KUALA LUMPUR (July 5): Rakuten Trade Sdn Bhd, a joint venture between Kenanga Investment Bank Bhd and Japan's Rakuten Securities Inc, remains positive on Malaysian stocks despite the heavy selldown seen in the last two months.

According to the research head at the online brokerage, Kenny Yee, market volatility is expected to continue for now. Although the recovery may not be immediate but once market liquidity is restored, a re-look at the small capitalisation space will be on the cards.

Yee told the media during its market outlook briefing for second half of 2018 that Rakuten Trade has selected Econpile Holdings Bhd, GFM Services Bhd, Kelington Group Bhd, Mi Equipment Holdings Bhd and Straits Inter Logistics Bhd as some of its top picks in the small cap space.

Econpile's share price has fallen by 3.5% today to close at 68.5 sen with about 4.48 million shares traded. The research house has a target price (TP) of RM1.20 for the construction player.

Yee highlighted GFM Services' potential transfer to the Main Board as one of the catalysts for the company. He has a TP of 60 sen for the company, which saw its share price settled at 56.5 sen.

Kelington, which operates in a niche business providing ultra-high purity gas and chemical delivery system solutions, could benefit from China's chipmakers move to increase the manufacturing capacity for memory chips and integrated circuits under the "Made in China 2025" government initiative. Its share price fell 2.4% to close at 82 sen today with 295,200 shares changing hands. Rakuten Trade has a TP of 91 sen for Kelington.

Rakuten Trade's RM2.30 TP for newly listed Mi Equipment translates to a 24% upside from its closing price of RM1.85 today.

Straits Inter Logistics — a provider of premium oil bunkering services to marine bulk cargo transporters, oil and gas vessels, FPSO vessels, cruise ships and ferries — is also expected to see a recovery in its share price amid its acquisition of 55% in Tumpuan Megah, which could transform the company into one of Malaysia's largest bunkering players serving eight ports around the country.

Yee has a TP of 38 sen for Straits Inter Logistics, which closed unchanged at 25.5 sen today with about 212,400 shares traded.