On Our Portfolio. Better Days Ahead. On Our Portfolio

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On Our Portfolio

09 October 2017

On Our Portfolio

Better Days Ahead

By Teh Kian Yeong l tehky@kenanga.com.my

4Q is seasonally a good quarter and coupled with the strengthening of MYR against the

greenback as well as improved crude oil prices, we see buying opportunity in quality stocks

following the recent price weakness. This is especially true as the FBMKLCI is now trading at

6% discount to the consensus’ index target of 1,870, against our target of 1,830. As for

potential theme plays, the recent run-up in commodities prices could revive market interest

for metal as well oil & gas stocks. Technically-speaking, key resistance levels for the

benchmark index stands at 1,783/1,796 with immediate support levels of 1,755/1,750 against

our ideal Buy on Weakness levels of 1,750. For portfolio performance-wise, despite the

falling barometer index, all our portfolios, including the two MPT portfolios posted monthly

gains in September. Both THEMATIC and MPT MAXIMUM RETURN Portfolios continued to be

the top monthly as well as YTD top gainers for their respectively categories.

Better days ahead. We are now at the beginning of the seasonally stronger quarters of 4Q and 1Q, which could be a buying opportunity due to the recent price weakness. On the marco front, MYR has stabilised at c.4.20-level against the USD while crude oil prices also staying above the USD55/bbl-level as these are the two main factors driving the overall market sentiment domestically. On the flipside, the recent hawkish Feb statement coupled with the on-going geopolitical tension could place some pressure on the market. Technically, a bullish reversal signal was generated earlier last week, with the new highs on Wall Street and improved sentiment in the key Asian markets. The overall technical picture suggests that bargain hunting activities are likely to emerge in the weeks ahead. The resistance levels to watch are at 1,783/1,796 while support levels are at 1,755/1,750. Our ideal “Buy on Weakness” is 1,750 with our end-2017 Index Target of 1,830.

A lacklustre month in September. The local market started the month of September with a positive note. However, the on-going geopolitical friction between US and North Korea turned investors cautious on their investment decision. Not helping was foreign investors selling local stocks in second half of the month, which dragged the overall sentiment southbound, following the Fed’s announcement that it would shrink its balance sheet by USD4.5t through quantitative tightening, the reverse of QE in October. This poses risk to emerging markets like Malaysia. This led to a 2nd consecutive month of foreign net outflow, totalling RM737m in September against RM242m net outflow in the previous month. But, YTD foreign flows were still positive at RM9.04b. On the positive note, MYR remained healthy hovering at 4.20 per USD-level while crude oil prices were also on an uptrend which was maintained at USD55 to USD60 per bbl and prompted investors to snap up oil & gas stocks. At the end of the month, FBMKLCI closed 17.58pts or 0.99% lower to settle at 1,755.58 which was attributed to the declines in CIMB (-11.01%), GENM (-7.71%) and IHH (-10.18%). On Wall Street, despite the geopolitical issue with North Korea, the US market continued its uptrend which saw all three major indexes namely Dow Jones, S&P 500 and Nasdaq hitting new record highs as the Fed indicated the possibility of another rate hike this year while the fundamental within the economy system remained strong.

However, a better portfolio performance. Despite the overall lacklustre month for the local market, our portfolios managed to perform fairly well thanks largely to PMETAL (+5.01%) as its share price continued to rise higher as well as the price recovery of PWROOT (+7.22%). Other noticeable gainers were AIRASIA (+3.92%), AEONCR (+2.88%) and KLCC (+2.56%). THEMATIC Portfolio was the best monthly performer with monthly gain of 2.04% in September against FBMKLCI’s -0.61%, followed by DIVIDEND YIELD (+1.83%) and GROWTH Portfolios (+0.80%). However, the gains were capped by losses at OLDTOWN (-4.48%), PESTECH (-4.29%) and SLP (-3.55%). YTD, THEMATIC Portfolio remained the top performer with 28.56% total YTD gains followed by GROWTH Portfolio (+23.14%) but DIVIDEND YIELD Portfolio’s 2.00% came below FBMKLCI of 9.53%. On the other hand, both MAXIMUM RETURN (+2.50%) and MINIMUM RISK Portfolios (+1.60%) under the Modern Portfolio Theory beat the 30-stock index on a monthly basis which extended their total YTD returns to 35.68% and 0.97%, respectively.

