CGS-CIMB: Take shelter in defensive sectors or high dividend yielders

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KUALA LUMPUR (March 26): CGS-CIMB Research said its scenario analysis reveals a KLCI downside in a bear market ranging from 913 to 1,300 points versus its current target of 1,449 points for end-2020.

In a strategy note March 25 to analyse the potential impact on Malaysia from the extension of the movement control order (MCO), the research house said it expects most companies that are not able to operate to incur losses as revenue achieved during this period is unlikely to be able to cover operating costs to sustain the business.

“The sectors least affected could be telcos, utilities, plantations, gloves, and F&B players, like Nestle (M) Bhd and Fraser & Neave Holdings Bhd.

“We expect tourism-related sectors like gaming (casinos and NFOs), airlines, airports, theme park operators, entertainment outlets and restaurants, as well as manufacturers that are not allowed to operate and retailers to be the most vulnerable,” it said.

CGS-CIMB Research said it was in the midst of adjusting its earnings forecasts to reflect the impact from the MCO.

“The exact impact on earnings is hard to measure at this juncture as it hinges on the success of containment strategies globally.

“We keep our end-2020 target of 1,449 points (based on forward P/E of 14.6x) for now pending a review of our earnings estimates.

“We advocate investors take shelter in defensive sectors like rubber gloves, healthcare, utilities and telcos, or high dividend yielders during these challenging and uncertain times,” it said.

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