PETALING JAYA: With election fever heating up, stocks that are politically-linked have started showing signs of strength despite the volatile global market.
Coupled with the fact that most stocks have fallen, thanks to the Dow Jones’ steep correction in the last two weeks, it might be a good idea to start positioning oneself in stocks that are deemed beneficiaries of the ruling government.
The FBM KLCI was showing signs of life on Thursday when it added 3.35 points to close at 1,838.28. Year to date, it is now up 2.31% or 41.47 points.
The first stock that comes to mind is easily MyEG Services Bhd. Political connection is one thing but for this company that started out as a government concession, it now seems to offer every service under the sun.
In January alone, it launched two new services. On Jan 3, it launched a new job-matching and placement service to match Malaysian employers with foreign workers, via its subsidiary MY EG Jobs Sdn Bhd. On Jan 10, MyEG announced that Bank Negara has allowed its unit to issue electronic money via iPayEasy e-wallet.
Presently, commercial services, not government concessions, contribute 70% to its bottom line.
MyEG’s share price has also moved with that same sort of gusto.
On Jan 2, MyEG’s largest shareholder, Asia Internet Sdn Bhd, acquired another 8.5 million shares in MyEG, giving it a total of 1.09 billion shares or 30.12% stake in the company.
Another diversified government-linked company which has seen some action is KUB Malaysia Bhd. While its allure has decreased over the last few years due to staid earnings, the stock continues to garner some interest.
The stock is 52.17% owned by Anchorscape Sdn Bhd. At its last price of 44 sen, it is up 5 sen or 12.82% on a year-to-date basis.
For the nine months to Sept 30, 2017, its net profit increased to RM17.16mil from RM15mil previously. Revenue jumped to RM415.2mil from RM364.45mil.
The company underwent massive kitchen-sinking and restructuring exercise in 2016, and is focusing on strengthening and expanding its three core businesses of energy, plantations as well as information and communications technology.
In January, KUB completed the acquisition of a brownfield oil palm plantation land in Kinabatangan, Sabah, from Kwantas Corp Bhd for RM100.45mil. The land is expected to contribute 31% to the group’s agro arm revenue and about 3% to the group.
News has also been circulating that KUB’s iconic A&W Restaurant along Lorong Sultan, Petaling Jaya, has been approved for a new development. This would mean the famous fast-food site will be demolished to make way for the upcoming development.
While most construction companies are perceived to have some sort of political link, perhaps the most distinct among them would be George Kent (M) Bhd.
This stock has been on a non-stop upward trajectory. For 2017, the stock was up 76.38%. For 2018, on a year-to-date basis, George Kent continues to rise on contract wins and is now up 12.25% or 43 sen.
RHB Research has revised its earnings forecast on George Kent on a higher contract win possibility.
The research house said it has upgraded George Kent’s order book replenishment assumptions to RM5.5bil this year, which would almost double the group’s order book to RM11.3bil from RM5.8bil currently.
Last week, George Kent announced that it has joined forces with four foreign companies to form a consortium to bid for the Kuala Lumpur-Singapore high-speed rail project.
George Kent said it would collaborate with Siemens, Alstom, Ferrovie Dello Stato Italiane and the PORR group to form an engineering, procurement and construction, and operations and maintenance consortium to bid for the asset company tender of the project.
Another well-connected political counter is Cahya Mata Sarawak Bhd (CMS).
CMS is one of the key local participants in Sarawak Corridor of Renewable Energy development and the RM1.36bil Pan-Borneo Highway project, in addition to its existing businesses with the state government. On a year-to-date basis, the stock is up 9.49% or 37 sen at its last price of RM4.27.
CMS is involved in cement manufacturing, construction, road maintenance and property development, among others.
Recently, CMS’ cash position experienced a growth of 1,096.9% to a net cash position of RM161.09mil.
The sudden jump in net cash was primarily because of the proceeds from its RM500mil Islamic medium-term notes. The five-year notes mark CMS’s first sukuk issuance.