*Maybank Kim Eng Kopi-O (1 Nov 2021)*
Nikkei 28892.7 0.25%
Kospi 2970.7 -1.29%
SSE 3547.3 0.82%
HSI 25377.2 -0.70%
TWSE 16987.4 -0.32%
SET 1623.4 -0.05%
JCI 6591.3 1.03%
STI 3198.2 -0.18%
KLCI 1562.3 -0.29%
*MKE Key Calls*
*Malaysia Budget 2022: Reinforcing the nascent recovery*
With continued expansionary fiscal policy and full economic re-opening, government expects firmer real GDP growth of between +5.5% and +6.5% in 2022 (2021E: +3.0% to +4.0%). MKE maintains real GDP growth forecast of +4.2% in 2021 and +6.0% in 2022. Notwithstanding pro-recovery fiscal dynamic, equity market read-through is negatively-biased due to earnings drag from a one-off FY22 special windfall tax. Sectors with post-Budget tailwind are Auto, Consumer/Retail/Gaming, Plantations and Technology.
*MY*
o Expect market to be choppy as investors assess the impact of Budget 2022, particularly on prosperity tax. All eyes will also be on the upcoming FOMC meeting and Bank Negara’s OPR decision. O&G and plantation stocks, however, should continue to gain traction thanks to firmer commodity prices. Technically, we expect the benchmark index to range between 1,548 and 1,580 today, with supports at 1,548 and 1,500.
o *Nestle Malaysia (NESZ MK)*: The sugar tax extension will have a negative earnings impact to NESZ as it directly affects pre-mixed products under their MILO and Nescafe brands. Nevertheless, we expect product demand to remain resilient given the staple nature of its products while product reformulations could also lower the sugar tax’s net impact to earnings going forward. We keep our earnings estimates, SELL call and DCF-TP of MYR103.35 unchanged pending NESZ’s 3Q21 results on 2 Nov.
*KNM Group (KNMG MK)*: Its indirect wholly-owned subsidiary FBM Hudson Italiana SpA had accepted a purchase order from *Saudi Basic Industries Corporation (SABIC AB)* for the supply of a reactor gas – gas exchanger, which amounting to approximately MYR17.7m. This is the second contract win of the month, or the fourth of the year. Prospects for the O&G sector will be supported by a higher crude oil price environment. Stock trades at 41x annualised 1H21 EPS.
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