Lim Chee SingDirector, RHB Research Institute Sdn Bhd
Sarawak Energy Bhd controls all the power assets in the state via Syarikat Sesco Bhd and the independent power producers (IPPs). With 20% reserve margin and 6% to 7% per annum demand growth, we expect stable cashflow for the next four years.
We see potential catalysts for a re-rating on Tanjong PLC over the next 12 months including acquisition of Globeleq Ltd's Asia power assets as well as bids for other overseas power plants in other regions, potential listing of Powertek Plc and improved earnings from Tropical Island.
Petra Perdana Bhd is a clear beneficiary of rising exploration and production activity with its marine division enjoying rising charter rates due to shortages of vessels in the market.
Mainly a pure upstream cost-efficient plantation player, Asiatic Development Bhd will benefit from any further uptrend in crude palm oil prices. Valuations are still relatively inexpensive, trading at 20% to 30% discount to the sector.
Zelan Bhd has good earnings visibility, underpinned by RM4.9bil outstanding construction order book, more than 90% of which are from overseas.
Public Bank Bhd remains as the best managed commercial bank in Malaysia with above industry loan growth (17% to 18%), sound management and superior asset quality.
Bumiputra-Commerce Holdings Berhad is anticipated to deliver strong earnings growth from multiple sources, including a sharp increase in non-interest income from robust capital market activities, synergistic benefits from the merger with Southern Bank Bhd and profits from the sale of its insurance units.
The plantation sector’s earnings visibility is underpinned by structural changes in demand and the focus will remain on this sector given high CPO prices and strong earnings visibility.
We continue to like oil and gas sector given shortages of capacity across the board around the globe and hence, earnings visibility. The laggards are in the banking sector, given sustained loan growth and interest income as well as fee-based income from capital market activities. We have an overweight rating on gaming sector as its earnings are set to benefit from rising consumer spending, Visit Malaysia Year 2007, better yield (electronic games) and a new million ringgit number forecast game.
The building materials is generally in an upcycle on account of strong demand for long steel products, cement and aggregates on the back of the 9MP and the construction boom in Singapore.
Pankaj C. KumarChief investment officer, Kurnia Insurans (Malaysia) Bhd
As the holding company of Kuala Lumpur Kepong Bhd (KLK), Batu Kawan Bhd should be revalued by the market as its stake in KLK alone is worth about RM13 per share. Dividend yield is strong at more than 4%.
Real estate investment trusts (REITs) are defensive, with steady flow of recurring income of more than 7%. Specifically, one can also ride on the reflation story for properties, which is relevant for Starhill and Amanah Raya REITs while Boustead REITs is favoured purely due to the CPO angle.
We also like KNM Group Bhd for its strong order book visibility and its mergers and acquisitions angle.
I think the plantation sector will still be a hot sector as it is correlated with the performance of CPO price, which again is correlated to crude oil to a certain extent.
We like global players in oil and gas sector, such as KNM, which has delivered tremendous earnings growth via its strong order book as well as its mergers and acquisitions strategy.
Next year, we expect the construction sector and retail themes (telcos, property, banking and gaming) to do well while defensive consumer stocks are favoured too. We also like selective small caps.
Lim Suet LingExecutive director and chief executive officer, UOB-OSK Asset Management Sdn Bhd
IJM Corp Bhd, WCT Engineering Bhd, Industrial Concrete Products Bhd, Ann Joo Resources, Puncak Niaga Holdings Bhd and Loh & Loh Corp Bhd are beneficiaries of the infrastructure development and the projects under the 9MP.
Our pick is Resorts World Bhd, which is leveraged to increase in disposable income. Gaming stocks are large and liquid proxies to consumption growth.
We like Dialog Group Bhd due to its recurring income business model in the tank farm business. We believe the partnership with MISC Bhd will help unlock the full potential of the tank farm businesses.
Having a slow-start until 2007, the implementation of mega projects under 9MP should pick up from 2008 onwards in infrastructure sector.
This trend would also benefit the building material players.
Consumer sector will benefit from the relaxation of withdrawals from EPF, which could result in an additional RM10bil of disposable income.
Furthermore, we will also see the full year impact from the pay increase for civil servants.
We are still overweight on oil and gas sector, especially the oil field services segment. Oil price is expected to remain firm in 2008, due to acute shortage of resources (human and assets). We remain optimistic on the plantation sector with several factors likely to drive CPO prices up in the near to medium term.
Gerald AmbroseManaging director, Aberdeen Asset Management Sdn Bhd
YTL Cement Bhd is very well run, with exports being switched to the domestic market and long-term clients. Cost pass through has benefited the cement industry.
Shangri-La Hotels (Malaysia) Bhd's costs are relatively unchanged but occupancy and rates are going up and this will go straight to bottom line.
Last year there was an excellent special cash dividend and we have a core defensive holding of British American Tobacco (Malaysia) Bhd, which has minimal capital expenditure, very strong cashflow and management is excellent as they control cost very well.
Malaysia has that high-yielding stocks of quality with consistent dividends. I think the growth will be in the insurance, financial services, retail, media, banking and finance.
BKAWAN : [Stock Watch] [News] MUHIBAH : [Stock Watch] [News] BAT : [Stock Watch] [News] SHANG : [Stock Watch] [News] PBBANK : [Stock Watch] [News] RESORTS : [Stock Watch] [News] PETRA : [Stock Watch] [News]