KUALA LUMPUR: UOB Kay Hian Malaysia Research expects market conditions will continue to favour small/mid-cap stocks, which have outperformed the FBM KLCI on a month-on-month basis in the last seven months.
The research house said this was one of the longest winning streaks in its 14-year performance review.
“Year-to-date (YTD), the FBM Small Caps Index has outperformed with a 21.7% year-to-date rise versus the KLCI’s 0.6%.
“We advocate being selective, picking beneficiaries of compelling investment themes or with specific event catalysts. These include Deleum, Barakah Offshore and Malaysian Resources Corp Bhd (MRCB),” it said.
UOB Kay Hian while small/mid caps have trounced the large caps’ YTD returns in all sectors under its coverage in 1H14, it reckons market conditions will still support further outperformance although it advocates being selective in stock picking.
“Valuation drivers include ample domestic liquidity amid government-led efforts to support undervalued small/mid-caps in Budget 2014.
“We also reckon retail investors, who have remained net sellers of Malaysian equities with RM500mil and RM6.5bil in net sell trades in 1H14 and 2013 respectively, would raise exposure in small/mid-caps.
“We also reckon the interest rate environment is still supportive, and even a potential further 25 basis point hike in the overnight policy rate (OPR) in September 2014 would not derail sentiment,” it said.
UOB Kay Hian said however, speculation in particularly the micro-to-small caps is stretched, for example companies trading at high multiples (nearing 10 times) or investors bidding up unproven conceptual stocks without perusing the strength of their business models (for example quality of earnings).
However, it pointed out that there was still value to be found. Small/mid-caps, as proxied by the FBM Small Cap Index, are up 21.7% YTD and 60.5% since the General Election in 2013, against the KLCI’s 0.6% and 10.8% respectively.
“Our top picks are MRCB, Deleum and Barakah (particularly its loan stock), while interesting situational stocks include Hong Leong Industries (see table overleaf).
“Notable NOT-RATED stocks include Suiwah, Tune Insurance and Heveaboard. Heveaboard’s earnings growth will be driven by higher operating margins from its expansion into higher-value ready-to-assemble (RTA) products, a more favourable product mix in the particle board segment, as well as a 50% decline in interest expense from 2Q14 onwards, having already settled its high-interest-rate term loans.
“Other beneficiaries of thematic investment plays include Sunway (emerging township in Medini, Iskandar) and SKP (cyclical recovery play).
“The recent retracement of HOLD–rated stocks that should rebound include Uzma and Tropicana. For year-end positioning, we like Perisai, Sunsuria and WCT,” it said.
Weekly Chart- Stage 2 of Market Cycle which is bullish. The Upward Trend is still intact. In Medium Term, it is expect to consolidate between $2.02 and $2.55.
Daily Chart- In short term, it is expect to consolidate in range of $2.32 and $ 2.47. A break below $2.32 may find $2.16 as strong support. A break above $2.47 may test resistance 1 at $2.55/2.7
Deleum has an RM3.3bil order book, which will last until 2023.
“This year we are aiming at a double-digit growth in earnings and revenue and to expand our oil field services and MRO segment,” he said, adding that the group had allocated RM160mil as working capital for this year.
Deleum’s core businesses are power and machinery (P&M), oilfield services and MRO......Starbiz
may due to Petronas is going to cut down on project plan budget, announcement made last week. Any hardcore supporter here got figure on Deuluem project from Petronas ?
base on history, there will be a interim dividend in sept.. price drop maybe due to possible bad quarter report and dividend expecte in these coming days
Whoa fantastic quarter ......... I believe this gem is going to fly sky high tomorrow !!!
1) QoQ - Better REV compare to preceding year corresponding quarter & last quarter 2) QoQ - Better EPS compare to preceding year corresponding quarter & last quarter 3) QoQ - Better 1st interim Div compare to preceding year Quarter (prior to bonus/split )
Introducing MY's First IPO Fund for Sophisticated Investors!
MQ Chat
New Update. Discover investment communities that resonate with your ideas
MQ Trader
M & A Value Partners IPO Equity Fund has been launched - Targeted 13% Return p.a
Latest Videos
0:17
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Dunknow
7,384 posts
Posted by Dunknow > 2014-07-31 21:07 | Report Abuse
hehehe,saw the news from thestar...at least relieve me,thanks bro....will continue hold it,be a royal fan!Let's do it