Stock Picks for 2016
GTRONIC (7022)
We expect near-term sentiment on technology stocks to be supported by the continued weakness in MYR/USD, which would further enhance earnings visibility.
Gtronic earnings growth is likely to ride on:
i) resilient demand for existing products,
ii) penetration into new sub-segments on their existing customers’ product portfolios,
iii) a favourable forex environment on top of their sturdy balance sheets.
KSENG (3476)
Its core business of palm oil, are planted in the field of the downstream industry. Company own has few plantations. Besides, the company is also involved in property development and hotel business, it turnover contribution for FY14 were 16.8% & 16.3%
In 9 months, KSENG net profit increased 1.3x as benefit from the strong dollar & the profit taking activities. There are more than 1/3 of the assets distributed at Singapore, HK, Canada and US, which benefited from the depreciation of MYR.
INARI (0166)
Inari's rosy days are expected to continue into this year on the back of capacity & production expansion, soupled with growth expected in the global semiconductor industry.
The short term & long term prospects for company are good due both weaker MYR and ramp-up of testers as its P13 facility in Bayan Lepas which to support its next wave of growth in radio frequency business and able to boost number of testers to 800 by Oct.
We like the company due to its strong balance sheet with a net cash position of RM 206mil which is sufficient to support it's expansion drive.
PADINI (7052)
Padini is a 43-year-old Malaysia-based fashion retailer offering clothing, accessories and shoes under the brands of Padini, Vincci, Seed, Miki, Padini Authentic, P&Co, PDI, etc.
We are positive that the group is able to deliver double-digit earnings growth for FY16, supported by
(1) new store openings which 4 new Padini Concept stores & 4 new Brands Outlet stores to boast company's sales which total gross floor area=117k sq.ft.
(2) strong same-store sales
growth (SSSG), the overall SSSG was up 14% (+7% in FY15), driven mainly by 23% SSSG in Padini Concept Stores (PCS), due to its mix-and-match bundling strategy.
(3) GP margin recovery. Besides, company have RM226m net cash as at 30 Sept 2015.
TAANN (5012)
We believe the company can maintain its momentum in the final quarter driven by stronger USD & improved CPO prices. We see better prospects next year led by positive outlook on the CPO prices & double-digit FFB production growth. Timber and plantation will continue to be the earnings growth drivers for 2016.
i) young age profile,
ii) strong FFB production growth,
iii) exports play for the timber business
iv) attractive dividend yield of 5-6%.
KAREX (5247)
We prefer Karex on the back of its margin expansion from a better product mix and favourable macro-economic factors. The global condom market remains buoyant, with Karex forecasting a 9.1% CAGR in demand over the next 5 years. In particular, Karex highlights the growing tender market demand from the African continent as well as opportunities in China (demand forecasted to grow 60% in 5 years) and India (recent liberalisation of condom ceiling prices).
SPSETIA (8664)
Favor developers with cheap but strategic landbank, strong balance sheet & high unbilled sales. We like SP Setia for its good earnings visibility, with unbilled sales of c.RM10bn. Sales YTD also appears to be on track to meet its RM4bn sales target. The Group has c.4,000 acres landbank with estimated GDV in excess of RM70bn. Main projects in the pipeline include Setia Eco Templer Township, which has estimated GDV of RM1.9bn, Setia EcoHill 2, Semenyih (RM5bn total GDV), Setia Eco Forest, Penang (RM1.1bn total GDV) and Setia Federal Hill, KL (RM8bn total GDV).
KIMHIN (5371)
The new plant will launch in January 2016 which enabled the production of the peninsular M'sia can be increased by 75% to 7 mil sq. m per year and year 2017 will further enhance the production capacity and continue to expand the production line.
As for the plant, the current production capacity can reach 8 mil sq.m, but the next 3 years and gradually reduced to 5 million square meters, mainly because the local prices of liquefied natural gas. It is subsidized peninsular M'sia plant using natural gas pipeline
KIMHIN is currently one of the 3 larger tile business, market share 20%, and strive to reach 25%
Export markets contributed 32% of turnover, it is devalued ringgit beneficiaries.
Company net cash RM 4.3mil.
BJAUTO (5248)
BAuto successfully sustained strong sales growth for Mazda, both in M'sia & Philippines, in 1HFY16. Combined Mazda sales volumes in M'sia & Philippines rose 18% yoy to 10,440 units. Sales volume in Malaysia increased 17% yoy to 7,843 units in 1HFY16, with the CX-5 (3,182 units) and Mazda2 (2,133 units) models posting the highest sales volumes. 1HFY16 sales volume in the Philippines rose by an even higher 24% yoy to 2,301 units, led by Mazda3 (708 units) and Mazda2 (613 units).
The new crossover CX-3 model that it launched in Malaysia on 8 Dec 2015 received very positive response, with around 600 bookings placed before the launch. Other new models in the line-up are the Mazda CX-5 facelift (Jan 2016), Mazda2 diesel (Feb 2016), Mazda6 diesel (Feb 2016), and CX-5 diesel (Feb 2016).
Unchanged model prices should lead to market share gain and highly positive for its earnings outlook in 2016.
TAMBUN (5191)
Tambun is the prime beneficiary as its flagship township development, Pearl City, is 15 minutes away from Batu Kawan, where the Penang Second Bridge ends. After numerous delays, the company finally obtained the advertising permit and developer licence (APDL) in early December to roll out new projects that were initially slated for launch in 1Q15. Tambun is backed by solid balance sheets. Tambun’s property sales to rebound strongly next year given the strong pipeline of projects that will be rolled out after a lacklustre 2015.
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