Published: Monday July 16, 2012 MYT 11:17:00 AM
Defensive sectors to outperform, says UOB Kay Hian Research
KUALA LUMPUR: UOB Kay Hian Malaysia Research expects defensive sectors to modestly outperform the market as they did in the first half of 2012 (H1, 2012), amid a low interest rate environment and the global economic slowdown.
It said on Monday this would suggest investors would still pay premiums for defensive and high dividend yielding stocks.
"We advocate a highly defensive strategy and Overweight defensive sectors like gaming (specifically number forecasting operators (NFO)), telecommunications, plantation and consumer (tactical)," it said in its strategy report.
UOB Kay Hian Research said among these, gaming is the most attractive, trading in line with their historical mean price-to-earnings (PE) multiples, whereas capital gains upside for the consumer and telecommunications sectors are limited by their above-historical mean PE multiples.
"Our favourite yield plays that are expected to sustain dividend yields of around 6% or higher in 2013 are BUY-rated Maxis, Berjaya Sports Toto, DiGi.Com (DiGi) and Multi-Purpose Holdings (MPHB), as well HOLD-rated Guinness Anchor," it said.
The research house said however, there could be potential profit taking on historical yield plays with exceptionally low yields.
UOB Kay Hian Research said it does not think that yield plays can sustain net yields of below 5%, unless they offer strong earnings growth prospects post-2013. These include KLCC Properties (HOLD), whose net yield is expected to be around just 4.5-4.8% even after it REITs its property assets. This is unattractive vs 10-year government bonds yields of around 3.5%.
It also noted that UMW Holdings (Hold) could be vulnerable to profit taking as it provides a 2013 net yield of only 4.1% (4.9% even under an optimistic scenario), versus its historically net yield range of 3.7%-6.6%.