Small-cap stocks offer good investment potential

Datuk Khairussaleh Ramli: Over the medium term, our reframed strategy will make us more focused on creating shareholder value

KUALA LUMPUR: The small capitalisation (small-cap) stocks in Malaysia have good potential to ride higher and are an attractive proposition for institutional and retail investors, backed by the country's strong economic fundamentals, high global oil prices and the ringgit recovery.

RHB Banking Group Group Managing Director Datuk Khairussaleh Ramli said the volatility inherent in small-cap stocks offered investors the opportunity to enhance the alpha in their respective portfolios to contribute towards outperforming their respective benchmarks.

“In time, we also expect these small cap names will flourish into tomorrow's mid- and large-cap companies that will help drive Malaysia's economic growth,” he said at the launch of the group's latest publication titled ‘RHB Top Malaysia Small Cap Companies 20 Jewels 2018' here, today.

Khairussaleh said the six measures announced by the government in February to boost market vibrancy were also expected to bring long-term positive effects for the mid- and small-cap sector, in addition to enhancing retail interest in the local equity market.

Among the measures introduced were a waiver on stamp duty for mid- and small-cap companies, as well as on trading and clearing fees for first-time individual investors for a period of six months, liberalisation of financial rules, and the introduction of volume-based incentive trading.  

Earlier, Khairussaleh said the book featured a portfolio of companies from 10 industry segments, with the biggest representation coming from the construction and consumer segments.

The stock with the largest cap listed in the book, at RM2.1bil, is Sarawak Oil Palms Bhd, while the smallest is Nova MSC Bhd, with a market cap of RM75mil.

Eighty-five per cent or 17 of the 20 companies listed in the book have a market cap of less than RM1bil.

“The median price-to-earnings and return-on-equity of this year's jewels stand at 14.9 times and 12.1%, respectively.

“As we continue to expand our client base in the local and regional markets, this book will deliver valuable insights and investment ideas to our clients to help them achieve their investment objectives,” he added.

The book is part of a regional compendium produced by the RHB's research teams in Indonesia, Hong Kong, Singapore and Thailand. - Bernama