A GROWING number of fundamentally strong stocks may have reached record highs in the recent MSEB rally, but analysts are still keeping these counters on their recommendation lists.
These stocks included Malaysia International Shipping Corp Bhd (MISC), IOI Corp Bhd, IOI Oleochemical Industries Bhd (formerly Palmco Holdings Bhd), Jaya Jusco Stores Bhd, OYL Industries Bhd, and British American Tobacco Bhd (BAT).
While many investors are awe-struck by the spiralling OYL share price, which touched a historical high of RM40 last Wednesday, and BAT's, which peaked at RM43.50 on Dec 31, 2003, analysts still see upside potential for these two so-called “expensive'' stocks.
“These shares are mainly driven by improving earnings prospects,'' said the research head of a local stockbroking firm. “Hence, there is still upside potential for them when economic growth accelerates.''
MISC surged to a record high of RM12 last Wednesday buoyed by renewed interest in shipping stocks as a result of the strong recovery in freight rates, particularly of dry bulk carriers.
“The year 2004 is expected to be a bumper year for shippers. The current high freight rates and strong global economic outlook will translate into higher volume,'' OSK Research said.
MISC slipped back to RM11.70 yesterday.
The bullish sentiments have also spilled over to Malaysian Bulk Carriers Bhd, which soared to a record high of RM2.70 yesterday.
The Kuok group's shipping counter was listed last December at an initial public offering price of RM1.19 for retail investors and RM1.38 for institutional investors.
Analysts said the sharp rise in freight rates would benefit bulk carriers more than tankers.
Meanwhile, an impressive set of results from Jaya Jusco for the nine months to Nov 30, 2003, boosted interest in the retail group. Jusco shares closed yesterday at a new high of RM10.30.
Many analysts are maintaining their “overweight'' rating on the stock after assessing the retailer's latest earnings numbers.
“We like Jusco for its unique business model and capable management team, who have proven themselves despite a lacklustre economy, SARS outbreak and intense competition,'' TA Securities said in a recent research note.
Analysts said Jusco's double-digit growth in turnover and net profit for its third quarter ended Nov 30, 2003, demonstrated that its retail business had been rather resilient, given the harsh operating conditions last year.
And despite the less exciting outlook that investment analysts have on the plantation sector, IOI Corp climbed to an historical high of RM8.25 on Thursday before finishing the week at RM8.20.
Analysts generally are of the view that the price of most plantation stocks had already factored in the current strong crude palm oil prices, which are likely to retreat from their peak this year.
Nonetheless, the bulls in the plantation sector argue that the accelerating economic growth in importing countries will help to fuel further demand for edible oils.
Meanwhile, shares in IOI Corp subsidiary IOI Oleochemical gained more ground than its parent, rising from around the RM4 level in April last year to a record high of RM8.70 last Tuesday.
The counter closed at RM8.60 yesterday, up 5 sen.