KUALA LUMPUR: Defensive stocks with high dividend yields and are beneficiaries of the strong US dollar may most likely become market winners in the short to medium term.
Some stock picks for this month by UOB Kay Hian Research indicated that the stocks are also beneficiaries of the reopening of the country’s border and stronger US dollar against the ringgit.
“While the market mindset is focused on capital preservation as the US quantitative tightening unfolds, we foresee modest capital gains from selected beneficiaries of the US dollar which had appreciated some 3.6% in April compared with the ringgit.
“This will also benefit exporters in the electrical and electronics (E&E) sector, selected commodity-based companies and enhance the transaction gains of companies with foreign subsidiaries,” the research house said.
“The prominent domestic events in April were the reopening of Malaysia’s borders, the restarting of foreign worker recruitment and the strong pre-Hari Raya sales which were likely boosted by the Employees Provident Fund’s special RM10,000 withdrawal scheme,” it added.
It also noted that the upcoming results season should see meaningful earnings uplift for selected plantation, E&E and gaming companies, which should prompt some re-rating of these sectors.
UOB Kay Hian Research’s alpha stock picks for this month are Genting Malaysia Bhd, Hap Seng Plantations Holdings Bhd, Heineken Malaysia Bhd, Magnum Bhd, Sunway Real Estate Investment Trust, Time dotCom Bhd and V.S. Industry Bhd.
Genting Malaysia is currently one of the cheapest casino stocks globally and is expected to provide a high dividend payout in this and the next year with forecast yields of 4.9% to 6.7%.
This puts Genting Malaysia as one of the top-yielding Bursa Malaysia listed companies.
Apart from the high dividend yield, other catalysts include recovery in revenue resilience and steady streams of cash flows for this and the next year on business normalisation.
“There is also a potential pent-up demand from domestic visitors to Resorts World Genting in tandem with the ‘revenge spending’ phenomenon. Resorts World New York City is also bidding to be a full-fledged casino in 2022,” it said.
Meanwhile, Heineken is expected to see a paced recovery over the next two years and the stock offers attractive earnings growth.
“Our volume growth assumptions of 13% and 10% for 2022 and 2023 projects that beer volume returns to pre-pandemic levels in 2023.
“Apart from the volume recovery and economies of scale, Heineken offers a two-year earnings compounded annual growth rate of 16.4% from 2021 to 2023,” it said.
The research house added that the increased confidence among consumers and a return to a pre-pandemic lifestyle should further spur overall beer consumption.