Without much delay, the new Malaysian government has started to deliver on its election promises, the first being the removal of the goods and services tax (GST) from June onwards. With nine other items still on Pakatan Harapan’s first 100-days manifesto, the Malaysian stock market could see some positive movement in the near-term with the new government in office.
According to DBS, there are three Malaysian sectors that you should watch out for in the coming months as the new government takes office.
Investors Takeaway: 3 Malaysian Sectors To Ride On Malaysia’s New Government Election Promises
- Malaysian Banking Sector – Maybank, Public Bank And Hong Leong Bank
With the removal of goods and services tax (GST) from 1 June, DBS expects consumer spending to be spurred on. According to DBS, this will lead to the recovery of loans, especially car loans following few years of soft hire-purchase loans. DBS also notes that small and medium enterprise (SME) loans will turn positive as businesses start shifting to growth mode.
Among the Malaysian banking stocks, DBS highlights Maybank and Public Bank as the key beneficiaries of recovering retail loans. Despite its recent rise in share price, Maybank still offers investors an attractive dividend yield of more than five percent. For Public Bank, its resilient earnings and expected recovery in loan growth will help it to maintain its earnings stability. Lastly, DBS’ top pick for the banking sector is Hong Leong Bank. Apart from strong earnings and asset quality, the expected recovery in loans will help Hong Leong Bank to lift its net interest margins, earnings and return on equity.
Public Bank: BUY, TP RM26.80
Maybank: BUY, TP RM11.50
Hong Leong Bank: BUY, TP RM21.00
- Malaysian Healthcare Sector – IHH Healthcare, KPJ Healthcare
Apart from medicine and drugs under the Malaysia National Essential Medicine List that are all along subjected to zero-percent GST, thus far, private healthcare services providers such as IHH and KPJ have been absorbing the six percent GST input tax on drugs and medicine under the exempt supply classification. Given the impending abolishment of GST, DBS expects private healthcare services providers to regain its prior healthy profit margin.
DBS also believes that the healthcare sector will benefit from recovery in private consumption which will lead to higher spending on private healthcare. Finally, DBS notes that the impending implementation of another election pledge (The “Skim Peduli Sihat” programme) to provide RM500 monetary assistance to the lower income group access private healthcare services will also be a boost for the private healthcare providers.
DBS recommends IHH Healthcare as a big cap proxy for the Malaysian healthcare sector while also recommending KPJ as a pure play on Malaysian healthcare.
IHH Healthcare: BUY, TP RM6.81
KPJ Healthcare: BUY, TP RM1.30
- Auto Sector – Bermaz Auto
Following the implementation of GST in 2015, most auto players revised their car prices downwards to absorb GST for consumers. Given that GST has now been slated for abolishment, DBS thinks that this could create a short-term catalyst for demand of cars among Malaysians until the sales and services (SST) is implemented.
Besides the removal of GST, the government has also pledged to reduce excise duty on imported cars below 1,600cc for first car purchases by households with monthly income below RM8,000. While there are no indications when this excise duty will be reduced, the upholding of this pledge will lead to improved sales for imported cars. Among the auto players, DBS recommends Bermaz Auto which stands to benefit from all the new measures from the government.
Bermaz Auto – BUY, TP RM2.44