As fiscal gap concerns eased, Kuala Lumpur Composite Index staged a strong rebound since July to outperform regional indices. However, with global equity market now dampened by simmering trade tensions between the US and its major trading partners especially China, DBS recommends investors to be selective on MY stocks.
Here are 3 Malaysian stocks with emerging value that DBS thinks will be good additions to a portfolio.
Investors Takeaway: 3 MY Stocks To Buy On Emerging Value
- Hibiscus Petroleum
Hibiscus Petroleum (Hibiscus) is working on enhancement projects throughout 2018-2019 with a budgeted capex of GBP 40 million to be funded by internally generated funds and proceeds from its recent private placement. The enhancement work on Anasuria Cluster and other enhancement projects will help to increase net oil production from 3,200 barrels per day to 5,000 barrels per day.
Hibiscus has a development license in the VIC/L31 field, which has been approved and a production license has been obtained. While development was previously halted, it could be restarted once the acquisition of the North Sabah EOR PSC is completed, amid robust oil prices.
BUY, TP MYR 1.46; Current share price RM0.96
- KPJ Healthcare
KPJ Healthcare is expected to show healthier earnings prospects going forward, according to KPJ Healthcare. This will be driven by the waning effect of declining patient affordability following the implementation of GST in 2015 and EBITDA contribution from EBITDA positive hospitals opened since 2012.
Operationally, KPJ Healthcare has also shown recovery in patient volume growth, which is in line with the recovery in consumer sentiment. The strengthening private consumption and the new government’s proposed healthcare scheme to provide RM500 per year for Bottom 40 (B40) families to visit private clinics could also sustain the sector’s recovery. DBS also notes the possibility of profit margin expanding following the abolishment of GST and lower imported drug cost due to the recent strengthening of the Ringgit.
With KPJ Healthcare trading at -1SD of its historical mean, value is starting to emerge. The active share buy-back by the group since end-2017 should also help to improve investor confidence in the stock.
BUY, TP RM1.30; Current share price RM1.12
- Serba Dinamik
Serba Dinamik’s focus on operations and maintenance businesses proved to be resilient even during the low oil price environment. Currently, DBS projects revenue/earnings growth for Serba Dinamik to be at a 3-year compounded annual growth rate of 22/23 percent in FY18 to FY20.
Growth of the group are expected to be supported by stronger market penetration, higher demand for maintenance services, and expansion of engineering procurement, construction and commissioning work. Notwithstanding that, DBS is leaving room for further upsides for Serba Dinamik’s share price and the catalyst could come in the form of potential contract wins with higher margins.
BUY, TP RM5.20; Current share price RM3.79