Following our first coverage of four MY stocks in Top 8 MY Stocks To Own (Part 1), we continue to highlight four other MY stocks that DBS recommends investors to own.
Investors Takeaway: DBS’ Top 8 MY Stocks To Own
As a pure oil & gas exploration and production player, Hibiscus is the best Malaysian proxy to rising oil prices. Hibiscus managed to undertake opportunistic acquisitions of the Anasuria Cluster in North Sea and the North Sabah enhanced oil recovery (EOR) production sharing contract (PSC). The completion of the acquisition of the Anasuria Cluster in March 2016 led to a turnaround from an FY16 core net loss of RM145 million to an FY17 core net profit of RM29 million. DBS expects the acquisition of North Sabah EOR PSC to more than double its earnings in FY19.
BUY, TP RM1.48
Following MUFG’s sale of stake in CIMB and placement of shares by Khazanah, CIMB’s share price corrected by 16 percent, leading to a share overhang. However, CIMB’s share price has since recovered and DBS believes that CIMB is better positioned for recovery.
CIMB’s revenue momentum has picked up well in terms of both net and non-interest income. Its net interest margin has also held up better than expected as CIMB managed to control its expenses. DBS notes that sustained improvements in earnings traction and achieving FY18 targets should help to support CIMB’s share price. The exclusive Touch ‘n Go and Ant Financial tie-ups to develop an e-wallet could also be a re-rating catalyst should the payment channel system help CIMB dominate the payment space and proliferate over time.
BUY, TP RM8.00
- Hong Leong
Hong Leong bank managed to grow its earnings at a better-than-expected rate in 1H18. Its ability to continue drawing recoveries surprised consensus estimate, which has prompted DBS to raise its FY18-20F earnings for Hong Leong. While the management has previously guided loan growth to 3-4 percent in FY18, DBS believes that the strong macro environment could drive higher loan growth. As such, DBS is forecasting earnings growth of 8-10 percent for FY18-19F.
BUY, TP RM21.00
DBS is taking a positive stance on Maybank as it is well positioned for earnings recovery after battling against asset-quality issues in Singapore and Indonesia. Maybank has both its insurance arm (Etiqa Insurance) and Islamic banking business (Maybank Islamic) that are ripe for spin off. DBS believes that any spin off will help Maybank unlock value in both businesses.
As the largest bank in Malaysia, Maybank has a strong current account savings account (CASA) base to shields its cost of funds from upside pressures. Maybank also has a large balance sheet to anchor its strong footing in corporate loans, giving it the opportunity to ride on the pick-up in demand as GDP grows. DBS also notes that Maybank has a sweet spot in its attractive dividend yield of six percent, which is one of the highest in among Asian banks.
BUY, TP RM11.50
For first part of this installation, please click HERE.