Market sentiments remain dampened by external concerns. In Malaysia, the new government’s policies signaled business-friendly overtures. Moving forward, UOBKH believes that there are a number of catalysts that will drive a rise in share price of selected MY stocks. These catalysts include asset monetisation, recovery in earnings and potential relocation of some manufacturing supply chains due to the trade war. Among the stocks in its coverage, here are five MY stocks that UOBKH recommends for investors looking for double-digit returns.
Investors Takeaway: Aim For Double-Digit Returns With These 5 MY Stocks
- CIMB Group
Despite just coming through a challenging period, CIMB’s 2Q18 core underlying operating metrics remained stable. UOBKH also noted that some of CIMB’s metrics like opex, asset quality and stable fee income growth even improved.
With the recent rupiah weakness coupled with rising interest rates in Indonesia, UOBKH believes that it is unlikely to materially impact CIMB Niaga’s asset quality and provisions. But this could lead to a potential share price weakness. However, UOBKH thinks that this will be a solid opportunity to accumulate CIMB as core operating metrics remain stable with attractive valuations.
At its current valuation, UOBKH thinks that CIMB is attractively priced at 11.6 times forward-FY18 price-to-earnings (P/E) against its 5-year historical mean of 13.3 times. From a price-to-book value (P/B) perspective, CIMB is also rightly priced at 1.10 times forward-FY19 P/B against its historical mean of 1.2 times.
BUY, TP RM7.00; Current share price RM5.79
- Gabungan AQRS
Gabungan AQRS is an execution play that is trading at a reasonable valuation and strong fundamentals. Gabungan boasts a strong outstanding order book of RM2.5 billion as of June 2018 (2.3 times forward-FY18 revenue), and a five-year plan to resuscitate its property arm. UOBKH expects its revived property arm to contribute considerable earnings in the coming years through key projects like E‘Island in Puchong and The Peak in Johor.
Right now, Gabungan is trading at a mere 5.9 times forward-FY19 PE before factoring in mega project subcontracting works. Moving forward, Gabungan is targeting to secure more than RM1.5 billion worth of contracts, mainly from Pan Borneo Highway Sabah (PBHS) and other civil contract works. With a commitment to dole out property development cash flows as dividends, investors can potentially achieve about 9 percent yield by investing in Gabungan.
BUY, TP RM1.86; Current share price RM0.95
The development of KL City Project in Bukit Jalil and sales of Eastern Dispersal Link (EDL) are expected to strengthen earnings and balance sheet, according to UOBKH. On top of its KL City Project and divestment in EDL, MRCB is also backed by a strong order book backlog of RM6.2 billion. This will provide earnings visibility for its construction arm for the next 3- 4 years coupled with its modest reliance on federal government’s related projects. Putrajaya’s recent nod to proceed with LRT3 project should be viewed as a positive catalyst for MRCB as it continues to lead as the project delivery partner (PDP).
BUY, TP RM0.98; Current share price RM0.74
With its manufacturing plants located in Malaysia and in US, Scientex is one of the forerunners to be a potential winner in the escalating US-China trade war. Its prospective 12 times forward-FY20 PE is an undervaluation with respect to its 30 percent production growth. In addition, with a take-up rate of 70 percent from RM1.2 billion worth of property launches in FY18, UOBKH expects Scientex’s property revenue to jump in FY19. The expected 30 percent revenue growth is also being underestimated by the market, leading to a gap in Scientex’s valuation that investors can take advantage of.
BUY, TP RM10.41; Current share price RM8.51
- Cahya Mata Sarawak
Cahya Mata Sarawak’s share price slid in recent weeks due to its association with alleged scandals by the Taib Mahmud family. However, UOBKH thinks that the negative sentiment will soon tide over. The current weakness in share price presents a good buying opportunity as Cahya Mata Sarawak’s earnings get back on a recovery path. The major turnaround at OM Sarawak will drive the earnings improvement and beat consensus expectations.
BUY, TP RM4.20; Current share price RM2.73
SI Research: Should You Put Koufu Group On Your Plate?