After examining how the Malaysian market has been faring thus far, let’s take a closer look into the top performing stocks of the KLCI and some of the initial public offerings (IPO) we have seen in this half year.
IPO Market Off To A Strong Start
In 2013, Malaysia was among the world’s leaders in terms of IPO value and performance. It looks like 2014 is set to be yet another strong year for Malaysian IPOs, with analysts projecting IPOs to raise more than RM18 billion .
Listing on 30 May, 7-Eleven Malaysia Holdings (SEM) launched a RM250.3 million IPO, which went off without a hitch. Prices trended toward the higher end of projections and since the offering stocks have continued to gradually move higher.
The issue price was RM1.38 and the company’s stock closed 27 June at RM1.68, or 21.7 percent above water.
Going forward, SEM is aiming to balance expansion and profitability by increasing new stores and improve same-store-sales growth.
CIMB Research has initiated a “Hold” call on SEM with a target price of RM1.85. The house highlighted SEM’s dominant status in Malaysia coupled with its strong earnings growth and return on equity as well as its surprisingly strong demand since listing.
Separately, Boustead Plantations topped SEM’s offering, raising RM928 million at an issue price of RM1.60. Bulk of its net proceeds has been allocated to acquisition of plantation lands, replanting and other capital expenditure.
The company’s listing date was set for 26 June and has remained in positive territory since its offering. It closed at RM1.64 on 27 June.
For those looking to invest in Malaysia’s booming oil and gas industry, Icon Offshore (ICON) has recently launched its IPO, raising RM410.2 million.
The final issue price came in at RM1.85, which represented the high end of expectations. So far, stock prices are hovering near the IPO price, closing 27 June at RM1.88.
Top Performers Of KLCI
Digi.Com has been enjoying a great year so far, with stock prices up an astounding 15.7 percent.
A recent report by RHB Research notes a neutral outlook for Malaysia’s telecom sector in general, but Digi.Com received praise for doing the best job monetising digital data.
Compared with other telecom carriers, Digi.Com has also been showing the least erosion in terms of messaging and voice calls, which many other telecom carriers are struggling with.
While Malaysia’s telecom sector may indeed be growing more competitive Digi.Com is so far proving to be the best competitor in the tight market.
Digi.Com has also been enjoying marketing success as of late, with its commercials topping YouTube charts . All things combined, Digi.Com should be able to maintain momentum going forward.
The house maintained “Buy” on DiGi.Com and raised its target price to RM6.20 from RM5.60.
IHH Healthcare has also surged ahead in recent months, growing 13.7 percent this year.
IHH has emerged as a leader in the hot and fast growing medical tourism sector. The company is already a major player in Malaysia, Singapore and Turkey, and is the world’s second largest hospital group.
IHH’s current market capitalisation has exceeded RM34 billion and the company has been growing rapidly. In Turkey, for example, IHH now supports 2,035 beds, up from 1,232 in 2009.
Even in its mature Malaysian market, admissions were up to 170,600 in 2013, from 146,200 in 2009. Still, the company has a trailing price-to-earnings ratio of around 66.8, suggesting that the company may be overvalued.
Malaysia’s banking system has been struggling over the last few months. Malayan Bank is down 1.4 percent for the year, while Hong Leong Bank is down 4.2 percent and CIMB is down 4.2 percent. In spite of these struggles, RHB Capital has surged ahead 7.3 percent for the year, making it the strongest performer in the financial services sector.
RHB Capital saw its profits rise to RM1.8 billion in FY13. Total income increased an astounding 23.2 percent to RM6 billion, while gross loans increased 9.2 percent to RM121.8 billion.
Meanwhile, the bank continues to pursue strategic partnerships across Asia and is now looking to expand its Islamic operations.
CIMB Research has an “Add” rating on RHB Capital and identified the stock as its top pick for the sector, premised on potential re-rating catalysts of attractive valuation, push for regional expansion and gains in the investment banking market share.
Performance Of KLCI Constituent Stocks
Source: FactSet
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