#Stocks To Watch* Battered stocks, Public Bank, plantations, Digi and SP Setia

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KUALA LUMPUR (Feb 6): If investors could ignore the current political risk in Malaysia, stocks to watch on Thursday (Feb 7) may include battered index-linked big cap stocks, Public Bank, Digi, plantations and SP Setia.

Malaysia has to hold its 13th general election by end-April 2013. And for this reason, the stock market has experienced three pre-election scares since late January – including the one today.

Marred by election risk, the FBM KLCI was hit by another round of sell-off on index-linked stocks by funds. It fell as much as 1.4% at mid-afternoon despite gains across regional markets. Analysts said investors also cleared their positions ahead the long weekend-Chinese New Year break (Feb 9-12).

At 5pm today, the benchmark dived 19.21 points or 1.19%, to close at 1,614.14.

Beaten down blue chips with large foreign holdings such as KLK, BAT, Nestle, HLFG, HLB, Digi, PPB, GAB and Axiata may regain some composure if election fear fades off. The bashing may cause value of quality stocks to emerge and bargain-hunting may help boost prices of some stocks.

However, with Reuters reminding the market of political risk in Malaysia through its report today, these stocks and other index linked stocks may sink further.

Prime Minister Datuk Seri Najib Razak’s ruling BN coalition is expected to win a tight race but the opposition is well placed to undermine Najib's standing, Reuters said in its political risk report.

An opinion poll released in January by a respected university put the coalition ahead of the opposition by 5 percentage points, with 21% of those surveyed still undecided.

If the market behaves in a normal manner, Public Bank Bhd – one of the few quality stocks that rose slightly today -- may lure some trading interests due to improved results.

The banking group reported a 9% year-on-year rise in its fourth quarter net profit. It said net profit came to RM992.47 million in the quarter ended December 31, 2012, against RM913.39 million a year earlier while revenue also grew by 9% to RM3.63 billion from RM3.32 billion.

"The improved earnings was mainly due to higher net interest income and lower loan impairment charges resulting from strong loans and deposits growth and stable asset quality, higher net fee and commission income partially offset by higher other operating expenses," Public Bank said.

Public Bank's full-year net profit rose 5% to RM3.87 billion from RM3.68 billion a year earlier and revenue was up 10% to RM14.06 billion from RM12.76 billion.

The group expects to sustain its strong market position within the retail-loan segment due to growth in consumer credit and small- and medium-sized enterprises loans. It sees opportunities in residential property loans due to government initiative to increase home ownership.

On the back of a high inventory, plantations counters may wonder whether they should dance with the launch the long-awaited biodiesel 10% blend (B10) tomorrow, a move expected to slash palm oil inventory by one million tonnes.

The launch will see the use of B10 in the vehicles of the Ministry of Plantation, Industries and Commodities. Eventually, it is expected to be used by commercial vehicles.

Local palm oil stock levels hit historical high at 2.63 million tonnes at the end of December 2012.

The implementation of the B10 is expected to boost crude palm oil prices, currently at about RM2,400 per tonne.

Digi.com Bhd, whose share plunged 26 sen to RM4.66 today, may continue to fall if investors are not happy with its results.

The company posted a net profit of RM245.52 million for its fourth quarter ended Dec 31, 2012, down 37.72% from RM394.23 million a year before on the back of higher depreciation and amortisation charges.

Digi announced a 5.16% hike in revenue for the same quarter to RM1.63 billion compared to RM1.55 billion in the corresponding period the prior year.

“4QFY12 service revenue was sustained by strong data performance in the quarter whilst voice revenues were slightly lower than previous quarter. The slight reduction in voice revenues in 4QFY12 was anticipated; mainly driven by continuous data shift and competition,” said Digi.

For the full FY12, Digi reported a 3.88% drop in net profit to RM1.21 billion from the previous year on the back of a 6.66% surge in revenues to RM6.36 billion.

But Digi declared a fourth interim dividend of net 2.5 sen, bringing total dividends for FY12 to 26.3 sen.

On its outlook Digi said: “We believe industry revenue growth still will be around 5% and that the group can deliver higher growth in the range of 5% to 7%”.

SP Setia Bhd, whose share price also took a beating today, is proposing a mixed-development project on 194.65 acres of land in Gombak, with estimated gross development value (GDV) of RM1.24 billion.

The giant property group said it has proposed a joint venture between its subsidiary Rockbay Streams Sdn Bhd – the project’s developer – and land-owner Cash Band Bhd.

The development, to take six years, will comprise residential and commercial properties on three parcels of leasehold lands in Gombak. Under the proposal, Rockbay Streams will pay Cash Band at least RM200 million.

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