As the excitement for the New Year passes, it is back to business for many investors to hit the right note for 2019. To help investors start off the year right, CIMB has compiled its top small cap and large cap picks for investors. Here, we will highlight four small cap picks that CIMB has recommended to help you kickstart your route to alpha returns in 2019.
Investors Takeaway: 4 Small Cap Picks To Start 2019 On The Right Note By CIMB
- China Sunsine
With its capacity currently at 98 percent utilisation, China Sunsine is at close to its full capacity. Going into 2019, China Sunsine is looking to boost its capacity by 13 percent to 172,000 tons of rubber chemicals in FY19F to meet higher demand. China Sunsine is also showing signs of average selling price stabilising to support gross margins in 2019.
China Sunsine’s share price has taken a hit due to the negatives from declining auto sales in China. However, with the negatives already priced in, CIMB feels that China Sunsine appears to be cheap at 7 times trailing 12-months forward price-to-earnings (P/E) with a net cash of $0.33 per share.
BUY, TP $1.41; Current share price $1.29
HRnetGroup is the only SGX-listed proxy for the labour markets in China and Singapore. HRnetGroup’s asset light and fairly defensive business model coupled with its twin earnings growth engines of professional recruitment and flexible staffing adds to HRnetGroup’s merits. Its high margin professional recruitment segment offers leverage to an economic upturn while the flexible staffing business adds a defensive edge to its earnings.
CIMB highlights that HRnetGroup has been executing plans to penetrate into new markets. Its net cash position acts as a potential catalyst to fund its North Asia expansion. CIMB believes that 16-22 percent earnings upside from M&A have not been factored in.
But despite its dominant position and regional reach, the stock has been underappreciated. With a current P/E of 13.7 times, HRnetGroup is trading at a 20-50 percent discount to its peers.
BUY, TP $1.10; Current share price $0.795
- CSE Global
2019 will continue to be a year of earnings recovery as CSE Global’s gross profit margin stabilise in the region of 26-27 percent. CIMB expects continued “flow contracts” to add to CSE Gobal’s order wins in the year ahead. In the long run, the collaboration with Serba Dinamik could lead to more downstream O&G, power and utilities contracts from the Middle East and Malaysia.
CSE Global is currently trading at 11.8 times CY18F P/E, which is trading at a discount to its historical 5-year mean. CSE Global also offers investors a six percent dividend yield with a committed FY18 distribution per share (DPS).
BUY, TP $0.50; Current share price $0.425
2018 was the year where Y-Ventures turned profitable. As Y-Ventures continue to tap on the burgeoning e-commerce market, CIMB anticipates further earnings growth in FY19F of more than 100 percent. Stronger than expected earnings and onboarding of more branded partners could act as key catalysts of Y-Ventures’ share price in 2019. Y-Ventures is trading at 15 times FY19F P/E, which stands at approximately 50 percent discount to global e-commerce peers.
BUY, TP $0.56; Current share price $0.22