Industrial, services lead RHB small-cap jewels

RHB Banking Group managing director Datuk Khairussaleh Ramli said the past year has seen volatile equity markets following the impact of the Covid-19 pandemic.

PETALING JAYA: RHB Investment Bank has launched its much awaited list of small-cap jewels this year, with a list of 20 new stock ideas.

The RHB Top 20 Malaysia Small Cap Companies Jewels 2021 saw the industrial products and services segment having the largest representation at 30%, followed by the consumer sector at 20% and technology and construction at 15% each.

The other sectors are oil and gas, media and healthcare.

The 17th Edition of the publication is part of a larger RHB Asean Small Cap yearly compendium from the bank’s research teams in Indonesia, Singapore and Thailand.

The 20 companies – 14 listed on the Main Market and six on the Ace Market – covered in the publication have a market cap limit of less than US$1bil (RM4.12bil), covering seven different industry segments.

Among those picked this year were GDB Holdings Bhd, Innature Bhd, Solution Group Bhd, ES Ceramics Technology Bhd, Star Media Group Bhd, Carimin Petroleum Bhd and Aemulus Holdings Bhd.

The selection took into consideration factors including the companies’ liquidity spread and size, managements’ track record, industry fundamentals, earnings growth potential, the long-term sustainability of the industry and their commitment to environmental, social, and governance (ESG) principles.

All 20 companies featured this year are outside RHB Research’s existing coverage portfolio, as it seeks to uncover even more under-researched gems.

The median trailing price-to-earnings (P/E) ratio and return on equity (ROE) of the 2021 Jewels were 21.9 times and 4.8%, respectively, with an average market capitalisation of RM437mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli said the past year has seen volatile equity markets following the impact of the Covid-19 pandemic and within that, they have seen the adaptability of small-cap companies in managing a fluid business environment.

“Technology, industrial products and services sectors continue to dominate the market, thanks to the inelastic underlying demand and strong investor interest amid the prevailing low interest-rate environment.

“Overall, the small-cap index has been encouraging, generating returns of 10.7% year-to-date as compared to 9.9% in 2020, and we see this buoyant trend continuing, ” he said.

The launch yesterday attracted about 60 fund managers and buy-side analysts from insurance companies, private asset management companies, unit trust companies, government-linked companies as well as pension funds from Malaysia and the Asean region.

Representatives from five Malaysian-listed companies, along with five companies from Singapore and two from Indonesia and Thailand, respectively, shared their perspectives and prospects at the virtual launch.

The RHB Top 20 Malaysia Small Cap Companies Jewels 2020 Edition outperformed the broader market with a value-weighted holding period return of 100.1% since its launch in May 2020, against the benchmark FBM Mid 70 at 31.1% (+31.1%) and the FBM Small Cap at 49.3%.

In achieving this, the bank said its equity research analysts have been relentless in stock screening initiatives, employing meticulous fundamental analysis and filtering for governance issues amid a backdrop of extreme market conditions.

From the selections, 90% were gainers spanning across various sectors and demonstrated the ability to adapt and capitalise on the “new normal” business and economic environment.

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