Big Cap Malaysian Stocks Below 50 sen

THE uncertainty sweeping the equity market, from the Covid-19 outbreak and plunging energy prices caused by geopolitical tensions to the country’s political crisis, has seen several big companies shed billions in market capitalisation, reducing these market darlings to penny stocks.

A list of Bursa Malaysia-listed companies that were trading below 20 sen per share last Friday — generated using Bloomberg data and sorted by market cap — shows that the top 10 were mostly notable companies, with oil and gas (O&G) players Sapura Energy Bhd and Velesto Energy Bhd topping the list. On March 9, O&G counters posted one of their worst days following the collapse of talks between Saudi Arabia and Russia after the latter refused to cut oil production further to stabilise prices.

The current supply agreement will lapse at the end of this month. Crude oil prices dropped to historical lows, dragging down several notable Malaysian O&G companies, especially those with upstream exposure.

Meanwhile, UEM Sunrise Bhd was one of the largest-cap stocks among counters priced between 20 sen and 50 sen. The property developer’s shares traded at a 52-week high of RM1.02 last April but have since been on a downward trend as the property market remains soft.

Two companies under tycoon Tan Sri Vincent Tan’s Berjaya Group were also among those priced between 20 sen and 50 sen. Berjaya Corp Bhd (BCorp) and Berjaya Assets Bhd (BAssets) closed at 22 sen and 28 sen respectively, on Friday. Other notable companies on the list include TA Global Bhd (down 9.8% YTD at 23 sen), Boustead Plantations Bhd (down 47.7% YTD at 40 sen), Hibiscus Petroleum Bhd (down 60.1% YTD at 37.5 sen), and Eastern & Oriental Bhd (down 33.6% YTD at 41.5 sen).

- 26 March 2020

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Bursa 2020 Highest Dividend Stocks

KUALA LUMPUR: In the prevailing low-interest rate environment and amid a lack of earnings catalysts, investors are likely to look out for defensive stocks that offer a high dividend yield in order to secure good returns.

This is especially so with the current fears surrounding the outbreak of the Wuhan virus which may have an impact on global economic activities, said analysts.

Hong Leong Investment Bank (HLIB) head of retail research Loui Low said investors should go for stocks with a high net cash position, high dividend yield and solid fundamentals and which would not be impacted by the virus outbreak.

This, he said, included stocks in the technology and telecommunications, construction, and power and utilities sectors.

With the fifth generation (5G) and National Fiberisation and Connectivity Plan that are being implemented in Malaysia serving as catalysts, the technology and telecommunications counters could be considered a defensive play, said Low.

Notably, DiGi.Com Bhd and Maxis Bhd have indicated dividend yields of 4.13% and 3.67%, respectively which are seen as relatively attractive.

Low said the construction sector is also his pick on the back of the anticipation of tender results from megaprojects and potential pump-priming activities by the government this year.

He said power-related stocks should be quite stable in this environment where there is a slowdown in economic activity.

TA Investment Management Bhd chief investment officer Choo Swee Kee pointed out that defensive stocks are suitable at all times for conservative retail investors.

“This is as defensive stocks are for investors who do not want high levels [of] risk, seek safety and yield certainty,” he said.

Most notable as defensive in nature with stable yields are the real estate investment trusts (REITs). Choo said investors should go for industrial REITs as well as those with assets that draw tourists.

“As you know, retail REITs are facing pressure and office REITs are facing an office glut. We like industrial REITs and REITs that have well-known assets that attract tourists,” he said.

Other than that, Choo highlighted dividend-paying stocks whose businesses are utility-based or concession-based as good picks in this environment. Typically these are businesses that have stable incomes.

He added that banks, while not always being defensive in nature, are defensive in today’s context.

“We think that the bad news for banks have [already been discounted] and banking stocks have gone down,” he said.

Malayan Banking Bhd, the country’s largest bank by market capitalisation, has a yield of over 6%.

Yields aside, the total returns of many banks’ shares have fallen over the past year.

Public Bank Bhd, for instance, saw its total return decline 23.9% over the year to RM18.34 last Friday. The counter had fallen to RM18 last Wednesday, a level that has not been seen since December 2016.

May not be so defensive after all

While some stocks may be deemed as defensive, this does not mean that they are automatically safe havens.

