Bursa Malaysia’s biggest border re-opening play beneficiaries

MALAYSIA’S border re-opening starting from April 1 (Friday) will be instrumental in lifting market sentiment with most economic re-opening beneficiaries expected to deliver trading gains despite the gravity pull of the US monetary contractionary policy.

UOB Kay Hian Research expects the following as positive effects of border re-opening:

  • Direct demand booster from foreign visitors;
  • Allowing local manufacturers to clinch new contracts (foreign representatives need to visit Malaysia to evaluate or/and certify the local contractors); and
  • Intake of foreign workers amid an acute shortage, noting that the foreign workforce has shrunk by 40% since 2018.

In a nutshell, the key beneficiary groups include (i) tourism-related groups such as aviation; COVID-19 tests and foreign worker renewal providers; e-payment services providers, brewery and selected retail real estate investment trust (REIT) as well as principally electrical & electronic (E&E) manufacturers which are highly dependent on foreign worker intakes.

“However, the foreign worker-dependent plantation sector may not re-rate as the expected productivity increase could be offset by wide expectations of crude palm oil (CPO) price consolidating in 2H 2022,” projected head of research Vincent Khoo in a Malaysia strategy report.

Based on the above, UOB Kay Hian’s key border re-opening picks comprised tourism-dependent Malaysia Airports Holdings Bhd (MAHB) and Genting Malaysia Bhd (GenM) followed by Magnum Bhd, MY EG Services Bhd, IHH Healthcare Bhd, Heineken Malaysia Bhd and Pavilion REIT.

“Demand recoveries for most businesses are unlikely to recover to the pre-pandemic level in the near term due to the absence of mainland China tourists and as the regionally high (Malaysia inclusive) daily infection rates of the Omicron coronavirus discourage travelling,” the research house pointed out.

“Malaysia’s intake of foreign workers is also hindered by on-going negotiations with the various governments of the targeted source countries which are asking for prohibitive recruitment fees. Nevertheless, we would expect investors to re-rate the re-opening beneficiaries and substantially price a fuller recovery in 2023.”

Meanwhile, the notable market laggards include Globetronics Technology Bhd and Sunway REIT which have fallen substantially since 2019 and remained sold down year-to-date, according to UOB Kay Hian Research. – March 28, 2022

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