The Kuala Lumpur Composite Index has mostly recovered from its year-to-date loss. Interestingly, KLCI has also outperformed all its ASEAN-5 peers year-to-date despite political uncertainty following Pakatan Harapan’s GE14 win. With the KLCI now trading at 17.1 times FY18 price-to-earnings (P/E), DBS advises investors to take caution and adopt a “Buy on Weakness” strategy given the external risks. Here are four Malaysian blue chips that DBS thinks investors should buy on price weakness.

Investors Takeaway: 4 MY Blue Chips To Buy On Weakness

  1. Maybank

Maybank has been making efforts to stave off asset-quality pressure and grow its revenue base. Despite softer loan growth, Maybank’s revenue growth has been centred on its ability to price its loans and deposits well.

At the same time, expenses have also been under control. With the potential spin-off of its insurance business, and rising value from its Islamic banking outfit, Maybank is sitting on two major catalysts. Its strong capital position (highest among its peers) and sustained high dividend pay-outs are also sweeteners for investors.

BUY, TP RM11.80; Current share price RM9.83

  1. Public Bank

Public Bank is a dominant market leader in its target segment of residential, commercial mortgages and hire purchase with growth that is above the industry. Given Public Bank’s superior track record, its 10-year annualised return of roughly 15 percent far outperforms the return of peers. DBS also notes that Public Bank is an overachiever in delivering earnings. According to Bloomberg data, Public Bank managed to beat consensus estimates 11 out of 15 quarters.

DBS believes that Public Bank is well positioned to withstand industry headwinds and also benefit from a macro recovery given its superior operating efficiency (lowest cost-to-income ratio) and sustained profitability metrics.

BUY, TP RM28.20; Current share price RM24.92

  1. Axiata

While Axiata’s share price has retreated considerably year-to-date, the Malaysian telecom conglomerate is seeing a strong turnaround in Celcom and XL’s performance which would be key catalysts for the stock price going forward. Celcom should see margins gradually improve from FY19 onwards underpinned by cost optimisation efforts while cost of network investment should also start to taper off, having already caught up with its peers in terms of 4G network coverage.

Meanwhile, early signs are pointing towards a recovery for XL as the Indonesian mobile sector in 2H18 start to raise data pricing. With higher service revenue exposure to data (60-70 percent), XL is well-positioned to capitalise on improving data yields in Indonesia.

DBS also notes that the IPO of Axiata’s tower arm edotco and asset monetisation of Idea-Vodafone could boost the sentiment for the stock and provide price recovery for its stock.

BUY, TP MYR 5.05; Current share price RM4.47

  1. Genting

According to DBS, progressive launches of key developments in the Genting Integrated Tourism Plan (GITP) and expected earnings recovery in Genting will improve its growth prospects. GITP’s launch will give Genting additional gaming capacity to ride on growing foreign tourists attracted by the weak ringgit. Indoor and outdoor theme parks are slated to open by end-2018 and 1H2019 to launch Genting into a phase of earnings recovery.

Potentially winning the Japanese casino bid in the medium term also provides a reason why investors should pick up Genting on weakness. Meanwhile, as the parent of Genting Singapore and Genting Malaysia, the group’s shares are trading at a more attractive valuation compared to both subsidiaries, yet also offering exposure to both integrated resorts.

BUY, TP RM12.15; Current share price RM8.03

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