TA’s Choo said defensive stocks are still equity-based and thus will be impacted by investor sentiment, which to put it simply could be a double-edged sword.

“They (defensive stocks) are still equity-based, so they are subject to market forces. If something catastrophic happens and the market falls they can fall. In terms of upside, if market sentiment improves such stocks can also move upwards,” he said.

Rakuten Trade Research vice president Vincent Lau concurred, saying investors have to see whether a particular stock’s dividend yield is sustainable.

“While a counter may be able to offer high dividend yields at present, this does not translate into consistently high dividend yields,” he said, adding that if the US Dow Jones index registers significant declines, these declines can reverberate across to Malaysia-listed counters as the performance of such key indices can weigh on investor sentiment in Malaysia.

As seen in the past fortnight, the coronavirus outbreak has triggered a selldown in tourism-related counters. HLIB’s Low believes that the selldowns in the aviation, travel and hospitality sectors’ have already been priced in, and the affected stocks may see a technical rebound.

“However, should the financial results for these companies decline moving forward, then perhaps investors have to avoid them,” said Low, adding that a downside risk would be the delay in the implementation of the projects that are expected to spur the technology, telcommunications, construction, power and utility sectors.

The Edge - 10 Feb 2020

Cheap Sale: 700 companies on Bursa valued at below US$100 million

KUALA LUMPUR: The double whammy of the Covid-19 outbreak and the oil price crash has dampened investor sentiments around the globe, especially on net export oil-producing economies like Malaysia.

The FBM KLCI has plunged nearly 18% year to date (YTD). Valuation wise, KLCI’s current price-to-earnings ratio (PER) stood at 14.56 times, representing a 15.1% discount to its 10-year average of 17.15 times.

Simply put, it is the market in which investors, with cash in pockets, could cherry-pick the good bargains.

Since investor sentiment is transient in nature — they come and go like dark clouds, as such we look into how many Malaysian-listed companies lie in the affordable range, to a business-centric and well thought out billionaire investor that has US$1 billion (RM4.43 billion) cash on hand.

According to Bloomberg data, there are about 868 companies which market capitalisation (cap) is at or below US$1 billion.

Big caps at discount on valuation

There are 31 big-cap companies, which market cap is in between the US$500 million to US$1 billion categories.

The stock exchange, Bursa Malaysia Bhd, is among the 31 listed entities.

Bursa Malaysia closed at RM4.70 last Friday after it rebounded 28 sen or 6.33%, giving it a market cap of RM3.79 billion, less than US$1 billion. The stock exchange is trading at PER at 20.45 times compared with its 10-year average of 23 times

LPI Capital Bhd, which sits on top of the list, came in at a total market cap of RM4.31 billion. The home-grown insurer last closed at RM10.82 as of last Friday — indicating its current PER valuation stood at 13.37 times, representing a 23% discount to its five-year average PER of 17.38.

With US$1 billion in hand, the billionaire investor can even afford to buy out utility companies, namely YTL Power International Bhd (RM4.1 billion), Malakoff Corp Bhd (RM3.32 billion) and Gas Malaysia Bhd (RM3.21 billion).

The three utility giants’ stock price fell in the range of 7% to 30% YTD, to close at 53.5 sen, 68 sen and RM2.50 last Friday.

Shares in Astro Malaysia Holdings Bhd saw its price dropped by more than half year-on-year (y-o-y) to 73 sen, valuing it with a total market capitalisation of RM3.81 billion. The stock is currently trading at a PER valuation of 5.98 times, according to Bloomberg. The media stock’s PER valuation is indeed at a 73% discount to its five-year average PER of 22.3 times.

It is worth noting that many of these companies are trading substantially lower than their net asset values. The list of companies includes Malaysia Building Society Bhd, FGV Holdings Bhd, Oriental Holdings Bhd, Affin Bank Bhd, Lotte Chemical Titan Holding Bhd, Alliance Bank Malaysia Bhd, DRB-Hicom Bhd and AirAsia Group Bhd.

A random check on all the stocks’ valuation, in comparison to end-October 2008 period (the heights of the global financial crisis), four out five of the stocks have suffered lower PER valuation during the 2008 selldown period.

