2018 ended on a sour note for majority of the companies listed on the Malaysian stock exchange. With headwind expected to continue weighing on market sentiments, CIMB recommends to switch faith into these five MY stocks.
Investors Takeaway: Time To Switch Faith Into These 5 MY Stocks
- Dialog Group
Dialog Group has been on an upwards earnings growth trajectory which CIMB expects to continue in the years ahead, thanks to major tank terminal projects coming onstream. The major tank terminal projects include Pengerang SPV2 (Phase 2), Gas Malaysia expansion of Pengerang SPV1 (Phase 1) and commissioning of Langsat 3.
In particular, the Pengerang tank terminals business is slated to give Dialog significant long-term secular growth by opening up new plant maintenance and catalyst handling opportunities for Dialog in the years ahead. As such, CIMB foresees Dialog to continue to deliver strong results and earnings growth in 2019.
BUY, TP RM3.98; Current share price RM3.15
Genting continues to stand out among its peers and Malaysian stocks for its diversified and defensive earnings base. CIMB notes that Genting’s revenue comes from gaming operations (80 percent revenue from Genting Malaysia and Genting Singapore) supported by defensive power and plantation earnings.
With its first direct gaming operations Resorts World Las Vegas (RWLV) scheduled to be completed by end-2020, plans to takeover RWLV could trigger a re-rating in Genting’s share price.
BUY, TP RM8.90; Current share price RM7.10
- KPJ Healthcare
In 2019, KPJ Healthcare is set to benefit from the turnaround of its hospitals, which are currently in the gestation phase, of which CIMB forecasts two of the three hospitals will achieve this year.
The expansion plans of KPJ Kuching and KPJ Miri will further strengthen its network to capture more patient volume from both its new and existing hospitals. This will drive a core net profit CAGR of eight percent over the next three years. CIMB also notes that KPJ Healthcare’s cost optimisation initiatives will help the business boost its EBITDA margin, leading to stronger earnings.
BUY, TP RM1.27; Current share price RM1.07
- Kossan Rubber Industries
Kossan Rubber Industries (Kossan Rubber) is a laggard play. There were a series of concerns following delay on Plant 16 in 2018. Plant 16 was part of an aggressive capacity expansion plan that is supposed to help Kossan Rubber drive earnings.
However, the concerns have now been fully allayed after its commissioning in August 2018. Thus, moving forward, CIMB thinks that Kossan Rubber will be re-rated and will start trading closer to its peers from its current share price.
BUY, TP RM5.16; Current share price RM3.80
- Supermax Corporation
Another glove player that CIMB is positive on is Supermax. Like Kossan Rubber, Supermax has also been expanding its production capacity, which CIMB expects to rise to 25.6 percent by end-2019.
Given the high proportion of latex products in Supermax’s product mix, the low latex price and weak ringgit should give its earnings more boost compared to its peers. With Supermax trading at 14.1 times forward-FY20 earnings, Supermax is trading at a 48 percent discount to the glove sector’s average price-to-earnings of 26.8 times.
BUY, TP RM 4.47; Current share price RM1.64
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