Updating for our latest calls and changes in the constituents, we downgrade EQ8 DJ Islamic 25 to HOLD (from BUY) at a lower target price (TP) of RM1.10 (from RM1.18 previously). Our TP implies an 8% upside, mainly driven by our Overweight on Plantations, as we expect 2025F CPO prices to average at RM4,250/tonne (+6% YoY). We are relatively more bearish on rubber gloves, as we believe valuations have more than priced in the earnings recovery.

• Downgrade to HOLD. We lower our TP for EQ8 DJ Islamic 25 to RM1.10 (from RM1.18). We revise downwards our TP for Inari Amerton (-36%), Dialog (-32%) and Nestle (-37%). This also reflects a 30% cut to consensus TP for QL Resources. In 3Q24, two property stocks, Mah Sing and Sime Darby were included in the universe, replacing Fraser & Neave (F&N) and Dagang Nexchange (DNex).
• Upside driven by Plantation. We are Overweight on plantation, the second highest sector of ETF weightage. This is driven by expectations of stronger CPO prices in 2025F, averaging RM4,250/tonne (+6.3% YoY). This is supported by supply tightness in palm, rapeseed, and sunflower oils. CPO exports are expected to face challenges due to Indonesia's increasing domestic consumption, driven by biodiesel demand and restrictions on overseas shipments.
• Neutral on Telecoms. Outside of plantations, a large portion of our returns is also derived from telecoms. We believe potential market consolidation can reignite interest in the sector, due to potential synergies and healthier competition. Even if it does not materialise, we believe negatives that have dragged the sector have been priced in, supported by a stabilisation of incumbent service revenues and continued cost cutting efforts.
• Relatively more bearish on rubber gloves. We believe valuations have more than priced in the earnings recovery. While we acknowledge that a steep increase in import tariffs on China-made gloves will benefit Malaysia, we foresee potential risks that can derail the earnings recovery. This includes uncertainties surrounding US trade tariffs on all imported goods, a freeze on foreign labour hiring and the expansion of Chinese glove manufacturers outside of China to circumvent tariffs. 

Source: AmInvest Research - 20 Dec 2024