Stocks worth watching on Bursa Malaysia

Here's a handful of picks that have the potential for huge success.

COMMENT

By V Bharathi

Every investor going into the market cherishes the dream of spotting blue chips in the making. In chasing that dream, one focuses the better part of investing time in hunting small-cap to mid-cap stocks that are likely to deliver the best results.

However, more often than not, one tends to ignore some of the value picks lost in the hundreds of stocks listed on Bursa Malaysia.

It is, no doubt, difficult to decide, but press reports and research notes that brokerage houses regularly send to their clients have an immense amount of information that help.

The slowing global economic environment has increased risks to earnings. Analysts say it will be the fundamentals of listed companies that will drive their performance and reward shareholders. They say promising companies are the ones that are well managed, fairly capitalised and are engaged in businesses that are not too complex to understand. Their stock prices are strong and they are managed by shrewd people with the ambition to undertake a long and successful journey.

The following stocks are high on the radar of research houses.

Kossan Rubber Industries

At Kossan, billions of gloves are rapidly moving out of an expanded production line, pushing profits to new highs. Investors were alerted when the Employees Provident Fund took a stake in the company. As an immediate consequence, the stock price hit a 52-week high of RM7.50, up 59% from a year ago. The company has made rapid strides towards establishing an identity through innovation and exploration into globalised frontiers for new business.

Inari Amertron

There is nothing more fascinating than the world of technology, and this company is right in the middle of it. The company’s thriving business is related to the surging growth for its key radio frequency chips, which are used by top-tier smartphone devices. According to AmResearch, the chips are much sought after by smartphone companies in China such as Lenovo and Xiaomi. There is an ardent ambition to grow and succeed, as reflected in its consistent earnings and evident in its target price call of RM4.10.

Malaysian Pacific Industries

Here is another powerful tech player, one which chooses to stay away from the limelight.

MPI, one of the fastest growing tech-related companies in Malaysia, caters to a large global market, driven by technological considerations. As Kenanga Research says, it has a healthy and strategic product mix in smartphones and tablets, which gives a balanced exposure of cyclical and defensive segments. What came as a surprise was the emergence of Carsem, a subsidiary that was crowned as the world’s No 1 volume producer of the micro leadframe package. The stock has hit a high of RM7.25.

Pestech International

Pestech is an entrenched player in the power industry with a firm business grip of the sector in our part of the world. To generate continuous profits, the company strikes out strongly to win contract bids, with its young and energetic chief executive officer Lim Pay Chuan scouting all over South East Asia. According to Kenanga Research, winning new deals in the Mekong Delta countries is definitely a prize catalyst for the company and the recurring income of up to RM20 million per annum will put the company in good stead. The stock price recently stormed 40% to a 52-week high of RM5.95.

IHH Healthcare

This company is in the grip of a strong expansion mode and its foray into India to take over Global Hospitals is its latest. India is one of the fastest growing hospital markets in the world. Its market size is projected to reach US$158 billion by 2020 from US$75 billion in 2015. IHH also has a presence in Singapore, Turkey and, of course, Malaysia, and is backed by strong fundamentals. It will continue to grow, given (1) the interest in increasing life expectancy, 2) the prevalence of lifestyle/chronic diseases, 3) the increasing interest in medical tourism, 4) the penetration of private health insurance into the market, and 5) increased affluence. The stock price has quietly reached a high of RM6.45. Furthermore, IHH won two awards in Euromoney’s Best Managed Company Survey in 2015.

Digi

To Digi’s energetic new chief executive officer, Albern Murty, capability-building and innovation are keys to the success of the mobile marketing industry amid intense competition. In light of the rapid evolution of technology, it is important for the organization to be focused on a consumer-centric approach. Maybank-IB has echoed the views held in the industry that Digi’s track record in execution and earning delivery is exemplary. It’s a strong dividend paymaster and the stock has a target price of RM6.75.

Analysts following these stocks say one factor becomes abundantly clear when investors understand these stocks, and that is, the market is rewarding their strong consistency in performance.

Investors are keen to buy solid businesses and will forgive them if they fail in having the greatest upside potential, but they must prosper and make their dividends grow. According to research houses, these stocks are attractive buys for the long haul rather than the short term.

 V Bharath is an FMT reader