KUALA LUMPUR (Sept 1): AmInvestment Bank Research has maintained its end-2021 FBM KLCI target of 1,695 points based on 16 times 2021 forecasted earnings projection.
In a strategy note today, the research house said this was at a discount to its five-year historical average of 18 times to: mitigate the distortion arising from earnings spikes from glove makers, i.e. Top Glove Corp Bhd and Hartalega Holdings Bhd, in 2021 due to the abnormally high glove selling prices that are not recurring, and factor in a higher perceived market risk premium arising from a dynamic political landscape.
AmInvestment said that despite the sharp rally in recent weeks, the local market is still underperforming most of its regional and global peers on a year-to-date basis.
“All is not lost as we believe this could be seen in a positive light whereby it makes the local market an even more compelling recovery play for the remainder of 2021,” it said.
AmInvestment said it is optimistic that the world at large will enter into the late stage of the pandemic in the coming months, with more countries attaining herd immunity against Covid-19.
It said a synchronised global recovery is almost a foregone conclusion underpinned by the reopening of economies and international borders.
“While the highly contagious Delta variant has brought about new waves of infections around the globe, the hospitalisation rate has been kept under control as vaccinated Covid-19 patients typically develop mild Covid-19 symptoms.
“This alleviates the risk of a collapse of the healthcare system,” it said.
The research house said its top picks reflect names that are likely to benefit from the recovery of the domestic and global economies, i.e. Malayan Banking Bhd, Tenaga Nasional Bhd, CIMB Group Holdings Bhd, Telekom Malaysia Bhd, RHB Bank Bhd, Westports Holdings Bhd, Astro Malaysia Holdings Bhd, ATA IMS Bhd, Hibiscus Petroleum Bhd and Perak Transit Bhd.
“Sector-wise, we are overweight on automobile, cement, consumer, EMS, financial services, media, oil and gas, power, REITs, telcos, and transportation and logistics,” it said.
The FBM KLCI dipped 14.49 points or 0.9% to close at 1,586.89 on Tuesday.