• OSK Holdings Bhd (OSK) operations history dated back since 1963 as a small scale local stockbroking company and has now evolved into a well-diversified mini-conglomerate with 5 major business segments.

• Stable loan portfolio expansion and gradual property development launches will continue to anchor growth.

• We initiate coverage on OSK with a BUY call and fair value of RM1.41, based on sum-of-parts model by valuing its capital financing and property business with 0.8x of BV, while the construction, industries and hospitality segment are pegged at 9.0x PE to FY23f earnings contribution.

Investment Highlights

• Well diversified mini-conglomerate. OSK has 5 core business in the financial services, property development, construction, industries and hospitality business. OSK also holds 10.18% equity stake in RHB Bank Bhd following the merger of OSK Investment Bank and RHB Investment Bank. The aforementioned strategic investment also allows OSK to reap benefits through long-term dividend income and subsequently translate to decent dividend yields over the years.

• Stable loan portfolio growth. OSK’s loan portfolio size has delivered gradual improvement over the years with manageable NPL ratio, demonstrating OSK’s ability to juggle between efficiency in customers’ selection, repayment collections and rising in size of portfolio value. Moving forward, we expect the loan portfolio value to balloon to approximately RM1.68bn by end-FY24f (from RM980.0m as at end-FY21).

• Progressive property development launches. OSK’s property business has demonstrate resilience despite the overhang of property market in Malaysia over the years with impressive take-up rates as bulk of its projects are skewed towards the affordable pricing that is targeted for the mass market. The move largely complements the previous Malaysia Budgets announcements that aim to tackle the homeownership affordability issue.

Source: Mplus Research - 13 Apr 2022