KUALA LUMPUR (Nov 5): The stocks of IOI Corporation Bhd, Perdana Petroleum Bhd and SapuraKencara Petroleum Bhd are at risk of being designated "non-compliant" when the Securities Commission (SC) publishes its semi-annual review of Shariah-compliant securities at the end of November, according to RHB Research.
In a note Wednesday, the research house said the Syariah Advisory Council (SAC) of the SC stipulates that on top of the business activity benchmarks, cash and debt should also not exceed 33% of total assets.
The research house said it expects IOI Corp, Perdana Petroleum and SapuraKencana to be designated as non- compliant as they each has debt that exceeds 33% of their respective total assets.
IOI Corp and SapuraKencana are component stocks in the benchmark FBMKLCI.
RHB Research explained that investors in “Syariah-compliant securities” which are subsequently re-classified as “Syariah non-compliant” are required to dispose of the stocks within a month, unless the market price is below investment cost.
Meanwhile, RHB Research said it had identified four stocks that could be included in the Syariah-compliant list.
They are Esthetics International Group (Neutral, TP: RM1.35), Pantech Group (Buy, TP: RM1.25), SKP Resources Bhd (Buy, TP: 85 sen) and Padini Holdings Bhd (Neutral, TP: RM2.03).
These stocks are currently not in the May list of compliant securities, but could be included in the coming review.
RHB Research said its top stock picks in the Syariah-compliant space include Tenaga Nasional Berhad (Buy, TP: RM15.50), Unisem (M) Bhd (Buy, TP: RM2.16), Matrix Concepts Holdings Bhd (Buy, TP: RM3.93), Cahya Mata Sarawak Bhd (Buy, TP: RM5.00) and Naim Holdings Bhd (Buy, TP: RM5.06).
“We remain optimistic on the outlook for equities heading into the tail-end of 2014 and looking ahead,” it said.