Stocks to watch after budget 2014
Prime Minister Najib Razak unveiled his government’s budget for 2014 on Friday, some of the measures are as expected such as the implementation of GST and the rise of real property gain tax (RPGT) to control the overheated of property market. The government is seeking to reduce the national debt and increase national revenue from this budget.
There are companies that will benefit from the government spending, many of them are under-valued stock counter that might be boosted after the stimulation of this budget , the affection of this budget to a range of industry should not be neglected, let’s take a look.
Implementation of GST on April 2015
The implementation of Goods and services tax by 6% gives impact to many of the companies to change their internal business system, despite the 6% GST is actually the lowest among the ASEAN countries. The government allocates 150 million to the small and medium enterprises for their accounting software upgrades, and also 100 million allocations to the companies that send their employees for GST training in 2013 and 2014. The spending to upgrade or replace the government internal software and the corporate software will contribute huge revenue to the related software companies.
Potential beneficial company
– Century software- Censof provide its software solution to over 100 government agency/ department, in additional, with the purchased of TIME Engineering recently, its revenue is believed to have positive impact in the near future. Censof’s GST ready accounting software and training services puts it on great advantages to benefit especially from the government agencies.
– MYEG- MYEG is a company which develops and implement of the electronic government service project and software solution, the company’s constantly release of new services makes it a prospected business in the future, especially during the digital and broadband era.
Building affordable homes and rises of property taxes
An estimated of 223,000 units of new houses will be built by the government and the private sector in 2014 to further increase access to home ownership for lower and middle class. On top of that, the robust rising of RPGT provide more chance for people to afford house by stabilizing the housing price.
Potential beneficial company
– Gadang- Benefited from the government project of low cost housing. Rumors state that it will be the main beneficiary under government budget plan as it won its maiden affordable housing development under the 1Malaysia Housing Programme. In spite of that, this company has a boost in its recent quarter earnings and it declared a 3 cents dividend on 25 OCT.
– Huayang- Another low cost hosing builder with its net profit recorded at high.
Development in the public TELCO service
Government is to increase the internet access in rural area and carry out second phase of high speed broadband project with the private sector, especially in Sabah and Sarawak, new underwater cables will be laid within three years at a cost of 850 million ringgit. In addition, 1,000 telecommunication transmission towers will be built in the next three years.
Potential beneficial company
– Instacom- Instacom is an East Malaysia company that specializes in building communication tower and the civil work related to tower erection and fiber optic installation. Instacom has planned to install fiber optic cable throughout the peninsular Malaysia. While the government is putting weight to develop the Telco service in east Malaysia, Instacom will be the major winner among the players.
– Redtone- With government planning to enhance the public Telco service, Redtone, the wifi infrastructure builder in Malaysia undoubtedly will be the beneficiary of this trend. Moreover, Redtone just declared a 10 times increase of its 1st quarter net profit.
– Weida- Another potential beneficiary with its main company at Sarawak, Weida is a Telecommunication infrastructure builder, it possessed the contract from the main Telco service provider like Maxis and Digi. This company also ventures into the environmental structure business, which can gain part of the advantages from the government plan to develop east Malaysia.
A total of reaching RM106 billion has allocate to the public investment in this budget, a lot of previously approved project is to be continued. A lot of projects that didn’t been mentioned during the budget might also be continued, such as the Menara Warisan project and Tun Razak exchange.
– West Coast Expressway- This project mainly run by two local listed companies, Kumpulan Europlus (KEURO) and IJM Corp. KEURO owning 80% of the project while IJM owned the rest of 20%. IJM is the major shareholding on KEURO with the holding of about 23% of stakes, thus these two companies can be the mutual beneficiary of each other in this project.
– Double-tracking rail project- This project carried out by MMC-Gamuda, the joint venture between this two construction giant. Some steel companies like Masteel and AnJoo steel are worth paying a watch as they are the potential indirectly beneficiary companies out of these projects.
– Project related to oil and gas sector- Projects undertaken by Petronas include Sabah Ammonia Urea Project in Sipitang; integrated oil and gas production development project, Kebabangan; regasification plant project and RAPID project will provide advantages for those oil and gas company. The government announced to put a weight especially in the transportation related to oil and gas, making the companies providing carriers on the O&G sector like Coastal, Alam maritime, TAS, Daya and Perdana. Some of the Oil Companies to be watched included Dialog and SKPetro.
– Aviation- The propose of replacement of existing air traffic control and management system in Subang, a new air traffic management centre costing RM700 million will be built at Kuala Lumpur International Airport (KLIA). This included the upgraded project in Kota Kinabalu, Sandakan, Miri, Sibu and Mukah airports. Potential beneficiary included AIRPORT.
The remain of sin tax in this budget remains the tobacco and alcohol companies’ outlook, counters like BAT, Carlsberg, BJTOTO, GENM and so on will be in cheers.
The allocation of various subsidies for senior citizen and youngster will boost retail business, stimulating retails goods selling, although this impact is not big, retail business like AEON and Parkson remains the interest to put in attention.
The allocation in health care of the people can benefit some of the government- link hospital like KPJ.