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KUALA LUMPUR (June 17): RHB Research recommended a list of six stocks to their clients today. These stocks are in different sectors from auto to construction, following the recent release of the financial results and new contract win.

RHB Research's buying list today comprises Gadang Holdings Bhd, RCE Capital Bhd, Allianz Malaysia Bhd, YTL Power International Bhd, Bermaz Auto Bhd and Malayan Cement Bhd.

RHB Research has upgraded Gadang from “neutral” to “buy” with a target price (TP) of 60 sen from 42 sen previously, following the announcement of the RM81.18 million East Coast Rail Link (ECRL) project wins in late May.

The counter is trading unchanged at 46.5 sen at the time of writing.

With the ECRL wins, Gadang’s order book stood at RM958 million across two years, while tender book sat at RM1.6 billion.

“With the ECRL jobs win announcement, sentiment is improving,” RHB Research said. “Our previous 30% sum-of-parts discount is removed, unmasking good upside.”

The research house estimated its project wins to amount to RM500 million for the financial year ending May 31, 2021 (FY21).

Gadang's other key construction jobs include related works for the Mass Rapid Transit Line 2 (MRT2), Tun Razak Exchange, and Cyberjaya Hospital developments.

RHB Research also told clients to keep buying RCE Capital Bhd as it has raised the TP to RM2.20 after the non-bank lender's latest results announcement.

The higher target price, the research house said, has accounted for its solid asset quality, the 15% return on equity, and its 6% dividend yield estimates for the financial year ending March 31, 2021 (FY21).

The counter has gained seven sen or 3.87% to RM1.88, below its end-FY20 book value of RM1.92.

“We gather that under 1% of RCE borrowers are on the six-month loan payment moratorium.

“Notwithstanding, collections via salary deduction have been stable and asset quality remained sound with no spike in non-performing loan (NPL) ratio,” said the stockbroking house.

Allianz Malaysia Bhd was another financial stock that RHB Research recommended clients to buy more. Allianz was the research house's top pick in the insurance sector with TP of RM16.70. The counter dropped 12 sen or 0.84% at RM14.18 at the time of writing.

But the stockbroking firm noted that it might tweak its earnings forecasts and TP pending today’s results briefing, although “underlying operations remained fairly unscathed during the quarter” as the recent weak quarterly results are within expectations.

Power producer cum telco YTL Power International Bhd was another stock that RHB Research recommended given the group’s attractive dividend yield of 7%.

It has maintained its "buy" call with unchanged TP of 86 sen. But the TP has not imputed the possible impact of the acquisition of Tuaspring assets in Singapore. The utility stock is trading down 1.5 sen or 2.16% at 68 sen.

The stockbroking firm noted that the TP of 86 sen has taken into account of YTL International’s narrower operating losses in the financial quarter ended March 31, 2020 (3QFY20) for its Singapore utility venture and the telco business under the brand “Yes 4G”, and possible headwinds it would encounter.

RHB Research said the group’s earnings growth for the financial year ending June 30, 2021 (FY21) should be fuelled by the maiden contribution from its 470MW Jordan plant, while the financial closure of its 80%-owned 1,320MW Tanjung Jati power plant in Indonesia could be a re-rating catalyst.

“We believe Wessex Water (YTL Power’s water supply outfit in the UK) is still capable of anchoring the bulk of its dividend payments,” it said. The current share price reflects a historical dividend yield of over 7%.

On Mazda car distributor Bermaz Auto Bhd, RHB Research maintained a buy TP of RM1.80, against its share price of RM1.52, as the Mazda car distributor has seen its sales orders surged after the tax exemption announcement by the Malaysian government.

However, it noted that Bermaz might face a hiccup on launching new models which will be delayed to 2021.

According to RHB Research, Bermaz’s management has set a sales target of 11,500-12,000 and 1,800-2,000 units for its Malaysia and Philippines operations, it said, versus the breakeven of 6,000 units in Malaysia and 1,200 units in the Philippines per year.

“The group will be entering cash preservation mode — to build buffers during this challenging time, and to fund potential merger and acquisitions,” the research house said.

RHB Research, meanwhile, lowered its buy TP for Malayan Cement Bhd to RM2.85 from RM3. However, it still recommended clients to invest in the cement maker amid expectation that construction activities will be normalised as well as expectations of a swing to profit next year. Furthermore, it is enjoying low fuel costs.

However, the stock is trading up eight sen or 3.17% at RM2.60.

The research house expects Malayan Cement’s results to bottom out in the upcoming quarters as construction activities normalise, coupled with future efficiency gains from the current operational overhaul under YTL Cement.

“We gather that bulk cement average selling price held up at RM240.00-RM250.00/tonne post the MCO, with the Rawang plant’s closure and healthy backlog of construction projects lending further support to supply-demand dynamics,” it said.

“Key input costs, such as fuel, coal, and petroleum coke also remained benign at three-year lows,” it added.

http://www.theedgemarkets.com/article/rhb-research-recommends-clients-buy-these-stocks
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