Top 20 Stock Picks For 2020 - INSAGE

Company Name        : Datasonic Group Berhad
Date                : 04 January 2020
Source              : The Star

             Top 20 Stock Picks For 2020
BURSA MALAYSIA has been one of the worst performing bourses in Asia
last year.

Throughout 2019, the FBM KLCI has been lacklustre with investors
adopting a “wait-and-see attitude” following the absence of clear growth
catalysts for the country.

Not surprisingly, as of Dec 31, the FBM KLCI was down 4.73% on a year -
to-date basis.

Initially, Malaysians were filled with hope when Pakatan Harapan won the
general election in May 2018. However, some 18 months later, sentiment
on the local bourse remains subdued amid unclear leadership succession
plans and flip-flop policies.

Nonetheless, the undemanding stock prices and weak ringgit could see
the market finally play catch-up to its regional peers. W ith the arrival of a

new decade, analysts and fund managers present to StarBizWeek 20
stock picks which they opine will outperform the market.

Below is a compilation of the stocks:

Gan Eng Peng (pic)

Director of equity strategies and advisory, Affin Hwang Asset Management

Stock   picks:   MALAYAN     BANKING      BHD    and    Perdana   Petroleum
BhdMalayan Banking Bhd (Maybank)

Price: RM8.75

To gain exposure to the big cap theme, we are picking Maybank. W ith its
ample capital, Maybank has the capacity to increase its cash dividend
yield to 4.5%, which is decent for a large cap stock.

It has been gradually reducing its dilutive scrip dividend which will help
support return on equities. Although we expect one more rate cut in 2020,

Maybank would have adequately prepared for this by reducing th e
duration of its deposits.

Even after the last rate cut, Maybank’s net interest margins rebounded in
only one quarter. In any case, one interest rate cut has been factored into
analysts’ forecasts.

We think asset quality would also gradually improve. As an added bonus,
there is potential of unlocking value given the top level changes at the
major shareholder level.

Perdana Petroleum Bhd Price: 40 sen

Our second pick is a turnaround stock, Perdana Petroleum.

Perdana is a high-risk choice given that in the nine months of 2019, it was
losing money and the turnaround is not certain although it has returned to
the black in its third quarter results.

Perdana is in the business of providing offshore support vessels (OSV) to
oil and gas companies. Looking at the latest Petronas Activity Outlook
report, OSV players are in for good years ahead. Petronas has forecast 30%
to 40% higher demand for OSV, which ties in with the need to have more
exploration and production activity globally to arrest declining producti on
growth.

Utilisation and pricing should go higher, which is almost pure profits for
OSV players.

The financial distress, which all OSV players had gone through in the last
couple of years, has sunk a few players in Malaysia and Singapore. This
means capacity is constrained             with some OSV players being not
financially viable as a business partner.

Perdana has completed a fundaising exercise that has substantially
reduced its debt load. Part of the turnaround is driven by interest savings.

Perdana is owned by DAYANG ENTERPRISE HOLDINGS BHD which is an
oil and gas service provider.

Dayang’s share price has risen five times in 2019 as strong execution and
new job wins drove its business prospects. Perdana’s prospects is
somewhat intertwined with Dayang as it uses a portion of Perdana’s OSV
to support its business.

Lim Suet Ling(pic)

CEO, UOB Asset Management (M) Bhd

Stock picks: Carimin Petroleum Bhd and GAMUDA BHD

Carimin Petroleum Bhd

Price: RM1.30

Carimin is an oil and gas service p rovider specialising in construction,
hook up, commissioning (HUC) and top side major maintenance (TMM),
manpower services and marine services. It deploys marine vessels such

as work barges, accommodation vessels, crew boats, and anchor handling
tug supply vessels.

It has grown steadily over the past decade from being a manpower service
provider to a dynamic contractor in integrated maintenance, rejuvenation,
hook-up and commissioning works onshore and offshore. It also provides
sub-sea underwater inspections, repair, maintenance works and services
for the oil and gas industry.

Since its inception, Carimin has completed projects valued at more than
RM1bil.

Among its notable clients are oil majors such as Petronas Carigali, Shell,
Murphy Oil, Repsol, Exxon Mobil, New Field, Petrofac, HESS and Nippon
Oil.

Carimin returned to profitability in FY19. Amid a challenging operating
environment, it recorded a profit after tax of RM27.7mil compared with a
loss of RM25.4mil a year earlier. The turnaround was a resul t of increased
offshore activities contributed by its maintenance, construction and
modification (MCM) contract.

