Valuations Stretched To Unjustifiable Levels But....

On the Edge Financial Daily. Market rally stretches valuations to unjustified levels, says Maybank Equity Research

• Market rally stretches valuations to unjustified levels, says Maybank Equity Research
  Written by Surin Murugiah
  Monday, 22 June 2009 11:00
  
  The market rally has stretched valuations to levels unjustified by earnings growth, since an economic and corporate earnings recovery is likely to be anemic, said Maybank Investment Bank Equity Research.
  
  Nevertheless, it said there is money to be made yet in equities, and the new prime minister's initiatives may inject positive sentiment.
  
  "A change in benchmark indices may introduce some volatility and large cap buying in early July. Risks include policy shocks should policies to address the financial crisis be reversed," it said in a note June 22.
  
  "We believe market valuations at 15.6 times and 14.2 times 2009E and 2010E earnings are expensive for the growth (-8.4%, +9.8% respectively) and the market is expecting an unrealistically rapid recovery."
  
  "The Malaysian market does not compare well against regional peers, especially Indonesia and Thailand, which have lower p/e and higher 2010 earnings growth," it said.
  
  Maybank Research said from a top down perspective, it did not expect much more upside from here, adding that to characterise the research house as bears would be inaccurate, since it has 33 buys against 29 sells.
  
  The research said the 30-stock FBM 30, to be adopted as the benchmark KL Composite index in early July, may not be universally adopted as the benchmark index due characteristics associated with its concentration in a small number of stocks and sectors.
  
  It said Public Bank, Bumi-Commerce and Resorts World benefit from a rise in their weighting in the benchmark index, while Petronas Gas, PLUS and Digi will have their index weighting reduced, regardless of whether the FBM100 of FBM 30 is chosen as the alternative benchmark.
  
  The research house said Prime Minister Datuk Seri Najib Razak would embark on new initiatives to reinvigorate the ruling coalition's popularity.
  
  "Hints have been dropped over relaxing certain Foreign Investment Committee requirements and embarking on a new economic model," it said.
  
  "The slow spending from the fiscal stimulus packages and weaker than expected 1Q GDP growth adds further pressure on the leadership, so the next two to three quarters are likely to be bumper ones for construction and building material companies."
  
  Maybank Research said its buy list included construction and buildings (Gamuda, IJM Corp, Sunway Holdings, Kinsteel, Lafarge, Hock Seng Lee), with some monopolies (Tenaga, Telekom, MAHB, PLUS, LITRAK) and selected consumer stocks (AEON Co, Resorts World, Guinness, KFC, JT International).
  
  Meanwhile, its top sells are stocks where prices have exceeded consensus target prices by the highest margin (SP Setia, Bursa Malaysia, MISC, KL Kepong, Asiatic Development), it said.

LOL! The first two lines kinda contradicted each other.

• The market rally has stretched valuations to levels unjustified by earnings growth, since an economic and corporate earnings recovery is likely to be anemic, said Maybank Investment Bank Equity Research.
  
  Nevertheless, it said there is money to be made yet in equities, and the new prime minister's initiatives may inject positive sentiment.

Strecthed valuations to unjustifiable levels...

but...but... but....

NEVERTHELESS .... money is there to be made.

LOL!

Nice one!

Macam mana ni bang?