13th General Election outcome – nestled between our baseline and best-case scenarios.The just concluded 13th General Election (GE13) 5 May 2013, ended with the ruling coalition Barisan Nasional (BN) retaining power with a slightly lesser majority than in the 12th General Election (GE12). BN won 133 (60%) of the 222 Parliament seats contested, down from the 140 (63%) won in GE12. Overall, the result was better than our baseline scenario which predicted BN to win the GE13 with a reduced number of Parliament seats of between 120 and 125, but just short of our best case scenario which predicted BN to win the GE13 with between 135 to 140 Parliament seats.
No change in our GDP forecasts, but tweaked our inflation and OPR calls.We maintained our 2013 real GDP growth forecast of +5.3% (2012: +5.6%) and expect the growth momentum to be sustained in 2014 with a projected +5.7% expansion as BN remained in power with Prime Minister Najib at the helm, and political continuity and policy certainty are positive in sustaining the investment growth momentum from the dilution of implementation or execution risk in major infrastructure projects and in the committed or approved investments that are already in the pipeline. However, given the smaller BN win, we expect subsidy rationalisation and GST implementation to be delayed. Therefore we cut our 2013 inflation rate forecast to 1.8% from 2.5% and expect the benchmark OPR to stay at 3.00% this year versus the expectation of a 25bps hike in 4Q 2013.
Raising YE KLCI target.We expect the market to react positively on the better-than-expected GE13 outcome and resume its uptrend, on continuition in policy direction withno impact on economic growth. Supporting the KLCI’s uptrend will essentially be: (i) greater clarity and stability, at the political and policy fronts, (ii) strong domestic economics and corporate balance sheets, (iii) continuous corporate earnings growth, and (iv) the KLCI’s underperformance (+0.3% YTD) versus regional markets, for the second year running. With the political overhang removed, we expect Malaysian equities to re-rate and are upgrading our YE KLCI target to 1,815 pts (from 1,710) after raising our 12M forward target PE multiple to15.0x (from an implied 14.0x).
Upgrading property and media to OW. Our top picks in property are SP Setia and Glomac while in the print media is Media Prima. Banks and gaming meanwhile offer value (maintain OW). We upgrade CIMB to BUY.Our top picks in banking continue to be AMMBand RHB Capitalwhile in gaming are Genting Malaysiaand Multi-Purpose Holdings. Thematics would be oil & gas and construction (maintain OW). Our top picks in oil & gas are SapuraKencanaand Dialog, while in construction are Gamudaand WCT. We upgrade Gamuda to BUY. We expect underperforming stockslike CIMB, ASTRO, Media Prima, Star, Dialog, SapuraKencana and YTL Power to react more positively.
by Maybank IB