Total Return (%) Key economic events to watch Date Consensus

MoM YTD

FBMKLCI -0.61 9.53 USA CPI YoY 13-Oct 2.2%

Thematic 2.04 28.56 China 3Q GDP 19-Oct -

Growth 0.80 23.14 Malaysia Foreign Reserves 20-Oct - Dividend Yield 1.83 2.00 Malaysia CPI 20-Oct - Maximum Return 2.50 35.68 Singapore CPI 23-Oct -

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On Our Portfolio

09 October 2017

Positive returns for both MPT portfolios. Like the previous month, both MPT portfolios in September registered positive performance thanks largely to the core-holding stocks that posted commendable gains. The gains in PMETAL and AIRASIA were offset by PESTECH (-4.29%) and SLP, which helped to push the MAXIMUM RETURN Portfolio’s monthly returns higher by 2.50%. On the other hand, the gains in core-holding stocks such as KLCC and TAANN (+0.82%) was capped by losses from the small holdings in OCK (-0.55%), PESTECH and SLP, hence resulting in a lower monthly returns of 1.60% for the MINIMUM RISK Portfolio. With this, total YTD returns for MAXIMUM RETURN Portfolio increased to 35.68% as of end September while MINIMUM RISK Portfolio turned profitable to total YTD returns of 0.97% for the same period. Going forth, we anticipate the MAXIMUM RETURN portfolio to continue to be more volatile than the MINIMUM RISK portfolio but with stronger expected returns given the continued emphasis on high beta stocks.

MPT September 2017 Portfolio

Maximum Return Portfolio Minimum Risk Portfolio

Est. Portfolio Risk 32.5% 8.5%

Est. Portfolio Return 12.9% 2.7%

(Unfavourable) Risk / Reward Ratio 1.26x 1.57x

Stock Selection Allocation Price

MoM Chg

Portfolio

MoM Return Allocation

Price MoM Chg Portfolio MoM Return FBMKLCI-EA 0.0% 0.00% 0.00% 30.0% 0.00% 0.00% KLCC 0.0% 3.69% 0.00% 30.0% 3.67% 1.10% OCK 0.0% -0.55% 0.00% 4.5% -0.55% -0.02% PESTECH 10.0% -4.29% -0.43% 4.2% -4.29% -0.18% PMETAL 30.0% 5.01% 1.50% 0.0% 5.01% 0.00% SKPETRO 0.0% 10.14% 0.00% 0.0% 10.14% 0.00% PWROOT 0.0% 9.21% 0.00% 0.8% 9.28% 0.07% AEONCR 0.0% 2.88% 0.00% 5.7% 2.88% 0.17% AIRASIA 30.0% 7.57% 2.26% 0.0% 7.53% 0.00% SLP 30.0% -3.55% -0.84% 3.0% -2.79% -0.08% PRTASCO 0.0% 4.85% 0.00% 2.8% 4.85% 0.13% TAANN 0.0% 2.21% 0.00% 18.9% 2.18% 0.41% 100.0% 2.50% 100.0% 1.60%

Source: Kenanga Research

MPT 2017 Portfolio Performance

Maximum Return Portfolio Minimum Risk Portfolio

Initial Capital (RM) 250,000 250,000

Month Beg. Balance MoM % End. Balance YTD % Beg. Balance MoM % End. Balance YTD %

Jan’17 250,000.00 9.45% 273,626.98 9.45% 250,000.00 -0.29% 249,279.87 -0.29% Feb’17 273,626.98 5.59% 288,922.73 15.57% 249,279.87 -1.85% 244,668.19 -2.13% Mar’17 288,922.73 5.35% 304,382.73 21.75% 244,668.19 1.56% 248,473.02 -0.61% Apr’17 304,382.73 5.79% 322,006.49 28.80% 248,473.02 0.29% 249,193.59 -0.32% May’17 322,006.49 -8.91% 293,315.71 17.33% 249,193.59 -1.94% 244,359.24 -2.26% Jun’17 293,315.71 2.46% 300,531.27 20.21% 244,359.24 2.54% 250,565.96 0.23%

