Budget 2015: Which Stocks to Watch?

After the Budget 2015, investors are bracing for the first trading day tomorrow. Before the opening session kicks off, what's the potential counters should investors focus on? How to relate those counters with Budget 2015 ?

The biggest beneficiaries...

Obviously, one of the biggest beneficiaries was construction sector with the announcements of various highways, MRT and LRT projects. Meanwhile, we can break it down to a few potential counters:

1. Gamuda:
   Another MRT line from Selayang to Putrajaya with an estimated RM23bil. With its expertise in tunneling works and PDP role of existing MRT line, Gamuda is the favorite to clinch the job again.
   
   
2. Bina Puri, Sunway and TRC:
   These are another few companies which already clinched some construction jobs for current MRT or LRT projects. The new line announced would definitely benefiting these counters, since they already have the experiences and also cost advantages.
   
   
3. IJM:
   When mentioned about the RM5bil West Coast Expressway (WCE) project, automatically IJM will comes into the picture.
   
   
4. Huayang and Sentoria:
   These two companies which involves in the building of affordable houses should benefiting from the PR1MA and various affordable housing scheme.

Other than construction sector, consumer sector also benefiting given the expanding lists of items being exempted from GST...

1. QL Resources
   The largest egg producers in the country would benefited after eggs was being listed as GST exempted item.
   
   
2. Nestle
   The largest food and beverage company would benefited after cocoa powder and coffee powder being GST exempted also.

How about the RM150mil financial assistance to SMEs for the purchase of accounting software? Yes...

1. Censof, YGL and IFCA MSC
   These are the major GST related software providers in the country. The latest financial assistance provided may speed up the enrollment process for SMEs to be GST registered companies, hence the need for such software.

With RM2.7bil going to spend within 3 years to further boosting the high-speed broadband services in the country, these two counters should be more than happy to heard the news:

1. Redtone
   Extensive track record in implementing and laying of under sea cables.
   
   
2. OCK
   The standalone telecom towers owner with extensive experience in building and maintaining telco towers. As announced, 1,000 new telco towers will be build.

That's it for all the beneficiaries of those good news. Wait...

Some counters may also benefiting purely because there is NO bad news being announced.

1. BAT
   The tobacco counter will smile in relieve simply because absence of duty hike as anticipated by many analysts.
   
   
2. Carlsberg and GAB
   These brewery counters also will smile after escaping from another round of duty hike. Moreover, the government efforts in promoting tourism industry seen as a positive news too.

Happy Trading...

New Fund: AmConsumer Select - Capital Protected

AmInvestment Bank is launching a new capital-protected fund and it is optimistic of a good take-up rate for this RM100mil new fund. According to its CEO, the launch of the fund is timely in view of the current macroeconomic uncertainties. Since it is capital protected, the fund offers a safe haven for risk-averse investors looking to hedge against the uncertainty in the global market, she adds.

The Fund is a close-ended fund which aims to provide regular income with an investment horizon of 2.5 years (30 months) whilst providing capital protection on Maturity Date. The Fund seeks to achieve its objective by investing in ZNIDs and/or MGS and an over-the-counter option linked to the price movement of a basket of five (5) consumer related stocks.

For the purpose of the Fund, consumer related stocks refer to stocks of companies that produce products/services that are consumed by individuals. Selection of consumer related stocks is based on fundamental strength of the companies through internal research and brands that the Manager considers to be widely known among investors.

The Strategy...

Generally, the Fund will adopt a two-fold strategy to achieve its objective, i.e.

1. Capital protection* from fixed income portion
   At the Fund’s commencement, a minimum of 85% of the Fund’s NAV will be invested in 2.5-year ZNIDs and/or MGS with shorter or similar maturity tenure to the Fund’s maturity, which upon maturity of the Fund will achieve an amount equivalent to 100% of investor’s initial capital (which includes entry charge payable by investors). A maximum of 5% of the Fund’s NAV will be maintained in cash and/or money market instruments for liquidity purposes.
   
   
   
2. Fund’s return from option portion
   At the Fund’s commencement, up to 10% of the Fund’s NAV will be used to purchase a 2.5-year USD denominated option with an option counter-party, which is a financial institution carrying a minimum long-term rating of “A” by S&P or the equivalent rating by any other global rating agency. The option provides exposure which is linked to the price movement of a basket of five (5) consumer related stocks.

