Sharing friend’s sales journal

WORST IS OVER? MKT BACK ON TRACK?; IJM TO CATCH UP WITH GAMUDA; DAYANG/WASCO-O&G DARLINGS AGAIN; MSM TOO HIGH?; NETT BUYERS AGAIN...

Normal service resumes? As market was gripped by small cap/retail saga, one wonders if the worst is over as the market looks to have stabilized propped up by better international headlines as China mulling USD278bil market rescue package while US stocks hit all-time highs. Anyways, we have been asking on this crash but *seemingly isolated small cap drama* as everyone tries to time the bottom. Firstly, rather than time, *assessing fundamentals is a better way* as there are fundamentally sound stocks out there. Macro wise, *encouragingly Msia CPI moderated to 2.5% in 23 (vs 3.3% in 22) but Nazmi reminds us to brace for a steady climb in price (3.2% inflation this year)* although this all depends on the *pace/structure of subsidy revisions as new taxes (luxury tax in May), are expected to lift prices* on gradual basis despite softer and diminishing base effect on commodity prices.

So, back to fundamentals as even *SC reminds investors to hunt for stock with strong financial background and so, CUMB’s latest upgrade (ADD: RM2.88) on IJM* couldn’t have come at a better time as it’s time for *IJM to play catch up with Gamuda.* On paper, while *GAMUDA is all the rage regionally, there’s no reason for IJM not to narrow its market cap* with GAM. At our TP, its P/E translates into 18x, still *below 22x average.* With a slew of upcoming wins expected - ie NPE extension, industrial warehouses/data centres, Kuantan port, Shah Alam logistics hub and Kuching transportation system on top of MRT3/Penang – this is where *IJM can leverage on its strong bal. sheet.* Also, with light at end of tunnel for *JV with Pestech (aerotrain) and industrial land exposure in MCKIP,* what’s not to like?

O&G services is another hot segment as CIMB retains *ADD on DAYANG as there’s still ample upside despite outperformance (up 50% since June’23).* While Petronas’ activity outlook offers strong *demand outlook for DAYANG’s services over next 3 years,* it seems market hasn’t really priced this in. For context, at current levels, market is pricing in a *ROIC of 11.3% for Dayang which is below CIMB’s 24/25 forecasts of 14.4-15.8%* while ex-cash valuations at mere 7.8x PE vs. 10 yr avg. of 11.5x. Certainly plenty of room to rerate.

Similarly, *WASCO (ADD) is also thriving and will cont. to surprise on the upside* on back of better margins as a lot more *pipe-coating works were carried out in 4Q which implies margins/earnings* should sequentially *improve in final qtr.* Tenderbook currently stands at RM7bil, a mix of 20% domestic and overseas and with share pricing running 66% over past 12 months, valuations remain *attractive (8.6x vs 10-yr avg. of 10x),* which looks enticing for a *growing O&G* name. At current levels, mkt. is pricing in a *ROE of 12.3% below CIMB ROE forecast of 14%.* Yup, still room to run further.

*RECENT FLOWS: Buy flows back in again though seeing profit taking on some property, O&G, constr’n and names that took off recently. Technically, MSM looks to retest 2021 high though need to break LT resistance at RM2.50 before closing Dec’18 gap. Near term looks overbought and ripe for some selling.*


$IJM / 3336 (IJM CORPORATION BERHAD) $GAMUDA / 5398 (GAMUDA BERHAD) $MSM / 5202 (MSM MALAYSIA HOLDINGS BERHAD) $WASEONG / 5142 (WAH SEONG CORPORATION BERHAD) $DAYANG / 5141 (DAYANG ENTERPRISE HOLDINGS BERHAD)