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On Our Portfolio

09 October 2017

MPT October 2017 Portfolio

Maximum Return Portfolio Minimum Risk Portfolio

Est. Portfolio Risk 32.3% 8.5%

Est. Portfolio Return 12.3% 2.8%

(Unfavourable) Risk / Reward Ratio 1.31x 1.52x

Stock Selection Allocation Allocation

FBMKLCI-EA 0.0% 30.0% KLCC 0.0% 30.0% OCK 0.0% 4.6% PESTECH 10.0% 4.5% PMETAL 30.0% 0.0% SKPETRO 0.0% 0.0% PWROOT 0.0% 0.3% AEONCR 0.0% 5.5% AIRASIA 30.0% 0.0% SLP 30.0% 3.5% PRTASCO 0.0% 2.7% TAANN 0.0% 19.0% 100.0% 100.0%

Source: Kenanga Research

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On Our Portfolio

09 October 2017

Retail Model Portfolio - THEMATIC

No CATS Code Company Last Buy Date No. of Shares Average Cost Avg Cost/ Share Share Price @ 29-Sep-17 Value Unrealised Profit / (Loss) % Change YTD Weighting (as % of NAV) Latest Dividend Ex-Date Gross Div Consensus 12M Div Yield KNK’s/ Consensus’ TP Potential Upside/ Downside RM RM RM RM RM % % RM % RM % 1 8869 PMETAL 16-Jan-17 25,000 46,250 1.850 3.770 94,250 48,000 103.78% 18.5% 30/8/2017 0.02 1.41 4.05 7.4% 2 0172 OCK 16-Jan-17 40,000 31,400 0.785 0.905 36,200 4,800 15.29% 12.6% 28/3/2016 0.01 0.00 1.05 16.0% 3 5099 AIRASIA 16-Jan-17 18,000 42,660 2.370 3.450 62,100 19,440 45.57% 17.1% 13/9/2017 0.12 6.70 4.05 17.4% 4 5012 TAANN 16-Jan-17 5,000 20,650 4.130 3.700 18,500 -2,150 -10.41% 8.3% 6/9/2017 0.05 2.67 3.65 -1.4%

5 0820EA FBMKLCI-EA 16-Jan-17 15,000 25,650 1.710 1.835 27,525 1,875 7.31% 10.3% 19/6/2017 0.01 1.79 N.A. N.A.

6 5201 OLDTOWN 11-Sep-17 15,000 40,950 2.730 2.560 38,400 -2,550 -6.23% 16.4% 25/9/2017 0.03 4.26 3.15 23.0%

207,560 276,975 69,415 33.44% 83.0% 2.51

Total Dividend Received YTD 7,495

Total Realised Return (5,500)

Total Return (based on the total allocated amount of RM250k) 71,410 28.56%

KLCI FBMKLCI Index 1,658.84 1,755.58 96.74 5.83% 3.19

KLCI – TOTAL RETURN 9.53%

Total Realised Return

CATS Code Company Last Sell Date No of Shares Cost @ Buy

Date Avg Cost/Share

Share Price @

Sell Date Value Realised % Change

5070 PRTASCO 30-Aug-17 25,000 31,250 1.250 1.030 25,750 -5,500 -17.60%

TOTAL REALISED RETURN -5,500

Total Dividends Received

No CATS Code Company No. of Shares Ex-Date Gross Div Div Rec

1 8869 PMETAL 25,000 10-Mar-17 0.02 375.00

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On Our Portfolio

09 October 2017

Retail Model Portfolio - GROWTH

No CATS Code Company Last Buy Date No. of Shares Average Cost Avg Cost/ Share Share Price @ 29-Sep-2017 Value Unrealised Profit / (Loss) % Change YTD Weighting (as % of NAV) Latest Dividend Ex-Date Gross Div Consensus 12M Div Yield KNK’s/ Consensus’ TP Potential Upside/ Downside RM RM RM RM RM % % RM % RM % 1 5219 PESTECH 16-Jan-17 20,000 31,800 1.590 1.560 31,200 -600 -1.89% 12.7% 28/12/2016 0.03 1.95 2.00 20.5% 2 8869 PMETAL 16-Jan-17 25,000 46,250 1.850 3.770 94,250 48,000 103.78% 18.5% 30/8/2017 0.02 1.41 4.05 8.0% 3 0172 OCK 16-Jan-17 50,000 39,250 0.785 0.905 45,250 6,000 15.29% 15.7% 28/3/2016 0.01 0.00 1.05 14.1% 4 7248 SLP 16-Jan-17 20,000 37,340 1.867 1.900 38,000 660 1.77% 14.9% 6/9/2017 0.02 2.11 2.13 28.2%

5 0820EA FBMKLCI-EA 16-Jan-17 15,000 25,650 1.710 1.835 27,525 1,875 7.31% 10.3% 19/6/2017 0.01 1.79 N.A. N.A.