Going     forward,   Carimin’s   earnings   momentum   is   expected   to   be
underpinned by two main factors. Firstly, we expect high levels of
maintenance works for the HUC and TMM segments in 2020.

Secondly,    Carimin’s venture     into sub -sea activities is expected to
contribute positively as it commands higher margins compared with its
existing MCM business. To recap, Carimin ventured into the sub -sea
segment with the acquisition of a 60% stake in Subna utica Sdn Bhd in
March 2019.

It has a strong balance sheet with a net cash (including short -term
investments) position of RM106mil (equivalent to about 37% of its market
cap) as of end-September 2019.

Carimin’s resilient balance sheet has enabled the com pany to weather the
recent oil and gas industry downturn without the need for an equity call.

Valuation-wise, Carimin trades at a price earnings ratio of 8x for FY20,
which is at a discount to its peers and the market.

Gamuda Bhd

Price: RM3.90

Given its strong track record in executing mega infrastructure projects,
Gamuda is arguably the best proxy to large construction jobs in Malaysia.
Some of the mega projects which were shelved immediately post the 14th
general election have been revived including B andar Malaysia and the
East Coast Rail Link. There have been reports that the government is
reviewing the MRT 3 and the High Speed Rail projects. If the two mega
infrastructure   jobs   were      revived,    we    see   Gamuda      as   a   potential
beneficiary. Gamuda has submitted alternative proposals for the MRT3 to
reduce the burden on the government’s finances. MRT3 is an essential
part of the Greater Kuala Lumpur Integrated Rail System to achieve public
modal share target of 40% in urban areas by 2030.

There are also other opportunities for Gamuda including the Penang
Transport Master Plan (PTMP). Gamuda has already received the letter of
award for the PTMP from the Penang state government.

Besides Malaysia, Gamuda is looking for opportunities offshore. It has
recently   acquired     a   50%    stake     in    Australian-based   Martinus     Rail,
Australia’s largest independent specialist rail constructor. This acquisition
will fast-track its expansion into the Australian infrastructure market,

especially the Australian railway market which is est imated to offer about
A$20bil of projects.

Gamuda’s proposed divestment of four highways to the Finance Ministry
would result in the group receiving RM2.36bil in net proceeds, if the plan
materialises.

The proceeds are expected to be used to fund future projects and reward
shareholders with a special dividend.

Gamuda continues to enjoy cashflows from its highway concessions.

Based on consensus estimates, Gamuda currently trades at a price
earnings ratio (PER) of 12.5x in FY20, which is at a discount to the market,
while dividend yield is 3.9%.

Mohd Redza Abdul Rahman(pic)

Head of research MIDF Research

Stock picks: MMC Corp Bhd and AIRASIA Group Bhd

MMC Corp Bhd

Price: 98.5 sen

We continue to favour MMC Corp due to the valuations supported by the
market capitalisation of its listed associate Malakoff whereby the expected
net gain disposal on Malakoff’s 50% stake in MacArthur Wind Farm of
RM546mil (expected completion in 1QFY20) c ould be channelled to firm
up Alam Flora’s operations or Malakoff’s existing business segments.

Meanwhile, Gas Malaysia’s FY20 gas volume sales will increase in line
with its recently acquired customers. Aside from that, synergies from the
full acquisition of Penang Ports supported by the container terminal
business and the cruise terminal operations (in collaboration with Royal
Caribbean Cruises Ltd), will be driven by the growth in tourism in Penang
in tandem with Visit Malaysia Year 2020 (VMY2020). Othe r catalysts for
MMC Corp include the possible reinstatement of the KVMRT3 project at a
revised cost (possibly half the original price tag of RM45bil). Latest
updates indicated that consultants have been appointed to find a suitable
model, and a decision on the MRT3 project would be made in middle of
this year. Key downside risks to our call include: (i) prolonged global trade
tensions; (ii) weak container volumes of MMC Corp’s ports; and (iii)
downward revision of its listed associates.

All factors considered, we reiterate our buy call on MMC Corp with an
unchanged target price of RM1.30 per share based on sum -of-parts
valuation. On a side note, MMC Corp has already been included as a
constituent of the FTSE Bursa Malaysia Mid 70 Index effective end trading
day on Dec 20,2019.

AirAsia Group Bhd (AAGB)Price: RM1.69AirAsia Group was weighed down
by the adoption of MFRS 16 which led to the higher -than-expected finance
cost. However, finance cost movement is expected to be flat in CY20.
Although MFRS 16 will continue to feature in the medium term, AAGB is
expected to gain from lower amount of interest as the tenure reaches the
end of the lease term.

