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Weak sentiment likely to persist for construction, property, building materials sectors in 2019, says HLIB Research

KUALA LUMPUR (Jan 7): Weak sentiment among retail investors is likely to persist in 2019 for the construction, property and building materials sector, according to Hong Leong Investment Bank (HLIB) Research.

In a note this morning, HLIB Research said this is partly due to the US-China trade war, as well as internal obstacles such as the massive national debt of nearly RM1 trillion and softer corporate outlook amid cancellation or postponement of megaprojects.

The research firm also opined that the sharp decline of Brent crude oil prices and weakening ringgit could dampen the growth in the oil and gas, as well as domestic sectors.

Nevertheless, the firm said there are several opportunities within Malaysia to be seen as defensive and investors could monitor on.

"In view of a prolonged trade war, we anticipate some job orders (furniture or technology related) in China may redirect to the regional peers (ASEAN), which Malaysia could be one of the beneficiaries.

"Besides, investors may focus on a few of the strategies in Budget 2019 which are related to the healthcare and insurance for the B40 group in 2019 as well as East Malaysia (Sabah and Sarawak) development expenditure, which is likely to be a more certain theme in 2019," said HLIB Research.

In order to sail through the troubled waters, the research firm advised investors to look out for companies with solid fundamentals and strong net cash or a steady dividend track record over the years.

"Also, we may select stocks that could potentially dish out special dividend in the coming months. Under this strategy, we like DKSH Holdings (Malaysia) Bhd and Taliworks Corp Bhd.

"For the healthcare and insurance sectors that may benefit under the Budget 2019, we prefer to look into KPJ Healthcare Bhd and Syarikat Takaful Malaysia Keluarga Bhd," the firm said.

Meanwhile for the East Malaysia theme, HLIB Research favours infrastructure firm Hock Seng Lee Bhd.

The firm is of the view that the ringgit is likely to remain within the RM4.10-4.30 band against the US dollar for 2019 and that could bode well for export-related companies, providing healthy earnings moving forward.

"We also anticipate certain job orders from China could redirect to regional peers such as Malaysia, benefiting technology-related and furniture companies. Under this segment, stock picks will be Frontken Corp Bhd and Focus Lumber Bhd," it said.

As the Refinery and Petrochemical Integrated Development Project (RAPID) is likely to commence in 2019, HLIB Research sees this as a new upcoming theme to be monitored closely.

"With that, we may look into some related companies such as Chemical Company of Malaysia Bhd as it is in a dominant position to benefit from RAPID as they produces caustic soda which is a key input for the petroleum refineries and by virtue of its plants being in Pasir Gudang, Johor giving an advantage logistically," it said. — theedgemarkets.com

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