180,290 236,225 55,935 31.03% 72.12% 1.01

Total Dividend Received YTD 1,925

Total Realised Return 0

Total Return (based on the total allocated amount of RM250k) 57,860 23.14%

KLCI FBMKLCI Index 1,658.84 1,755.58 96.74 5.83% 3.19

KLCI – TOTAL RETURN 9.53%

Total Dividends Received

No CATS Code Company No. of Shares Ex-Date Gross Div Div Rec

1 7248 SLP 20,000 09-Mar-17 0.02 300.00

2 8869 PMETAL 25,000 10-Mar-17 0.02 375.00

3 8869 PMETAL 25,000 02-Jun-17 0.02 375.00

4 0820EA FBMKLCI-EA 15,000 19-Jun-17 0.01 75.00

5 8869 PMETAL 25,000 30-Aug-17 0.02 500.00

6 7248 SLP 20,000 6-Sep-17 0.02 300.00

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On Our Portfolio

09 October 2017

Retail Model Portfolio – DIVIDEND YIELD

No CATS Code Company Last Buy Date No. of Shares Average Cost Avg Cost/ Share Share Price @ 29-Sep-2017 Value Unrealised Profit / (Loss) % Change YTD Weighting (as % of NAV) Latest Dividend Ex-Date Gross Div Consensus 12M Div Yield KNK’s/ Consensus’ TP Potential Upside/ Downside RM RM RM RM RM % % RM % RM % 1 5139 AEONCR 16-Jan-17 3,000 30,321 10.107 12.840 38,520 8,199 27.04% 12.1% 23/6/2017 0.22 3.18 13.13 2.3% 2 7237 PWROOT 16-Jan-17 25,000 52,000 2.080 2.080 52,000 0 0.00% 20.8% 18/9/2017 0.03 6.25 2.70 29.8% 3 5235SS KLCCSS 16-Jan-17 4,000 31,240 7.810 8.000 32,000 760 2.43% 12.5% 6/9/2017 0.09 4.55 7.80 -2.5% 4 5201 OLDTOWN 11-Sep-17 15,000 40,950 2.730 2.560 38,400 -2,550 -6.23% 16.4% 25/9/2017 0.03 4.26 3.15 23.0% 154,511 160,920 6,409 4.15% 61.8% 2.95

Total Dividend Received YTD 5,183

Total Realised Return -6,600

Total Return (based on the total allocated amount of RM250k) 4,992 2.00%

KLCI FBMKLCI Index 1,658.84 1,755.58 96.74 5.83% 3.19

KLCI – TOTAL RETURN 9.53%

Total Realised Return

CATS Code Company Last Sell Date No of Shares Cost @ Buy

Date Avg Cost/Share

Share Price @

Sell Date Value Realised % Change

5070 PRTASCO 30-Aug-17 30,000 37,500 1.25 1.03 30,900 -6,600 -17.60%

TOTAL REALISED RETURN -6,600

Total Dividends Received

No CATS Code Company No. of Shares Ex-Date Gross Div Div Rec

1 5235SS KLCCSS 4,000 2-Feb-17 0.10 394.00

2 7237 PWROOT 25,000 14-Mar-17 0.03 625.00

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On Our Portfolio

09 October 2017

Yearly Portfolios Total Returns (based on the total allocated amount) vs FBMKLCI Performance

2013 Portfolio 2014 Portfolio

2015 Portfolio 2016 Portfolio

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09 October 2017

Daily Charting: FBMKLCI Weekly Charting: FBMKLCI

Daily Charting: FBM70 Weekly Charting: FBM70

Daily Charting: FBMSC Weekly Charting: FBMSC

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09 October 2017

Stock Ratings are defined as follows:

Stock Recommendations

OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10%

MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10% UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%

Sector Recommendations***

OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10%

NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10% UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%

***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage.

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies.

Published and printed by:

KENANGA INVESTMENT BANK BERHAD (15678-H)

Level 12, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Chan Ken Yew Telephone: (603) 2172 0880 Website: www.kenanga.com.my E-mail: research@kenanga.com.my Head of Research

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