The 18.8% year-on-year (y-o-y) increase in passengers for AAGB
contributed to higher 9MFY19 ticket sales of 18.9% y-o-y to RM6.6bil, also
resulted in the airline’s related ancillary income revenue growing by 15.3%
y-o-y. Non-airline ancillary segments, total revenue more than quadrupled
to RM475.2mil, mostly coming from Teleport at 70.2%. The performance of
Teleport will be enhanced by: (i) the launch of “teleport.social” – a
platform   enabling      sellers   to   integrate   with   Teleport’s   logistics
infrastructure; (ii) JV with Gobi Partners in EasyParcel; and (iii) direct
interline agreement with Lufthansa Cargo.

In addition, revenue from AAGB’s new products such as BigPay and
AirAsia.com, is expected ramp up next year. As such, we expect the
contribution of non-airline ancillary revenue to overall ancillary revenue to
increase from 23.3% in 9MFY19 to around 30.0% in FY20.

AAGB has hedged 69% to 82% of their fuel requirements at US$60 per
barrel in FY20, mitigating oil price volatility. Moreover, AAGB will be
having four A321neos by year-end and six more in FY20.

The shift towards aircraft equipped with fuel efficient technol ogy will lead
estimated fuel savings of 15% by FY20, translating into 10% reduction in
cost per seat as it has 50 additional seats compared with the A320neo,
which bodes well with the expected increase in tourists from VMY2020.

Choo Swee Kee (pic)

Chief investment officer TA Investment Management Bhd

Stock picks: OCK Group Bhd and MAH SING GROUP BHD

OCK Group Bhd

Price: 61 sen

OCK   is involved   in   the   telecommunication   infrastructure   space   by
providing telco tower-related services that include the owning and leasing
of telco towers, network design, deployment, operations and maintenance,
as well as mechanical and electrical engineering services.

The company has about 4,200 towers mostly in Myanmar and Vietnam and
managed more than 20,000 towers for telco operators such as Maxis, Digi
and Celcom.

The tower leasing business contributes to one third of its revenue and is
expected to grow rapidly with more requirement for towers as the
Indochina region extend its coverage areas.

OCK is targeting to grow its ownership of towers to more than 5,000 within
a year. As a comparison, Axiata’s Edotco owns almost 30,000 towers in
Malaysia, Bangladesh, Cambodia, Sri Lanka, Myanmar and Pakistan.

OCK is a growth story and is a key beneficiary of the 5G deploymen t and
infrastructure projects under the national fiberisation and connectivity plan.

Technology-wise, we understand that 5G network requires significantly
more transmission towers, equipment and antennas than 4G network.

Over the next two years, we belie ve that capital is the main constraint to
OCK growth. The group is actively looking for strategic investors to drive
this growth. If successful, it would unlock the value of this tower business
by providing a base reference value.

Its earnings growth for 2019 is reflective of its potential with three
consecutive quarters of growth. We expect consistent earnings growth of
10% over the next three years.

Mah Sing Group

BhdPrice: 69.5 sen

Mah Sing is a value stock trading at 40% to its book value while still giving
a potential dividend yield of 5%. Do note that the numbers already took

into consideration that corporate earnings PATAMI had fallen 45% from its
high four years ago.

This is in line with the current property market condition which is very
challenging.

It is during challenging times that we can differentiate between proactive
and passive management. Mah Sing has tweaked its product range to
match market demand for mid-end and affordable housing.

The company is also aggressive in selling its products at home exhibitions
and shopping complexes. So far, its affordable products in the Klang
Valley were well-received, registering strong take up rates of above 80%
(M Vertica, 83% for the first three blocks and M Centura, 90%).

Hence, in its latest quarterly results announcement, Mah Sing recorded
new property sales of RM375mil in the third quarter of 2019 ( -18% quarter
on quarter, +36% year-on-year (y-o-y), bringing the nine months to 2019
sales to RM1.1bil (-7% y-o-y).

We believe in buying for the future rather than worry about the current
depressed market.

All markets, inclusive of the property sector, are cyclical and the future
could only change for the better.

Part of the problem with the Malaysian property market is the mismatch
between demand and supply as there is a large supply of unaffordable
units while there is a low supply of the affordable units. The government
has to come up with a solution to bridge the gap.

For those looking for long-term investment with yield, why buy a property
at market value yielding 4% to 5% when you can get the property
developer which owns land at 60% discount and still provide a 5% yield?

