The Kuala Lumpur Composite Index (KLCI) has been at the brunt of recent market sell off following months of trade war concerns that have turned into reality. As the market reels in from the reality, RHB thinks that investors should be ready for bargain hunting with Malaysian stocks that are backed by fundamentals. According to RHB, investors will be best served by looking at quality laggards that have suffered the brunt of the recent market sell-off.
Investors Takeaway: Bargain Hunting On KLCI By RHB
Stocks With The Biggest 12-Months Decline
Astro Malaysia (Astro) is currently trading at an undemanding valuation that is -2SD below its historical EV/EBITDA mean. At its current share price, Astro offers superior prospective dividend yields of more than seven percent backed by its solid operating cash flows.
RHB also notes that the strong balance sheet gives Astro enough headroom to seek out potential M&As. Strong content intellectual properties (IPs) and commanding household penetration are also key investment merits.
BUY, TP RM1.97; Current share price RM1.35
OCK Group is one of the stocks that RHB is positive on. In particular, RHB is positive on the growth prospects of the group’s regional towerco businesses in Vietnam and Myanmar. Besides that, OCK Group is also a key beneficiary of potential 5G infrastructure spending and the growing trend towards outsourcing and maintenance of passive infrastructure. The future spinoff of the regional towerco businesses could potentially catalyze the stock.
BUY, TP RM0.82; Current share price RM0.44
The sharp decline in Genting Malaysia’s (Genting) share price in the last 12-month period was mainly caused by the gaming tax hike during Budget 2019. The stalled opening of its outdoor theme park and the write-off of its RM1.8 billion investment in Mashpee’s note were also contributing factors to the stock’s decline.
However, the stock has started to recover and is one of the best performers on KLCI since the start of 2019. That being said, Genting still has a significant gap to close, having fallen by 34 percent in the last 12 months.
BUY, TP RM3.90; Current share price $3.16
Stocks With The Biggest Year-To-Date Decline
Hartalega Holdings (Hatalega) is one of the worst performing stock year-to-date. However, RHB continues to like Hartalega for its superior profitability and defensive balance sheet. Hartalega recorded an average 5-year net profit margin of 16-20 percent, which is far superior to its peers’ 8-10 percent. Its net gearing of 11 percent is also the lowest among the Big Four. The consistent earnings and management track record is also another investment merit of Hartalega that RHB highlighted.
BUY, TP RM6.18; Current share price RM5.17
CIMB Group’s (CIMB) share price has been impacted by investor disappointment over management’s “Forward 23”, which is a 5-year strategic plan unveiled in Feb 2019. The management’s aspirational ROE of 12-13 percent by 2023 has also been met with skepticism.
Despite the lack of investor confidence, RHB believes that CIMB is still a decent investment given its attractive valuation: 0.9 times price-to-book value along with a dividend yield of five percent.
BUY, TP RM6.60; Current share price RM5.32
Recent earnings disappointment has hurt the sentiments for Power Root stock. However, RHB believes that the company is firmly on track to stage a strong earnings recovery. This is supported by favorable raw material price costs, moderation in advertising and promotional expenses as well as increasingly stable sales.
BUY, TP RM2.02; Current share price RM1.46