PEMERKASA slightly positive for market sentiment, says CGS-CIMB

Wednesday 24 Apr 2024

KUALA LUMPUR (March 18): The PEMERKASA stimulus package unveiled yesterday is slightly positive for market sentiment and will have some earnings impact on tourism plays, real estate investment trusts (REITs), Genting Bhd, small contractors and GHL Systems Bhd, according to CGS-CIMB Research.

In a strategy note today, CGS-CIMB analysts Ivy Ng, Michelle Chia and Nagulan Ravi said that based on their initial assessment, the stimulus package is broadly neutral for corporate earnings.

They said the incentives provided for the tourism sector in the form of a wage subsidy, exemption of tourism and service taxes and others will help lower operating cost for hotels and mall operators, benefitting REIT players and Genting.

They also opined that the higher allocation for small-scale construction projects at RM5 billion from RM2.5 billion will benefit small contractors.

They added that the government plans to raise the allocation from RM150 million to RM300 million for e-wallet credit under the e-Belia programme, which will drive e-wallet penetration and total processing value (TPV) for e-wallet service providers like GHL Systems.

“We gather that the 10% discount offered on electricity bills, which has been extended to April-June 2021 from January-March 2021, for six sectors could cost RM135 million and Tenaga Nasional Bhd's (TNB) contribution will be limited to a maximum of 10% of the total, which works out to only RM13.5 million, minimal relative to TNB’s earnings base of RM5 billion for FY21,” they said.

The analysts kept to their FBM KLCI target of 1,759 points (forward price-earnings [P/E] of 16.2 times).

According to them, there were three key positive takeaways from Prime Minister Tan Sri Muhyiddin Yassin's speech that they believe will boost market sentiment.

Firstly, the government plans to achieve herd immunity among the people by December 2021, instead of the first quarter of 2022 (1Q22).

It was also shared that over 5.6 million people had registered for vaccination and over 300,000 of them had been vaccinated so far.

Secondly, the government will likely not impose the nationwide and statewide movement control order (MCO) anymore to contain Covid-19.

It plans to use a more targeted approach, based on locality, focusing on related clusters.

Thirdly, it will consider allowing interstate travel in stages and may establish a special green lane for border travel that involves air transport.

“These, coupled with a steady decline in new Covid-19 cases in Malaysia to 1,219 [yesterday] from a peak of close to 5,700 new cases, are positive as it suggests that the country is on a recovery path, and this will lower future potential corporate earnings risk due to Covid-19 disruption,” they said.

Yesterday, Muhyiddin unveiled the RM20 billion stimulus package, dubbed PEMERKASA, of which RM11 billion is a direct fiscal injection. The stimulus package is the second of 2021 and the eighth stimulus package since the Covid-19 crisis began.

Edited BySurin Murugiah

Text Size