The Malaysian market is not only hit by negative sentiments from US-China trade tantrums but also the impending 14th General Election. US and China are both important trading partners for Malaysia and the electrical & electronic (E&E) appliances sector is also a major contributor to Malaysia’s export. Thus, the market is extremely concerned about the development of the US-China trade tension.
In spite of that, RHB believes that there are some stocks that have been caught up in the sell-off, including domestic-centric stocks. RHB notes that the domestic-centric stocks should not be directly impacted by a contained trade spat. Here are four Malaysian stocks that are immune to a trade war and have been oversold by the market.
- Genting Malaysia
Genting Malaysia is one of the best defensive picks amidst current US-China trade friction for its casino operations’ earnings resiliency. RHB believes that it is now a good time to accumulate on weakness before the opening of its 20th Century Fox outdoor theme park by end-2018. The 20th Century Fox outdoor theme park will be a major visitation re-rating catalyst as it could then spur patronage to its hilltop casinos to improve profitability in the long run.
BUY, TP RM5.94
- Mynews Holdings
Mynews Holdings (Mynews) is not likely to be affected by any trade friction, given that it is largely driven by the domestic market. All of Mynews’ convenience store outlets are based in Malaysia and all of the products are sourced locally. According to RHB, Mynews is now attractively priced. Its attractive value proposition comes from exciting earnings growth and ambitious multi-pronged expansion plans. Rising demand for convenient ready-to-eat (RTE) food will help support Mynews food manufacturing plant and outlet expansion plans to underpin its earnings growth.
BUY, TP RM2.03
- Petron Malaysia
Petron Malaysia focuses on the refining and distribution of petroleum products, concentrating largely on the Malaysian domestic market. Petron’s products (largely gasoline and diesel products) are mainly sold in Malaysia. The pricing of its product is pegged to weekly changes in Means of Platts Singapore (MOPS). Thus, a trade war would not affect the group’s business directly.
Petron has been highlighted as a stock to own partly due to its recent selloff. Petron has been oversold on overblown concerns of weaker refining margins. However, RHB believes that even after factoring in significantly weaker margins, Petron is still priced attractively.
BUY, TP RM10.70
The trade war is unlikely to dampen China’s One Belt One Road ambition. On the contrary, it might even spur China to drive the development of the One Belt One Road. High impact public transportation projects in Malaysia include the Mass Rapid Transit Line 3 (MRT3), KL-Singapore high-speed rail (HSR) and the East Coast Rail Link (ECRL).
Among construction players in Malaysia, WCT was one of only a handful of contractors that secured work packages for both the MRT2 and Light Rail Transit Line 3 (LRT3). Thus, RHB views WCT as a good proxy to the burgeoning government expenditure for domestic public transportation projects. Despite an outstanding order book of RM5.6 billion and forecasted 3-year earnings CAGR of 21 percent, WCT stock is still underappreciated by the market.
BUY, TP RM2.18