Most conversations with investors about Malaysia over the recent weeks have been centered on politics. Unfortunately, it appears to us that foreign interest on buying stocks in Malaysia continues to be low as valuations remain unexciting. Consensus earnings growth has gradually been ratcheted downwards, while ringgit weakness is another uncertainty. Our top five absolute return Buy picks in Malaysia in order of preference are: MISC, KLK, IHH, Astro and AirAsia
(Source: Deutsche Bank)
Highest Buy conviction ideas should drive alpha over the next 12 months :
MISC Bhd: The crude oil tanker rate has been elevated this year due to a lower supply of newbuild vessels. We expect rates to reach its usual year-end high. Higher USDMYR is earnings positive due to translation effects.
KLK: Should benefit from a potential CPO price upcycle, while aggressive downstream expansion enables it to benefit from a low tax structure.
IHH: Strong capacity expansion should drive 2-year FY14-16E adj EBITDA growth of 18%. It is well positioned in private healthcare to tap on the rising affluence and an ageing population.
Astro Malaysia: An ARPU increase from premium customers and operating leverage should fuel 30% FY16 EPS growth. FX is fully hedged until April 2016.
AirAsia: We expect better performance at associates and stabilisation of amounts due from associates to be key catalysts. Earnings should grow from lower oil prices and a more benign competition in Malaysia
Note: explanation for the above is solely for academic reference/guidance only.
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