It is typically hard to find dividend growth. Here are three Malaysian stocks that CIMB believes will offer investors investment opportunities for the dual play.
Investors Takeaway: 3 MY Stocks That Offers Dual-Plays
- Lotte Chemical Titan
CIMB regards Lotte Chemical as an attractive dividend and growth play, thanks to its strong earnings recovery, growth initiatives and high dividend yield.
Lotte Chemical is on track for its next phase of growth with its three growth projects (PP3, Integrated Petrochemical Facility in Indonesia, and ethane cracker in the US) on track for operation. The PP3 project will expand its polypropylene (PP) capacity by 200kilotonne per annum (ktpa) and will commence operations in 2H18.
Lotte Chemical’s 40-percent-owned ethane cracker in the US to produce 360ktpa ethylene and 280kt mono-ethylene glycol (MEG) is now 78 percent completed and slated for commercial start up in 1H19F. Moving forward, Lotte Chemical will also be making the final investment decision on whether to invest in the 1mtpa ethylene project in Indonesia in 1H19.
With a valuation at only 6.7-7.2 times FY18-20 earnings Lotte Chemical is attractive given its improving earnings growth visibility and growth outlook.
BUY, TP RM7.50; Current share price RM4.98
- YSP Southeast Asia Holding
YSP Southeast Asia Holding (YSP) concluded 2Q18 on a weaker set of results due to seasonally weaker demand, lower economies of scale and less profitable product mix. However, 1H18 still beat consensus expectations, thanks to higher sales volume and more profitable product mix in 1Q18.
Moving forward, the new government’s plans to raise Ministry of Health’s budget allocation will help to drive demand for drugs and medical supplies. As a pharmaceutical company, YSP will benefit from the increase in demand for their manufactured drugs.
YSP has an attractive risk-to-reward profile at 10.5 times FY19 price-to-earnings (P/E) and robust earnings growth prospects of FY18-20 compound annual growth rate of 16.1 percent. Stronger-than-expected local sales could help YSP re-rate its share price in the medium term. CIMB also notes that YSP’s net cash position could give YSP the option to fund possible value accretive acquisitions, which could act as another share price catalyst.
BUY, TP RM4.00; Current share price RM3.23
- Astro Malaysia Holdings
Despite news of liberalisation of the pay-TV market in Malaysia, CIMB thinks that Astro Malaysia Holdings (Astro) will survive the challenge. Firstly, Astro is technically not a monopoly in Malaysia. Astro is no stranger to competition. It has been facing mounting competition since its inception due to pirated content. Internet streaming has also opened up access to global content providers, which are providing challenges to Astro. Furthermore, CIMB thinks that Astro’s main risk comes from the ubiquitous piracy market.
Astro’s strength has always been to offer unique content to its consumers. This will be difficult for the aspiring pay-TV broadcaster to catch up in terms of building up its infrastructure and subscriber base. Moreover, content costs tend to perennially escalate and require scale to be profitable. However, there is a possibility that the newly elected government could instruct Astro to share some of its popular content rights with another broadcaster, just like how Singtel was forced to cede its exclusive rights to broadcast the Premier League.
BUY, TP RM2.70; Current share price RM1.70
3 MY Value-Growth Plays