The market seems to be shifting its preference towards large cap stocks. This is not surprising given the current investment climate where investors are seeking safe havens. As concerns over global economic growth continue to linger, should investors stay away from small cap stocks? Not quite, according to CIMB. There are a few small cap gems that CIMB thinks is worth adding into your portfolio given their relative risk-to-reward.
Investors Takeaway: 5 MY Small Caps That Are Worth Considering By CIMB
- CCK Consolidated
CCK Consolidated ended the year on a low. In the short span of a month, CCK Consolidated’s share price fell to RM0.38 due to concerns of higher feed cost and lower demand for poultry products. However, CIMB believes that the retracement in share price has been overdone and the stock is now an appealing investment once again.
With more store openings, price hikes and higher consumption of poultry products in the increasingly urbanised East Malaysia, CIMB foresees that 2019 will be a year where CCK Consolidated records stronger earnings.
BUY, TP RM0.98; Curent share price RM0.49
- Kawan Food
Following a delay of more than 18 months, Kawan Food’s new factory finally started commercial operation in July 2018. The new factory’s production capacity of roti paratha and chapatti is thrice the amount of the old factory. Given that Kawan Food had previously lost the opportunity to increase sales due to maxed out capacity, the increase in capacity will help Kawan Food capture more sales. In addition, Kawan Food is looking to expand its product range with ‘fresh frozen’ bread in the US market in early 2019.
The management believes that the ‘fresh frozen’ bread market is as large as its current frozen bread market. In other words, Kawan Food has a lot of room to grow in 2019.
BUY, TP RM 3.02; Current share price RM1.70
- LBS Bina
LBS Bina’s exposure to the Chinese market will be a huge factor in its outperformance in 2019. Given the potential value arising from its China Zhuhai International Circuit upgrade, investors can expect LBS Bina’s earnings to improve in the coming quarters. The Chinese government’s increasing focus on affordable housing will also help LBS Bina to drive property sales from new property units.
BUY, TP RM0.98; Current share price RM0.68
- Muhibbah Engineering
Despite being in the manufacturing industry, Muhibbah Engineering has limited exposure to the LRT3 and MRT2 projects. Most of its focus is in the overseas market where Muhibbah Engineering has a unique overseas exposure, thanks to its Qatar projects and Cambodian Airport concessions. CIMB notes that Muhibbah Engineering’s newly acquired Intelligent Automation Group will help to support its earnings in 2019.
Muhibbah Engineering is currently trading at an undemanding forward FY19 core price-to-earnings of 8-9 times, which underappreciates its lucrative airport concession earnings and ROE of over 13 percent, according to CIMB.
BUY, TP RM3.76; Current share price RM2.82
- Star Media
If you are looking for a value play, Star Media is your best bet according to CIMB. Based on CIMB’s proprietary analysis, the land bank that Star Media possess is equivalent to 93.8 percent of its market cap. In 2019, Star Media is looking to unlock the full potential of its properties’ value through a diversification to the property development and/or investment business. Furthermore, the company is also in a net cash position (RM0.42 per share) and offers a decent yield of 5.3 percent.
BUY, TP RM1.14; Current share price RM0.70