KLCI hit 1640 and closing to 1650, we sold high PE and swap to low PE

We sold UMW at RM 10 half of our portfolio. Also to Oldtown RM 2, half of what we are holding. We changed it to Tomei, Spritzr, UOAREIT, Allianz. We believe this round the crisis is well shield-ed. Everything back to earnings instead of timing. We staying invested but will be cautiously optimistic and defending as strategy.

We believe KLCI will maintain above 1550-1600 after General Election

Many people are in doubt about the market and feel it is very artificial. To a certain degree i do agree because they are a lot of PE 14 – 15 times counters in the market compare to below 10 times in China, Hong Kong, US, UK, Australia and Singapore.

However, our market has been semi closed up nd not highly depending on foreign funds for sometimes. We believe a few keys factors will keep the market above 1600. 1st Najib administration is pretty good capitalism. They are maximizing values of government assests in Malaysia. In short, he knows how to make good price of stock. 2nd Money become smaller, i maintain this and i do agreed to Jim roger that QE3 is somehow coming. 3rd Malaysia has created a successful internal demand.

But i do worry, crime rate, education and politics are road block to any uncertainties. In summary, we revised our year end target to above 1650 towards 1700 before election.

Speculative target – Teledata and Bingo

Nothing change from our view point although we have missed the chance to dispose Teledata before right issue exercise at 0.030 level. However, we continue to call for a mildbuy if below 0.010 level and we will continue to monitor its performance.

For Bingo, we are surprise the restructuring speed of Stephen Chow. We will give him another 6 months before we decide the next move. We have stopped purchase of its share pending more actions from him.

Top 5 Picks from J&J for 2nd Half 2012

1. Allianz – Current price RM 5.00 and target price RM 8.00 – RM 10.00 depending on quarterly results. VW business is growing strong and we are expecting VW will become a major brand in Malaysia ahead of Toyota and Honda soon. Besides, conventional life insurance and funds will continue to do well.

2. Spritzr – Continue to deliver steady grow result with its recent Air Asia deal, we expect even a better result ahead. We likes Spritzr because of its continuous brand building and quality enhancement of its product and service portfolio. Our fair value target of this brand should be at RM 1.00 above. No dispute.

3. FocusP – Following brand building, FocusP is venturing into different but related industries on eye sight, new market – Indonesia and more agressive promotion on major shopping malls. We still think a fair PE of 8 to 10 times compare to current 5-6 times PE yearly. We target FocusP 12 months performance to be RM 0.45-0.50 plus a 4-5% dividend yield.

4. Tomei – Our continue jewel if below RM 0.800 and we are continuous nibbling.

5. Affin – We expect an M&A will be soon landing onto Affin and we believe given its majority share holder is Tentera. A fair value of government link acquisition from Maybank, CIMB or RHB will be around RM 4.50. Thus it is a buy as current PE still around 10 times plus dividend yield around 4-5%

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