In the previous articles, we talked about the outlook and strategies for the Malaysian stock market as highlighted by MBKE and CIMB Research.

In this instalment, we look at four stocks that MBKE and CIMB Research recommend investors to own in 2H17 as part of their investment strategies.

1. Tenaga Nasional Berhad

Under its transmission and distribution (T&D) earnings regulated by the incentive-based regulation (IBR), Tenaga Nasional is only allowed to make a 7.5% return on its (T&D) assets.

It is currently in talks with regulators for the new set of rates for its upcoming term in 2018. There are fears that the new set of rates will only allow Tenaga Nasional to earn 6.5% return, which is equivalent to RM1 billion per annum.

Despite concerns on the rates that it can make under the IBR, CIMB Research believes that Tenaga Nasional still offers a good investment. CIMB Research attributes this to Tenaga Nasional’s strong organic earnings growth potential as it looks to build four new power plants.

The market appears to have underappreciated Tenaga’s stronger earnings growth potential compared to its peers.

CIMB Research: Tenaga Nasional Berhad (KLSE: TENAGA) – BUY; Target Price MYR16.30

2. Sime Darby Berhad

Sime Darby

Sime Darby announced early this year that it is planning to spin off its plantations and property business in separate listings on Bursa. The exercise will lead to the spin-off of Sime Darby Plantation, making it the largest palm oil plantation company in the world.

Following the spinoff, Sime Darby Property will also become Malaysia’s largest property developer in terms of landbank. CIMB Research thinks that the spinoff could help Sime Darby to unlock value in its individual businesses as pure plays.

The businesses were previously underappreciated due to the discount attached to its conglomerate structure.

CIMB Research: Sime Darby Berhad (KLSE: SIME) – BUY; Target Price RM10.10

3. Sasbadi Holdings Berhad

Sasbadi

Sasbadi Holdings is a publisher of educational materials and also runs an education MLM business. As an education and MLM business, CIMB Research rates Sasbadi Holdings highly for its defensive qualities.

Under its education business, Sasbadi has been developing its robotics technology education division. Sasbadi currently has a tie-up with University Malaya to certify its robotics education classes.

Sasbadi is looking to franchise its robotics technology education division to reach a wider target audience, especially as the government focuses on building Science, Technology, Engineering and Mathematics (STEM) education.

With a healthy balance sheet, CIMB Research highlights that Sasbadi is in a financially strong position for M&As. The management has also signalled its intention to target at least one M&A annually.

CIMB Research is confident that any M&A actions will likely boost its earnings.

CIMB Research: Sasbadi Holdings Berhad (KLSE: SASBADI) – BUY; Target Price RM2.82

4. EITA Resources Berhad

EITA Resources is a small-cap company that manufactures and installs elevators, escalators and bus duct systems. EITA Resources is currently the leading domestic player in the elevator market with a 10% market share.

According to CIMB Research’s analysis, EITA Resources will benefit from the tailwind of major construction projects in Malaysia. EITA Resources joined the bidding for the MRT installation elevator project for MRT2. The winning bid is expected to be announced in the coming months.

As the only major local player bidding for the job, CIMB Research believes that EITA Resources stands a good chance of winning at least one of the MRT2 elevator job packages. The tenders for LRT3 is also likely to open up soon and EITA Resources is expected to join in the bid.

Another tailwind for EITA Resources comes from the “constant flow of affordable condominium launches in the country over the next few years”. With the shortage of land in Klang Valley, developers are launching more affordable high-rise apartments in the area.

EITA Resources’ elevator division, which is focused on the mid-market segment, should benefit strongly from the shift in development to the mid-market segment.

CIMB Research: EITA Resources Berhad (KLSE: EITA) – BUY; Target Price RM2.40

Upcoming Event

SIConv2017 - article ending-min

We managed to invite a few popular names in the finance and investment education world to speak at our upcoming Shares Investment Convention on 16 September 2017 (Saturday)!

They’ll be covering topics on personal finance, macroeconomics and investment strategies to help retail investors make more shrewd decisions especially in the current uncertain and volatile economy. Click on the button above to learn more and grab your early bird tickets. See you there!

P.S. Don’t forget to enter promo code “SHARES10” for a $10 discount!