Mid-large cap choices

There are 124 companies that are valued between US$100 million and US$500 million.

A billionaire investor, who has US$1 billion in hand, could afford a buyout of some oil and gas giants, Bumi Armada Bhd, Velesto Energy Bhd and Sapura Energy Bhd, which have been succumbed to irrational selldown after the meltdown on the crude oil prices.

Remarkably, shares in Supermax Corp Bhd was the only one yielded positive among the top-31 companies within the category. Supermax which gained 7% YTD, closed at RM1.49 last Friday — valuing the rubber glove maker at RM1.96 billion. Valuation of Supermax which was widely viewed as one of the beneficiaries for the pandemic containment efforts stood at 18.85 times PER, 33% higher than its 10-year average of 14.18 times.

Companies that sit above the RM2 billion mark within this category include Aeon Credit Service (M) Bhd, Shangri-La Hotels (Malaysia) Bhd, Allianz Malaysia Bhd and UMW Holdings Bhd — which saw their share price slid between 13% to 68% y-o-y.

In particular, Aeon Credit is trading at a single PER of 7.86 times based on last Friday’s closing of RM8.58. The valuation is at a 17% discount to its five-year average of 9.47 times.

While Shangri-La Hotels’ stock price was holding up strong at RM4.85 despite the concern on the Covid-19 outbreak that will affect occupancy rate. The five-star hotel group is trading at PER of 33.7 times, which is a 12% premium to its five-year average of 29.92 times.

Meanwhile, Allianz Malaysia, which used to trade above six times average PER in the past five years, is currently trading at a 32% discount at 4.31 times PER at RM12.02. Interestingly, Allianz’s net tangible assets (NTA) currently worth about RM11.89 per share — indicating that the investor gets to own 98% of the tangible assets for every ringgit invested into the insurance company.

Some of the notable consumer-related companies within US$100 million-US$500 million market cap range, includes Guan Chong Bhd (RM1.78 billion), Leong Hup International Bhd at RM1.68 billion, 7-Eleven Malaysia Holdings Bhd (RM1.49 billion), Aeon Co (M) Bhd (RM1.40 billion) and Padini Holdings Bhd (RM1.35 billion), which saw their share price tumbled 9% to 47% YTD. This group of companies, except for Leong Hup which was newly listed last year, were trading below their five-year average PERs.

Among the semiconductor companies that are within US$100 million and US$500 million range, Malaysian Pacific Industries Bhd (RM1.81 billion) was the only one traded at a premium to its historical values, which stood at 13.44 times PER, representing a 7% premium relative to its five-year average of 12.48 times.

Meanwhile, Frontken Corp Bhd, VS Industry Bhd and Pentamaster Corp Bhd are all traded at a discount to their historical values. Their share prices had plummeted 20% to 45% YTD.

Cheaper companies but cheaper quality

With US$1 billion in hand, billionaire investors will be spoilt for choice at bargain prices for stocks with a market cap of US$100 million or less.

There are 713 companies valued at below US$100 million, based on last Friday’s closings, according to Bloomberg.

Out of the top 31 market cap companies within this category, there are five loss-making companies.

Interestingly, companies in which NTA is significantly higher than their respective share prices include MNRB Holdings Bhd, MPHB Capital Bhd, Sunsuria Bhd, Muhibbah Engineering (M) Bhd, Malayan Flour Mills Bhd, Can-One Bhd. Share prices in these companies have tumbled 25% to 66% YTD.

MNRB’s NTA at RM2.97 per share is about close to five times higher than Friday’s closing price of 52 sen. While Can-One’s NTA stood at RM9.01 per share, close to four times higher than its share price of RM1.93, and MPHB’s NTA of RM1.88 per share is more than two times higher than its last trading price of 56.5 sen.

In terms of price valuation, all of the companies were traded below their five-year average PER, except for Amverton Bhd and Ayer Holdings Bhd which are both involved in property development.

Amverton, which has a valuation of RM438 million, saw its share price closed at RM1.20 — implies current PER of 85 times, three times higher than its five-year average of 28 times.

Ayer Holdings current PER stood at 29 times, representing 22% higher than its five-year average of 23 times, as of last closing price of RM5.20, valuing the company at RM389 million total market capitalisation.

The Edge - 23 March 2020