20180611-兴业金融证券-Finding_Diamonds_In_The_Rough__Our_Best_Investment_Ideas_21页_867kb
报告摘要
Summary of "Finding Diamonds In The Rough" Report (11 June 2018)
Core Content
This report outlines 16 investment recommendations for companies within RHB's ASEAN + Hong Kong coverage area, identified as "Diamonds In The Rough" based on a fundamental bottom-up analysis. These companies are selected for their strong financial fundamentals, growth potential, and reasonable corporate governance.
Main Criteria for Selection
The following four criteria were used to identify the companies:
- Return on Equity (ROE) of 15% or above
- Increasing margins
- Trading below average market multiples
- Reasonable corporate governance
These companies are believed to have robust earnings growth potential due to sector-specific or company-specific reasons.
Key Investment Ideas
The following companies have been highlighted as "Diamonds In The Rough" with BUY recommendations:
| Company Name | Rating | Price | Target | % Upside (Downside) | P/E (x) Dec-18F | P/B (x) Dec-18F | Yield (%) Dec-18F |
|---|---|---|---|---|---|---|---|
| APAC Realty | BUY | SGD0.90 | SGD1.35 | 50.7 | 10.7 | 2.2 | 5.6 |
| Astra International | BUY | IDR6,975 | IDR8,450 | 21.1 | 14.5 | 2.1 | 3.7 |
| Bermaz Auto | BUY | MYR2.22 | MYR2.55 | 14.9 | 13.9 | 5.2 | 5.4 |
| China State Construction | BUY | HKD9.66 | HKD13.20 | 36.6 | 7.2 | 1.0 | 3.9 |
| Chinasoft International | BUY | HKD6.68 | HKD7.77 | 16.3 | 18.5 | 2.2 | - |
| Cocoaland | BUY | MYR2.34 | MYR3.02 | 29.1 | 13.9 | 2.0 | 4.3 |
| Dialog | BUY | MYR3.38 | MYR3.92 | 16.1 | 44.2 | 6.3 | - |
| GSS Energy | BUY | SGD0.15 | SGD0.25 | 68.9 | 10.6 | 1.5 | 1.9 |
| Gudang Garam | BUY | IDR70,075 | IDR91,100 | 30.0 | 16.0 | 2.9 | 3.7 |
| Japan Foods Holding | BUY | SGD0.51 | SGD0.63 | 23.8 | 14.0 | 2.4 | 4.1 |
| Major Cineplex | BUY | THB27.25 | THB31.00 | 13.8 | 27.0 | 3.8 | 4.0 |
| Shimao Property | BUY | HKD25.10 | HKD30.00 | 19.5 | 6.8 | 1.0 | 5.9 |
| Singapore Exchange | BUY | SGD7.26 | SGD9.00 | 24.0 | 19.9 | 7.1 | 4.5 |
| SKP Resources | BUY | MYR1.60 | MYR2.04 | 27.7 | 13.3 | 3.2 | 3.8 |
| TISCO Financial | BUY | THB86.25 | THB104.00 | 20.6 | 9.7 | 1.8 | 6.2 |
Key Points on Each Company
- Bermaz Auto: Strong ROE and dividend yields, with potential for margin expansion due to new models and higher sales. Trading below sector valuations.
- Cocoaland: Strong brand equity and contract manufacturing capabilities. Plans to increase production capacity, leading to higher ROEs and margins.
- Dialog: Strong ROE due to associate contributions. Trading below sector valuations despite a high P/E. Strong corporate governance.
- Serba Dinamik: High ROE, with potential for margin expansion through new projects and automation. Trading at attractive valuations.
- SKP Resources: Leader in plastics manufacturing, with strong ROEs and growth potential. Trading below sector averages.
- Major Cineplex: Strong market share and ROE, with growth from screen expansion and movie line-ups. Trading below peers with high dividend yields.
- Tisco Financial: High ROE and dividend yields, with resilient growth due to efficient cost management and improved asset quality. Excellent corporate governance.
Risks and Considerations
- Potential risks include lower-than-expected sales, higher-than-expected input costs, and market volatility.
- The report also highlights the importance of corporate governance, with all recommended companies meeting reasonable standards.
- The stock price discounts are believed to be due to smaller market capitalisation, lower margins, and trading liquidity.
Conclusion
These 16 stocks are viewed as having strong growth potential and attractive valuations, and the report suggests that they are likely to show healthy absolute returns over time. RHB's methodology combines fundamental analysis with on-the-ground insights, and the companies are selected for their earnings growth, dividend yields, and value creation potential.
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