WHILE the return of foreign investors to the local bourse has ignited more interest in blue chips, some bargains can be seen in several lower liners.
Market observers said some counters had performed well in the past and had good track records to propel them further ahead.
In the construction sector, analysts and fund managers have identified Ahmad Zaki Resources Bhd (AZRB), Ken Holdings Bhd, Loh & Loh Construction Bhd, TRC Synergy Bhd, TSR Capital Bhd and WCT Engineering Bhd as good buys.
These companies are builders with proven track records and they could benefit from some infrastructure projects such as the national water and sewerage schemes which are expected to be announced in the next one or two months.
“The water theme is very much alive because the government has allocated funds for them. I believe it is now a matter of time before new projects in this sector are announced,” said a fund manager with a local brokerage.
Projects expected to be announced in the near future include the 13 sewerage schemes financed by the Japan Bank for International Cooperation (JBIC). It is understood that JBIC has approved a total of 480 billion yen (RM1.35bil) for the projects that are currently pending evaluation by the Malaysian government.
Among the companies identified by analysts as likely contenders of these projects, AZRB, for one, has been involved in water projects in Terengganu and has a team of experienced civil engineers. In terms of valuation, AZRB is trading at about 10 times its estimated 2004 earnings and 1.3 times its book value.
Others in the same category include Loh & Loh and WCT Engineering which are trading at 12 times its current year's earnings and 10 times respectively.
While Ken Holdings is not a water player, it has built a reputation overseas through its Hong Kong unit and has expanded its land banks in the Klang Valley through a recent acquisition.
As for property counters, analysts recommended established developers such as Glomac Bhd, SP Setia Bhd and Island & Peninsular Bhd. However, should the stock market sustain until the end of the year, the impact could spill over to other players in the industry.
Transmile Group Bhd has also been one of the favourite fund managers' stocks because of its ability to grow strongly and take advantage of the turnaround in the regional air cargo services.
Analysts said the company was well managed and had a strong client base of international courier companies such as DHL International and UPS. Recently, Transmile has bid for a lucrative defence project.
For consumer stocks, analysts pointed to Courts Mammoth Bhd, which is currently trading at about 13 times its earnings.
Courts had also posted stronger earnings for the first quarter ended June 30, and could further leverage on its strong presence across the country to improve future growth. It is still the leading consumer finance company in the country and has received strong foreign interest and expanded regionally.
For industrial-based stocks, machinery and equipment specialist Atis Corp Bhd was the fund managers' favourite pick as it could benefit from the increasing use of automation and recovery in the manufacturing sector.