise (DEHB MK, BUY, TP: MYR4.52)
Slowly Increasing Stake In Perdana
Company Update
Dayang has placed out the first tranche of 52.1m shares from the 82.1m proposed private placement. It has raised MYR175.6m in proceeds, which we believe will be used to buy more Perdana shares. Dayang currently owns 26.6% of Perdana’s shares, given the recent share price weakness. We trim our TP to MYR4.52 from MYR4.80 (a 53.7% upside) in light of the enlarged share base and a larger stake in Perdana. BUY.
Petronas Gas (PTG MK, NEUTRAL, TP: MYR21.98)
9M14 Core Net Profit Grows 10.4%
Results Review
Petronas Gas’ 9M14 results met expectations. We maintain our NEUTRAL call, forecasts and TP of MYR21.98 (a 0.8% upside). We believe the market has priced in near-term earnings catalysts of Petronas Gas, ie contributions from a new power plant in Sabah and a regasification terminal in Melaka. However, its long-term outlook remains favourable, backed by rising demand for gas.
Economic Highlights - Lower Oil Prices Unlikely To Derail 3.0% Fiscal Target In 2015 (Published 4 Nov 2014)
We estimate that for every USD10 per barrel fall in average crude oil prices, government revenues will be reduced by an estimate of MYR4.0bn. However, this will be mitigated by a corresponding reduction on the expenditure side through a lower fuel subsidy bill, with a potential reduction of MYR2.5bn in the fuel subsidy. We believe the Government will be able to adjust its expenditure to make up for any shortfall in oil revenue caused by a lower price of crude oil. As a result, we believe the Government’s fiscal deficit target of 3.0% of GDP in 2015 is unlikely to be derailed.
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