10 Singapore Stocks with an Exposure to Malaysia that Investors Should Look At
Malaysia, Singapore’s closest sovereign neighbour had just undergone a change in government in the recently concluded general elections on 9th May 2018. The stock market reacted positively with the KLCI key stock market index closing up higher compared to market prices at last close before the general election. Election outcome may impact stock prices in the short term, but the pro-business tone of any governing government would ensure companies can flourish in the long term by putting in place the right systems and infrastructure. Many Malaysian based companies have sought to list in SGX, and investors could be rewarded by looking closely at companies with operations in Malaysia and invest in well run businesses serving a larger market.
Riverstone Holdings Limited is a powerhouse rubber glove manufacturer that has and could potentially deliver more solid returns for investors. Its key manufacturing plants are located mostly in Malaysia. Its key competitive advantage lies in manufacturing laboratory cleanroom gloves which gives it superior margins compared to low-cost latex gloves. Its revenue growth and net profit is nothing short of extraordinary where it registered a CAGR growth of 20% and 32% respectively from FY2012 to FY2016. Management has been rewarding shareholders by paying out excess earnings as dividends in increasing quantum every year since 2012. Q1 2018 earnings saw a slight dip of 7.6%, but expansion plans are intact to commission new glove lines to churn out more gloves to meet increasing demand. Its P/E ratio has expanded significantly at 19 times historical earnings but the premium is justified given the strong earnings growth track record.
Top Glove Corporation the world’s largest rubber glove manufacturer headquartered in Malaysia with a dual listing of its shares in the Malaysian and Singapore Stock Exchange, is another top-notch rubber glove manufacturer that should sit in a long term investors’ portfolio. Top Glove announced plans to acquire Aspion, a surgical glove manufacturer to increase output and product mix which could translate into higher group earnings going forward. Earnings for the period ended 28 February 2018 rose 31% on the back of strong demand for gloves in emerging markets. The top glove maker is expected to have a fantastic year in 2018. With about 23 manufacturing plants located in Malaysia, Top Glove is pumping out gloves at full speed to serve the needs of the medical practitioners.
Health Management International, a hospital operator in Malacca and Johor, has been in the healthcare business since 1994, and a good proxy to the booming healthcare sector. Q3 2018 earnings for the period ending 31 March 2018 were positive, with the company recording EPS of 1.9 sen per share, a remarkable turnaround from a loss of 0.26 sen per share. Its Mahkota Medical Centre and Regency Specialist Hospital has seen higher patient loads and medical bills and management is working hard to offer more comprehensive medical services.
ISEC Healthcare, an eye care medical specialist service provider with the majority of eye care centers in Malaysia, may be a good investment thesis for investors looking for healthcare stock exposure. 1st quarter profit as at 31 March 2018 rose 30% to SGD2.1million, signalling good growth potential of the eye care niche segment ranging from cataract lens implants to treating retinal diseases.
Hatten Land Limited, an award-winning property developer, is another stock to watch with its massive property development projects in Malacca, a heritage city in Malaysia with deep cultural history. Integrated development consisting of condominiums, retail and hotel blocks are going forward in full throttle, and Hatten brand name has been well received by Singaporeans and Hatten hotel are their preferred choice of accommodation during their stay in the Malacca city town. Earnings for Q3 2018 were not favourable, with a loss of S$4.5million, but strong unbilled sales and ongoing projects should sustain future earnings. It is branching out into other business areas ie mall management to complement its property development expertise.
Another Malaysian based property developer listed in SGX is GSH Corporation, with the bulk of projects and investment property owners located in East Malaysia, Sabah. Its earnings are mainly contributed by Sabah hotels and residential project in Kuala Lumpur. For the 4Q 2017 period, earnings stood at S$15.2million, reversing a net loss suffered in 4Q 2016, with revenue doubling to S$37.8million. Their latest unveiling of ocean-front residential development in Sabah, Kota Kinabalu may bring forth earnings visibility for the coming years.
Aspen Group Holdings, a Malaysian property developer, may see greater fortunes since the conclusion of the Malaysian election. Its commercial and residential projects, namely Tri Pinnacle, Vervea and Vertu has been progressing well with earnings contributions flowing into the books of the Group, powering the company into a net of profit increase of 150% to RM13.1million for the period ending 31 March 2018. Oxley holdings’ share subscription into Aspen Group has sent a positive confirmation signal to investors on the strength of the company. Penang state government of Malaysia has been actively promoting Batu Kawan, where one of its major development projects is located.
Sunright Limited derives the bulk of its earnings from its listed Malaysian listed associate KESM industries Bhd. Its share price has risen strongly on the back of robust semiconductor sector growth for the past 2 years. Its 1st half 2018 earnings for the period ended January 2018 rose 38%, forecasting a strong year forward in its burn-in, testing and electronic manufacturing sector. The main driver has been strong investments into autonomous driving technology by global tech companies which require substantial semiconductor components.
Khong Guan, a confectioner maker, with various business units across different states in Malaysia, is poised to perform well with rising disposal income. Earnings for the 1st half of 2018 for the period ending 31 January 2018 rose 8 times from a low base to S$0.8million, due to foreign exchange appreciation and unrealized fair value gains on investment stock portfolio. Revenue has been stable as it is selling staple food products such as wheat and flour. Investors favouring exposure to the Malaysian staple consumer food products market can consider Khong Guan.
Investors can take a look at JB Foods Limited, a Malaysia based cocoa production company with plants located in Johor. Its rights issue has made headlines recently which the company is planning to use proceeds raised for expansion plans. Earnings had been commendable, with March 2018 quarter earnings rising almost 3 fold to USD4.7 million. This dividend yielding stock may be a good fit for investors looking for consumer food exposure.