KUALA LUMPUR (June 17): Tenaga Nasional Bhd (TNB), Yinson Holdings Bhd, Pentamaster Corp Bhd, Top Glove Corp Bhd, Bermaz Auto Bhd (BAuto) and DRB-Hicom Bhd are CGS-CIMB Research’s top shariah picks for the second half of the year (2H20).
“We are of the view that shariah investments could outperform conventional investments in 2020, simply because the gloves have done well and the sectors that are typically shariah-compliant are quite defensive, versus those in the conventional [areas] like banks which tend to be a bit more cyclical,” said CGS-CIMB head of research Ivy Ng.
Besides rubber gloves, other sectors picked by the CGS-CIMB for 2H20 are oil and gas (O&G) and healthcare.
Ng said among big cap stocks (market capitalisation exceeding RM2 billion) that have been issued “Add” calls by the research house, Top Glove, Dialog Group, Yinson and DRB-Hicom have an upside of 29% and above.
Top Glove has an upside of 46%, Dialog an upside of 43%, Yinson 47% and DRB-Hicom 29%.
Ng was speaking in the Shariah Investing Virtual Conference 2020, organised by Bursa Malaysia Bhd and CGS-CIMB.
She said the research house is maintaining its end-2020 forecast of 1,449 points for the FBM KLCI, based on price-to-earnings ratio of 16 times.
“Based on historical data, we observe that the KLCI’s performance tends to be mixed in June, with an average of month-on-month return of 0.3% over the past 10 years, but an average monthly return of 0.6% over the past 40 years.
“In terms of the first-quarter corporate earnings, 87 companies or 66% of the 132 companies CGS-CIMB tracks reported their earnings, with 17% posting better than expected results, and 40% of companies reporting results that were below expectations,” she added.
Ng said investors will be tracking news flow on the Covid-10 pandemic, the U.S.-China trade war, protests in the U.S. and crude oil prices.
“Given the strong gains in the past two months, concerns over the potential second wave of Covid-19 cases, as well as rising political uncertainty, we do not discount profit-taking, which may lead to the pullbacks in the gains in June,” she said.