Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
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Regional <strong>Small</strong>/<strong>Mid</strong> <strong>Cap</strong> <strong>Strategy</strong> Q2 2008<br />
Country Assessment<br />
Malaysia<br />
Attractive values<br />
The FBM <strong>Small</strong> <strong>Cap</strong> Index (FBMSC) underperformed <strong>the</strong><br />
FBM100 <strong>and</strong> benchmark Kuala Lumpur Composite Index<br />
(KLCI) in 1Q08. In view of <strong>the</strong> external uncertainties <strong>and</strong><br />
surprise General Election results in 1Q08, <strong>the</strong>re was<br />
reduced appetite for small-mid caps.<br />
Our projections show stronger growth for <strong>the</strong> small-mid caps of 23% versus<br />
18% for large caps. Toge<strong>the</strong>r with <strong>the</strong> 1Q08 underperformance, <strong>the</strong> gap in PE<br />
multiple for small-mid caps against <strong>the</strong> large caps has widened. <strong>Small</strong>-mid caps<br />
in our universe are trading at 9x 08 earnings, representing a 34% discount to<br />
large cap multiples (8x 09 earnings, 40% discount).<br />
In terms of picks, we like Alam Maritim - a beneficiary of Petronas’ preference<br />
for Malaysian-flagged support vessels- that is now trading at an attractive PEG<br />
multiple of 0.2x. For Litrak, toll collection on <strong>the</strong> Damansara Puchong Highway<br />
is a steady business that generates strong cashflows. We foresee that this stock<br />
has <strong>the</strong> potential to significantly improve yields.<br />
Wong Ming Tek . (603) 2711 2222 . mingtek@hwangdbsvickers.com.my<br />
Page 34<br />
www.dbsvickers.com<br />
Refer to important disclosures at <strong>the</strong> end of this report
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