Thursday 28 Mar 2024
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KUALA LUMPUR (April 20): Hidden "gems" residing among the small cap players on Bursa Malaysia could be key to providing superior returns for investors, says RHB Investment Bank Bhd (RHB IB).

This is in line with the investment bank's launch of its 13th edition of RHB Top Malaysia Small Cap Companies 25 Jewels 2017 Book here today.

The 25 companies featured in the book include those with a market capitalisation limit of not more than RM1.8 billion.

RHB Research Institute Sdn Bhd director and head of Malaysia Research Alexander Chia said the current small-cap stock rally still has legs despite the outperformance of the FBM Small Cap index in the first quarter of 2017.

Chia said the catalysts for the selected small-cap companies would be driven by their strong track record in earnings, their management's strong entrepreneurial drive and spirit that encourages innovation and ingenuity.

According to Chia, the market has rebounded from a poor 2016, in line with the improvement in earnings seen.

He, however, warned that the external risks, which include uncertainty surrounding US President Trump's policy, the geopolitical tension as well as the upcoming election in France and snap election in the UK could dampen appetite for risky assets.

Nonetheless, Chia believes now is a good time to take a look at small cap stocks.

"This year's selection of small cap names come from a broad mix of 10 sectors, similar to the sector spread in 2016," he added.

In RHB Small Cap book, it noted that the largest cap stock, at RM1.7 billion is AirAsia X Bhd, while the smallest, with a market cap of RM125 million, is O&C Resources Bhd. The average P/E of the stocks in the book is 17.8 times with an average return on equity (ROE) of 16.9%.

 

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