At the end of each quarter, if the closing price of each of the stock is at or above its respective initial level on any day within the quarter, the option counter-party pays a conditional coupon. The income distribution (if any) will however be paid half yearly to investors.

The basket of five (5) consumer related stocks (indicative selection only) currently identified as

follows:

If the Coupon Payout Condition is met at any quarter, the coupon payout from the option

counterparty is calculated as follows:

Coupon (RM) = (Notional Amount / USD/RMInitial) x coupon rate (settled in USD) x

USD/RMEnd

• “USD/RMInitial” refers to the USD/RM exchange rate for the determination of the Notional Amount in USD as at Commencement Date.
• “USD/RMEnd” refers to the actual USD/RM exchange rate for conversion of the coupon (received by the Fund) from USD to RM.

* Investors are advised that the Fund is not a guaranteed fund. Capital protection is provided through investments in ZNIDs and/or MGS and not by a guarantee. Consequently, the return of capital is SUBJECT TO the credit/default risk of the issuers of the ZNIDs and/or MGS and may result in losses.

Source: AmMutual

Why All of Us Must Care about 1Care Malaysia?

Heard about 1Care Malaysia healthcare plan? If no, then you must read this article thoroughly word by word. Because the the proposed healthcare system will drastically change the way we seek for treatment in the future. The main issue was "Is it viable to implement 1Care?".

Well, the intention is good for our community. The plan had a very beautiful definition as below:

But...

Concern is always there whenever Government want to implement something and that thing is managed solely by Government. Experience? Got (bad experience). Money? Got, but already drained somewhere (normally). You can't prevent Malaysians from worrying, especially when 1Care touches each and everyone of us for life.

What are the concerns?

1. Each person in different sector have different risk level. How to determine the amount of contributions of each contributor?
   
   
2. Subsequently, how to determine the benefits package each individual entitled to? If the benefits was based on the amount of contribution, then, our existing insurance system already functioning very well now.
   
   
3. Then, you can say that it was community-rated, not risk-rated. That's mean rich are subsidizing the poor, economically active to passive system. But, doesn't rich already pay taxes to government to subsidize them currently?
   
   
4. Level of services of hospitals and choices of hospitals. Can we seek treatment at any hospital, be it general or private hospitals? If not, it will again limit our choice.
   
   
5. Choice? Emm. The proposed 1Care is being made compulsory to all employees and employers to contribute (except government servants). Wait!!! Does this mean that private sector is subsidizing public sector?
   
   
6. A government agency was being set up to manage the pool of money collected from all of us. OMG!!! We are talking billions of ringgit per year. It's a huge huge huge amount which could bought over CIMB bank!!!

Once 1Care was implemented, the following sector will suffer:

1. Private sector. If the said 10% mandatory contribution by each employee is true, most salary based person will switch to personal loan, I think.
   
   
2. Retailers will suffer badly from less disposable income after the mandatory deduction of salary. No more 25% drop in car sales anymore. It's probably 90%.
   
   
3. Property market will slump. Don't forget that our loan applications now is based on net salary, which means deducting your 11% EPF + 10% 1Care + Socso + Tax. How much left?
   
   
4. Private healthcare system. Private hospitals have to lobby smartly to get involved in 1Care system to remain in business. Monopoly game means you have to "pay" more? Good Luck.
   
   
5. Private insurance companies and its agents. A big chunk of their medical policies will be terminated and a big chunk of premiums will flow to the new set up government agency. Thousands of agents will struggle to survive.

Then, why Government proposing 1Care Malaysia? Emm. I got many input from friends and professionals and below could be the 3 reasons behind 1Care:

1. Diversifying the problems of public healthcare system to private healthcare, so that private healthcare was forced to collaborate.
   
   
2. Reducing Government's burden, thus reducing budget deficit, by imposing mandatory contribution from everyone. For us, it's just like another form of income tax.
   
   
3. Hijacking the lucrative insurance business which was dominated by foreign companies (etc. Great Eastern, Allianz, AIA, Prudential, ING...) especially on medical policies. With 1Care, it could effectively grab the market share from them, entrusting government agency as the undisputed largest insurance company in Malaysia.

Finance Malaysia blog is just voicing out the concerns of general public for betterment of Malaysia going forward. Readers were welcome to give comment or feedback. Thanks.