The Malaysian Budget 2023 has just concluded on 24 February 2023.
This time around, the new Malaysia PM, Anwar Ibrahim is trying to stamp his mark in the revised budget for 2023.
And what a surprise the budget was for many Malaysians!
A couple of policies were entirely new and could mean that these Malaysian stocks would stand to gain – big time.
Hence, here are 4 Malaysian stocks from various sectors that you should get a good look at in line with the new Budget 2023!
#1 Nestle Malaysia Berhad
Yes, you heard that right. Nestle Malaysia Berhad (NMB) could be THE stock to watch out for.
That’s because the government has lowered the income tax rate by 2% for Malaysians earning RM35k to RM100k.
This could potentially encourage Malaysians to spend more on food necessities.
NMB produces and sells food & beverage products for the mass market in Malaysia. Its flagship brands are what we are familiar in Asia including Milo, Nescafe, Maggi, Nespray, Koko Crunch, and Kit Kat.
In terms of financial performance, NMB is just a classic example of a recession-resistant stock in Malaysia.
Revenue only declined by 1.9% in 2020 during the pandemic, and has since grew by 16.2% in 2022 to RM6.7 billion.
Likewise, profits have also grew by 8.9% in 2022 to RM620 million, close to its pre-pandemic profit average of RM660 million (2017 to 2019).
NMB has a HOLD call from most analysts, but could see its prospects improve with the release of consumer spending from the M40 household groups in Malaysia. It has an average target price of RM134.32 currently.
NMB could be a worthwhile investment for you to consider:
- Improving prospect of lower tax rates for M40 households. The lower tax rate is expected to benefit 2.4 million Malaysians and unleash about RM900 million in spending.
- Deep and strong position in the F&B market with brands such as Milo, Nescafe, and Maggi enjoying almost-monopoly positions.
- Steady dividend yields of 2%.
That being said, NMB is currently trading at a lofty P/E ratio of 51.1x. Investors are mostly positive on NMB’s prospects and strong position in the market, and expect NMB to continue growing at strong rate moving forward.
#2 Genting Malaysia Berhad
Basically, no news is good news for Genting Malaysia Berhad (GMB). When Pakatan Harapan came into power in 2018 (Anwar’s coalition party, but Mahathir became Prime Minister), it raised the gaming income tax to 35% from 25%, which was of course bad for GMB.
This time around, there does not seem to be any pressure to increase the gaming tax further. It could be because the Malaysian Islamic Party (PAS) is not currently part of the unity government.
GMB is an integrated leisure and hospitality operator, owning casinos, theme parks, hotels, and dining & retail outlets in Malaysia, U.S., U.K., and Egypt. Resort World Genting in Genting Highlands, Malaysia is GMB’s flagship asset.
While GMB’s financial performance have not yet return to its pre-pandemic level, the absence of news on gaming tax is expected to be positive for GMB.
In fact, GMB’s revenue have doubled to RM8.6 billion in 2022 from RM4.2 billion in 2021, on the back of the easing of lockdown restrictions in Malaysia. Meanwhile, losses have also shrunk to -ve RM667.4 million from -ve RM1.1 billion over the same period.
GMB currently has an OUTPERFORM investment call, with an average target price of RM3.30. This implies an upside of 21.2% from its current share price.
GMB could be worth taking a good look at for the following reasons:
- No political pressures to increase gaming income tax for now from the government.
- Dominant position as the leading leisure and tourism operator for most Malaysians and international travelers.
- Return of Chinese tourists is expected to boost GMB’s prospects.
In terms of valuation, GMB is currently trading at a P/B ratio of 1.22 times and had a dividend yield of about 7% to 8%. This translates to a potential gain of 29% for GMB including the upside of 21.2%.
#3 Malaysia Airports Berhad
It’s been some time since Malaysia Airports Berhad (MAHB) has been on investors’ radar. The new Budget 2023 actually announced that the airports in Penang and Subang will be expanded to accommodate higher traffic volume.
While there was no official figure on the expansion of the airports. about RM17.6 billion in development expenditure was earmarked for the transportation sector in 2023.
MAHB had been on a rough patch during the pandemic considering that it is dependent on tourism and travelling activities.
Its trailing revenue for 2022 (September 2021 to September 2022) of RM2.8 billion is only about 51.3% of 2019’s revenue of RM5.2 billion.
Meanwhile, its losses have narrowed to RM308.7 million for the trailing year compared to a loss of RM766.4 million in 2021.
From the market, MAHB has an OUTPERFORM investment call, with an average target price of RM7.34. This translates to a potential gain of 6.4% from the current share price.
MAHB could be worth your time to look at for the following reasons:
- Monopoly position in airport market in Malaysia.
- Government support to increase capacity in Penang and Subang airports in line with the Budget 2023.
- Re-opening of Chinese travel routes could boost MAHB’s prospects.
MAHB is currently valued at a P/B ratio of 1.9 times and had a dividend yield of about 1% to 2.5% before the pandemic.
#4 Gamuda Berhad
The reaffirmation of the MRT3 project in the Budget 2023 is expected to be good news for Gamuda Berhad (GB).
GB is after all the main contractor for the MRT1 and MRT2 project and hence, it stands the best chance to get the contract for MRT3 too.
Even with a reduced estimate cost of RM45 billion for MRT3, this is still a big contract for GB going into the next few years.
GB is mainly involved in the infrastructure, engineering and property development businesses. Its notable projects include MRT1, MRT2, Gamuda Cove, Smart Tunnel, and the LDP highway.
With the resumption of the MRT2 project in 2021 and 2022, GB’s revenue have been growing quite strongly to RM5.6 billion in trailing year of 2022 (Oct 2021 to Oct 2022) from RM3.5 billion in 2021.
Likewise, profits have also grown by a whopping 31.6% to RM831.8 million during this period as well.
GB has an OUTPERFORM investment call from analysts, with an average target price of RM4.45. This implies an upside of about 6.0% from its current share price.
GB could be worth taking a good look at for the following factors:
- Strong stream of projects from the Malaysian government in rail projects. GB is the main front runner for the MRT3 project tender.
- Ability to produce consistent profits even during the pandemic. No losses sustained for any of the financial years.
- Diversifying income sources with the purchase of Downer’s Australia transport projects worth A$212 million. GB has plans to generate about A$3 billion in annual revenue from Australia in 2-3 years time.
GB is currently valued at a P/E ratio of 21.0 times, slightly higher than its historical average of 18.4 times.
Investors are probably pricing in the high possibility of Gamuda tendering for the MRT3 projects and the higher contribution from its Australia’s operations. Gamuda has about 4.0% dividend yield before the pandemic, which translates to a potential total gain of 10.0%.
Conclusion
The new Budget 2023 which was tabled by the new government presents various interesting investment opportunities in the Malaysian market. Take the time to dive deep into the Malaysian budget 2023 to uncover hidden gems that could boost your portfolio returns!
