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Stock picks for 2019


Still resilient: The reason why Genting is a stock to look at is the diversity of its business. — Reuters

Still resilient: The reason why Genting is a stock to look at is the diversity of its business. — Reuters

LAST year was a black spot for global financial markets that experienced a big hit.

In Malaysia, the FBM KLCI was down 5.91% but does that mean that local stocks are not worth a look?

On the contrary, the slide in prices has made stock-picking more appealing. In some cases, for the short-term, but in most cases, for the longer-term.

The depressed prices are giving investors opportunities to start scouting around and maybe start nibbling at certain counters that are seeing some real value emerging.

In this regard, StarBizWeek has chosen 10 counters for investors to look at.

The stocks are picks by fund managers and journalists that track corporate companies listed on Bursa Malaysia.

FUND MANAGERS’ PICKS

FRANCIS ENG

Chief investment officer

UOB Asset Management (M) Bhd

PENTAMASTER CORP BHD

Market capitalisation: RM747.1mil

Fifty-two-week high: RM3.79

Fifty-two-week low: RM1.70

PENTAMASTER is an automated testing, automation manufacturing and technology solutions provider. The company’s main customers are in the telecommunications, automotive, semiconductor, consumer electronics and medical devices industry. Pentamaster employs over 350 engineers and is based in Penang.

We believe that Pentamaster can sustain its earnings momentum going forward, underpinned by a few key factors. Firstly, we expect demand for Pentamaster’s testing solutions to be driven by increasing volume of smart sensors and 3D sensing technology in smartphones.

Secondly, Pentamaster’s continuous diversification efforts and expansion into new segments, particularly the automotive and medical industries, are starting to yield results. Demand from the automotive and medical sectors tends to be relatively more stable compared with semiconductors, which can be cyclical. There are growth prospects for Pentamaster in the automotive sector, especially in electric vehicles.

Eng: Pentamaster can sustain its earnings momentum.
Eng: Pentamaster can sustain its earnings momentum.

Thirdly, Pentamaster has developed in-house automation systems which have capabilities in automating manufacturing processes. We believe that there is strong growth potential for such systems as more manufacturing companies embrace Industry 4.0.

Pentamaster is poised to capture opportunities as its capacity has almost tripled with the completion of a new plant in Batu Kawan in mid-2018.

Additionally, Pentamaster could be a beneficiary of the US-China trade war if multinational manufacturers who shift their production from China to Malaysia were to source their test equipment from local suppliers.

Valuation-wise, Pentamaster is trading at a price earnings ratio (PER) of 10 times in financial year 2019, which is at a discount to its equipment maker peers which are trading at more than 20 times the PER. The company has a strong balance sheet with net cash equivalent to 30% of its market cap.

VINCENT LAU

Vice-president of research

Rakuten Trade Sdn Bhd

BCM ALLIANCE BHD

Market capitalisation: RM73.72mil

Fifty-two-week high: 25 sen

Fifty-two-week low: 14 sen

MEDICAL devices and laundry company BCM Alliance is at its inflection point in 2019.

Its share price has been langushing since its initial public offering (IPO) in 2016, where it was listed at 19 sen.

Things are set to change from a combination of a jump in its existing healthcare business, mergers and acquisitions as well as overseas expansion that will see BCM becoming a more serious medical devices player.

Lau: BCM is trading at a historical PER of 10 times.
Lau: BCM is trading at a historical PER of 10 times.

Fundamentals-wise, BCM is trading at a historical PER of 10 times. Coupled with a net cash position of RM11.7mil, the company is primed to capitalise on opportunities that come its way.

It also had an order book of RM42.3mil as at Oct 31, 2018. At its current price of 18 sen, the stock is trading below its IPO price, and only has a market capitalisation of RM71.61mil.

BCM is in the business of selling medical equipment and devices, and providing commercial laundry services. The medical devices business is now seeing traction, thanks to healthy orders from the KPJ Group of Hospitals and Columbia Asia.

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Markets , Stock Pick 2019