IMPRESSION : Tough & Unpopular Budget. Meant for Middle Class Malaysians. Good attempt to reduce RM500 billion Malaysian Government Debt and RM700 billion Malaysian household debt. Bullish for Bursa Malaysia. Biggest winners – Oil Gas. Biggest Losers – Properties.
TOP FIVE NEGATIVE SURPRISEs :
(1) BR1M : BR1M is significantly lower than expected (RM650 instead RM1200) despite general election promise (consumer/retailer stocks eg AEON, Parkson, Amway may be mildly bearish here).
(2) GST : GST come higher than expected 6% instead of 4% (all GST tariff sensitive Tenaga, YTLPower, GasMsia & all tech/software players Censof, MyEG, Iris, DKSH, Inari & Gtronics should ram higher).
(3) RPGT : Properties gains tax is brutal than expected with rates double (15% to 30%) than last year (big five properties player should face selling next week UEMSunrise, SPSetia, IJMLand, Sunway, IGB).
(4) SIN TAX : No sin tax announced for cigarettes, brewery and gambling (Guinness, Carlsberg, JTI, BAT and all Genting stocks should theoretically go up).
(5) SABAH/SARAWAK : No mega projects for Sabah/Sarawak despite being the biggest BN supporters (Sarawak construction may face pressure especially Cahaya Mata Sarawak & Naim).
TOP FIVE POSITIVE SURPRISEs :
(1) INCOME TAX : Individual income tax rates to be reduced by 1%-3% for all tax payers. Maximum tax bracket to be increased from RM100,000 to exceeding RM400,000. Corporate tax rate to be reduced from 25% to 24%. (Beneficiaries : All Public Listed Companies in Bursa & All Malaysian Middle Class in particular)
(2) OIL GAS/POWER UTILITIES : More tax incentive for private investment (mostly come from oil and gas) with total private projects increase to RM189 billion or 17.9% of GDP. Petronas projects are likely to double by 2020 with projects in Sabah Sipitang, Lahad Datu and RAPID in Pengerang Johor to kickstart immediately. (Beneficiaries : Petronas Linked Oil Gas Companies should benefit Petronas Dagangan, Petronas Chemicals, SKPetro, Uzma, Dayang, Deleum, Coastal). A sum of RM865mil is allocated to boost power supply nationwide (Beneficiaries : Utilities player eg Tenaga, YTLPower & GasMsia).
(3) TECHNOLOGY : Government will increase allocation/incentives to spur innovation and productivity of SMEs. (Beneficiaries : Censof, MyEG, Iris, DKSH, Inari & Gtronics)
(4) TELCO : Government will increase Internet access in Sabah and Sarawak with underwater cables, build within 3 years, at a cost of RM850 million. Government will implement second phase of High Speed Broad Band (HSBB) at total cost RM1.8 billion, benefiting 2.8 million households, increasing Internet speed to 10 Mbps (Beneficiaries : Maxis, Axiata, Digi & TM).
(5) TOURISM : RM1.2 billion allocated to implement Visit Malaysia Year 2014, targeting 28 million tourists. Another RM2 billion allocated to the Special Tourism Infrastructure Fund under Bank Pembangunan Malaysia, to build hotels, resorts, airports and theme parks (Beneficiaries : Malaysia Airports & Shangrila).
OVERALL : Budget 2014 should be bullish for the stock market. It push through tough unpopular reforms to inspire investors confidence, reduce debt/deficit while maintaining a caring stance. Given that, let’s bet both Ringgit & FBMKLCI Index should go up next week.
TOP 20 STOCKS/WARRANTS TO BUY :
(1) Bursa Malaysia (2) Tenaga (3) YTL Power (4) Gas Malaysia (5) Globetronics (6) Maxis (7) Malaysia Airports (8) Petronas Chemicals (9) Petronas Dagangan (10) Uzma (11) Deleum (12)Dayang (13)Shangrila (14) Century Software (15) Iris (16) Bursa Malaysia WA (17) Century Software WA (18) YTLPower WB (19) Inari WA (20) Iris WA.
Good Luck !
