The Kuala Lumpur Composite Index (KLCI) will continue to head higher in 2018, according to CIMB’s analysis. CIMB’s end-2018 target for KLCI is 1920, which represents an 11 percent upside to its last close. There are a few particular segments that CIMB recommends for investors with stronger risk appetite.
With the small and mid-cap stocks underperforming this year, CIMB believes that 2018 will be time to switch to the small and mid-caps. Among the universe of small and mid-caps, there are five stocks (with potential for double-digit returns) that CIMB highlighted as its top picks.
Investors Takeaway: 5 Small And Mid Caps With Big Returns For 2018
1. Bonia Corporation
Bonia Corporation (Bonia) has been working on paring down its loss-making licensed brands and non-profitable boutiques and counters to raise its bottom line, targeting to narrow the losses in FY18 and potentially breakeven by FY19. So far, Bonia has been making good progress in reducing its loss-making brands and boutiques. Going forward, Bonia will start to realise a full-year’s contribution from its Braun Buffel Indonesia unit. CIMB expects the paring down and strategy realignment for its inhouse brands to be catalysts for its share price.
BUY, TP RM0.78 (Current Share Price: RM0.52)
2. Unisem Group
Unisem Group (Unisem) offers full turnkey solution from package development to assembly and testing, packing and a full range of wafer bumping services. While Unisem is not your average kind of sexy stock, CIMB recommends it for its positive outlook in 2018. With a resilient industry demand outlook and strategic shift towards advanced packaging, Unisem is expected to reel in a bumper year in 2018. Unisem should register record stronger earnings in FY18, based by CIMB’s estimation.
BUY, TP RM5.00 (Current Share Price: RM3.61)
3. Berjaya Food
Starbucks will continue to be the Berjaya Food’s key growth driver, according to CIMB. Berjaya Food’s positive earnings trajectory should continue on the back of its healthy store expansion programme, with some 25 to 30 stores a year. Berjaya Food has also been working to dispose its loss-making food brands like Kenny Rogers Roasters (KRR) in Indonesia and Jollibean franchise in Singapore. CIMB believes that concrete plans of the disposal could bring back investors’ attention to Berjaya Food.
BUY, TP RM1.96 (Current Share Price: RM1.74)
4. Oceancash Pacific
Oceancash Pacific (Oceancash) is a leading manufacturer of non-woven fabric, thermal bonded non-woven and felt products. CIMB believes that Oceancash should expect to see volume growth in both its hygiene and felt segments in 2018. According to CIMB, the group should begin to secure orders from a large global MNC from 1Q18 onwards, after delays due to the prolonged testing period. Felt sales volume are set to improve in tandem with higher orders from its Indonesian factory as well as a recovery in Proton’s sales volume.
BUY, TP RM0.93 (Current Share Price: RM0.71)
5. CCK Consolidated Holdings
With the fast urbanisation of East Malaysia, CIMB foresees CCK Consolidated Holdings (CCK) to ride on the consumer trend of higher consumption of poultry products. Apart from the changing consumer trend, CCK has been undergoing expansion across its integrated supply chain to build better economies of scale. CIMB expects CCK’s group earnings to grow on the back of better economies of scale.
BUY, TP RM1.65 (Current Share Price: RM1.11)
CIMB believes that Protasco is an underappreciated player in the domestic road maintenance space despite a dominant 43 percent market share in 2016. Margin recovery, new road contracts and high order book are potential earnings catalysts for Protasco. With an attractive PE valuation and decent dividend yield of about 6 over percent, Protasco is among the undervalued small cap stocks within CIMB’s coverage.
BUY, TP RM1.43 (Current Share Price: RM1.04)