Malaysia Strategy
When Opportunity Comes Knocking
Market Strategy
The 4.9% retracement in the FBM EMAS index since 1 Sep has been the biggest shock the market has seen all year. We reiterate our view that this is a temporary retracement and that the global economic recovery would not be derailed. Risks of a significant tightening in monetary policy have receded, while corporate earnings are on track to recover in 2015. Accumulate growth stocks on weakness.
FBM KLCI
Market Correction May Have Ended
Technical Review
There is a strong possibility that the market correction may have come to an end, as the “Bullish Engulfing” pattern was constructed after the FBM KLCI’s daily RSI retraced to the most oversold level since the bull market started in 2009, and the bullish reversal pattern also appears above the meaningful 1,769-pt support level – which was the previous lowest point in 2014. A subsequent breakout from the short-term downtrend line would be needed for a confirmation.
Datasonic Group (DSON MK, BUY, TP: MYR2.10)
Company Update
Potential Blip In Earnings
We hosted Datasonic in our Invest Malaysia event in Hong Kong recently. Meetings were well attended with representatives from over 15 local funds. During the event, management shared its potential initiatives going forward but cautioned that near-term earnings could come under pressure on slower-than-expected orders of MyKad. With that, we reduced our TP to MYR2.10 from MYR2.50 (25.0x FY16F P/E, 35.7% upside) following our earnings revision. Maintain BUY.
Auto
Sales Soften Ahead Of Axia and Iriz Launches
Sector Update
September auto sales were softer due to stringent financing approvals and in anticipation of the two new models launches by Proton and Perodua. We expect to see a rebound in total industry volume (TIV) in 4Q14 as deliveries of the two models pick up pace to meet the robust bookings reported since their respective official launches. We believe our 675,000-unit forecast is achievable. Maintain NEUTRAL.
