12MP is long-term positive but lacks near-term market excitement — HLIB Research

12MP is long-term positive but lacks near-term market excitement — HLIB Research
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KUALA LUMPUR (Sept 28): Hong Leong Investment Bank Research (HLIB Research) said the targets and measures of the 12th Malaysia Plan (12MP) are broadly positive in the longer term, but are unlikely to cause much immediate market excitement as this still hinges on near-term economic reopening momentum.

In a report on Tuesday, the local research house said the 12MP’s targets seem realistic but it is cognisant there could be longer-term implementation risk, noting that "manoeuvring the next half-decade in an endemic won’t be a walk in the park". The 12MP was tabled in Parliament by Prime Minister Datuk Seri Ismail Sabri Yaakob on Monday.

HLIB Research highlighted some of the notable market or sector implications:

  • Foreign labour. The long-term goal for the national workforce to be limited to a maximum 15% foreign labour. Sectors that are currently foreign labour-dependent are construction, electronics manufacturing service, gloves, plantation and, to a lesser extent, technology.
  • Bumiputera ownership. To introduce a safety net for sustainable bumiputera equity ownership, where bumiputera companies or shares are only sold to other bumiputera consortiums, companies or individuals. Holdings and disposals of ownership in bumiputera companies to be regulated by related ministries and agencies.
  • Construction. Headline development expenditure of RM400 billion is a 61% increase from the 11MP's sum of RM150 billion. While positive, this typically translates into smaller to mid-sized jobs as megaprojects tend to be funded “off-budget”. There is also an absence of widely anticipated megaprojects like the Mass Rapid Transit 3 (MRT 3).
  • Property. The focus here is mainly on increasing supply of affordable housing (a target of 500,000 homes under the 12MP) and access to financing for buyers. This push should be beneficial for developers focusing on the affordable housing space (such as Matrix Concepts Holdings Bhd and Lagenda Properties Bhd).
  • Carbon neutral. Malaysia aims to achieve carbon neutrality by 2050. This should see more investments in renewable energy (players in this space are Cypark Resources Bhd, Solarvest Holdings Bhd, Samaiden Group Bhd, Pekat Group Bhd and Ipmuda Bhd — all not rated), while conventional power generation players (Tenaga Nasional Bhd [TNB] and Malakoff Corp Bhd) have been restrategising to reduce investments in coal plants and reinvest in renewable energy. Petronas Gas Bhd (PetGas) should benefit from potential higher gas utilisation (in replacement of other carbon fuel energy). There is also a push for more electric vehicles (EVs) — with original equipment manufacturers already offering EVs and hybrid EVs, include BMW (Sime Darby Bhd), Mercedes (DRB-Hicom Bhd), Porsche (Sime Darby), Volvo (Sime and MBM Resources Bhd), Honda (DRB-Hicom), Hyundai (Sime Darby) and Nissan (Tan Chong Motor Holdings Bhd). Both Toyota (UMW Holdings Bhd) and Mazda (Bermaz Auto Bhd) are expected to start introducing hybrid EV models in the near term.

HLIB Research noted that its end-2021 FBM KLCI target is maintained at 1,620 points (15.7 times price-earnings on mid-2022 earnings per share). “We continue to see near-term upside bias to the market on the back of a rather fast-tracked economic reopening, effectively putting the country in Phase 4 of the National Recovery Plan by late October or early November.”