By Say Cheong //
June 20, 2022

2022 continues to be a year of reckoning for investors across all asset classes. It has been a down year across equities, crypto and even gold. It was however an extremely good year for FX traders that had the vision of taking a long position on USD.

During June, equities continue to fall with an unprecedented 75 basis point rate hike from the FED. S&P 500 has reached bearish territory with it falling more than 20% from its high. This could however be an opportunity for bargain hunters with some stocks dropping to good levels.

Here are 7 stocks listed on KLSE that astute investors should take note of.

Stock Idea #1 Malaysia Smelting Corporation Bhd

Malacca Securities has maintained its Buy rating on the stock with a target price of MYR 4.83.

The shrewd acquisition is bound to unlock more value for the company.

“Upon completion of the proposed acquisition, RHT is expected to expand its current mine pit eastward to ABSB Land, which in turn is expected to allow RHT to mine additional resources with inferred tin resources of 2,690 tonnes.

The move will beef up RHT’s contribution of 3,428 tonnes of gross tin ores in FY21 (representing more than 10.0% of the raw material) to the tin smelting activities.

Although tin prices have softened in recent months, we reckon that tin prices to remain above the pre-pandemic levels on the back of

(i) robust demand in industrial usage such as electric vehicles (EV), solar panels and electronic devices,

(ii) supply chain disruptions due to port congestions and

(iii) persistently high inflationary pressure in commodity prices due to unresolved Russia-Ukraine tension. We reaffirmed our expectations that tin prices to average around USD30,000/MT over the foreseeable future. ”

>> Read more about the company here.

Stock Idea #2 Genting

RHB has maintained its Outperform rating on the company with a target price of MYR 6.37.

The possibility of IPO or merger and acquisitions of its assets could unlock hidden value for the company.

“Post channel checks, we gathered that 20%-owned TauRx Pharmaceuticals’ (TauRx) HMTM drug will need to undergo 12 months of open-label trials – it could seek regulatory approvals for this Alzheimer’s drug before the trial’s conclusion, though.

Favourable trial results may pave way for potential M&A interest on TauRx, giving Genting an early opportunity to monetise – it could contribute MYR1.3-4.3bn to GENT’s FY24F-26F earnings and may potentially fetch an upside of MYR3.47 (base)-13.88 (bull)/share.”

>> Read more about the company here.

Stock Idea #3 Bermaz Auto Bhd

Kenaga Research has maintained its Outperform rating on the company with a target price of MYR 2.30.

The better than expected results and positive forecast provided the company with a good valuation from the analyst.

“Based on 15x CY23E EPS (roll-over from CY22E EPS) on par with local peers’ average 1-year Fwd. PER of 15x and at a 15% premium to its Japanese peers’ average PER of 13x given its standing with one of the highest PAT margin among automakers (commanding an average of 8% compared to average PAT margin of both local and Japanese peers at 5%) which also translated to 5-year Fwd. historical mean PER.

We like the stock as it offers: (i) one of the highest dividend yields in our auto universe coverage, and (ii) the highest PATAMI margin which is head and shoulders compared to peers.”

>> Read more about the company here.

Stock Idea #4 Dayang Enterprise Holdings

Hong Leong Bank Research has maintained its Buy rating on the company with a target price of MYR 1.19.

Positive guidance for the quarters ahead drives the positive valuation from the analyst.

“Increasing OSV charter rates and blended fleet utilisation rates. The group has guided that the OSV charter rates has increased by a total of 3-5% YoY as the number of OSVs in the market has declined over the years as many OMS companies have totally exited the industry while some have gone bust following the slump in oil prices from 2015-2020.

Also, management has guided that the division’s blended fleet utilisation rates have increased substantially to >70% in 2Q22 (from 38% in 1Q22) – which is higher than the guided net profit breakeven level of 60-65%. With that, we believe that 63.7%-owned Perdana Petroleum will turn into the black in 2Q-3QFY22”

>> Read more about the company here.

Stock Idea #5 UOA Real Estate Investment Trust

AM Investment Bank has initiated its Buy rating on the stock and with its target price at MYR 1.42.

Long term prospects of the assets and the diverse tenant range are the attractive points of the company.

“We like UOA REIT for its long-term prospects bolstered by:

(i) its strategic located properties which are well connected with the neighbourhoods via bridges, major highways and public transportation;

(ii) its diverse tenant mix which could mitigate potential rental payment risk during economic downturns;

(iii) its excellent track record of distributing at least 94% of net income to unitholders with a strong distribution yield of more than 7% from FY22F to FY24F;

(iv) large pipeline of potential assets from its sponsor—UOA Development. ”

>> Read more about the company here.

Stock Idea #6 Bank Islam Malaysia

AM Investment Bank has maintained its Buy rating on the company with a target price of $3.30.

The company will definitely be a key beneficiary of the impending rate hikes.

“Recall BNM raised the OPR by 25bps on 11 May 2022, increasing the benchmark interest rate from 1.75% to 2.00%. We expect another increase in OPR by 25bps to 2.25% in 2H2022.

This could occur as early as the next monetary policy committee meeting (MPC) on 6 July 2022. We see BI as a stronger beneficiary of rate hikes compared to peers with a higher sensitivity or increase in net income margin (NIM) by 8-9bps for every 25bps change in interest rate. ”

>> Read more about the company here.

Stock Idea #7 Syarikat Takaful Malaysia

Hong Leong Investment Bank has maintained its Buy rating on the company with a target price of MYR 4.20.

The sound management transition and future strategy plans are driving the analyst’s favourable ratings.

“We continue to like STMB especially hearing more from their new head honcho, En Nor Azman, regarding business strategies, and believe that the company is in good hands. Broadly, the plan is to ride on existing core businesses (Banca, LPPSA, employee benefit, general takaful) and attempt to grow other small noncore segments (retail, recurring GEC business).

Overall, our forecasts are intact and we reckon it is a good opportunity to buy STMB on weakness, particularly for those who want a longer-term play into the bright takaful space”

>> Read more about the company here.

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