Lee Chung Cheng (pic)

Head of Research JF Apex Securities Bhd

Stock Picks: JHM CONSOLIDATION BHD and OKA CORP Bhd

JHM Consolidation Bhd

Price: RM1.70

We like this technology/electronic manufacturing services (EMS) company,
as we see several catalysts that should be able to propel its stock higher
from the current levels.

Firstly, the group has successfully ventured into the aerospace segment
after having received purchase orders of machining parts with estimated
values of US$1mil per year. We foresee the potential of the company
securing more orders, with potential values of US$3mil per year.

Secondly, there is potential of the company expanding the or der book for
its automotive segment in 2020, with the conclusion of the labour dispute
for its existing major customer in the United States.

And thirdly, we think JHM could potentially win more orders from new
customers, benefiting from the US -China trade war, as more companies
are considering supply chain diversification.

Although the Phase 1 of the US-China trade deal has been resolved,
market expects technological restrictions imposed by the United States on
China to remain.

JHM’s shares are currently trading at 19 times of estimated price -earnings
(PE) for the financial year ending 2020, and 16 times PE for 2021, which
are at discounts to its peers.

Our fair value for JHM is RM1.96, which implies 23 times PE for 2020, and
20 times PE for 2021.

For the first nine months of 2019, JHM posted a net profit of RM22.7mil on
revenue   of    RM186.9mil,      compare   with   RM23.8mil   on   revenue   of
RM190.5mil in the corresponding period last year. Dividend declared year
to date totalled 1.5 sen per share.

Stock Picks: Oka Corp Bhd

Price: 74 sen

We see upside potential for the shares of this building -materials company,
supported by several catalysts.

Firstly, the group is envisaged to benefit from the improving outlook of the
construction prospects, following the revival of several mega infrastructure

and property projects such as the Light Rail Transit 3, Klang Valley
Double Track Phase 2, East Coast Rail Link, Bandar Malaysia, and KL -
Singapore high-speed rail.

As a leading precast concrete manufacturer, with a proven t rack record of
supplying building materials to mega projects in the country, we believe
Oka group could clinch sizeable orders in the near future.

Secondly, we believe worst is over for the group. After a dismal showing
for the financial year (FY) ended March 30,2019, where Oka’s net profit
fell 55% to RM11mil from RM24.6mil in the preceding year, Oka could see
its bottom line improve for FY2020.

This is evidenced by its earnings recovery, with a net profit of RM7.8mil
for the first half of FY2020.

We expect Oka to post earnings of RM15mil for FY2020, which represents
an annual growth of 36.4%. Its net earnings could further strengthen to
RM21mil for FY2021.

In addition, its decent dividend yield of around 5% for FY2020 (assuming a
dividend per share of 3.7 sen as per last financial year and based on
current share price) should lend support for the stock.

Our fair value for Oka’s shares is 86 sen, which represents 10 times its
estimated PE for FY2021.

Ivy Ng Lee Fang(pic)

Head of research CGS-CIMB Securities Sdn Bhd

Stock Picks: Pentamaster Corp Bhd and Yinson Holdings Bhd

Pentamaster Corp Bhd

Price: 4.52

We see the recent pullback in Penta master’s share price due to its
exclusion from the Securities Commission’s shariah list as a good
opportunity for investors to accumulate the stock. The exclusion will not
alter the company’s fundamentals and growth prospects. We maintain an
“Add” on the stock with a RM5.40 target price based on an estimated 19.6
times FY20 price-to-earnings (P/E). This is a 10% premium over the
semiconductor equipment sector at about 17.8 times.

Pentamaster is also expected to deliver strong revenue growth in FY20
driven by higher contributions from the automotive and medical segments
following its acquisition of medical equipment provider, TP Concept Sdn
Bhd in September 2019.

Higher sales contributions from the automotive and medical segments will
provide better earnings stability due to long-term demand visibility and
higher margin portfolio.

Overall,   weproject   an   impressive   three -year   (2018-2021)   net   profit
compounded annual growth rate (CAGR) of 27% that will be driven by
automated test equipment and factory automated solution segments on
the back of capacity expansion at Batu Kawan plant and potential new
customer wins in North Asia.

Hence, we see higher contribution from auto and medical device segments
to provide Pentamaster better earnings stability, thanks to their long -term
demand visibility and higher margin portfolio. Pentamaster is a lso a
beneficiary to the government push towards IR4.0 initiative among
domestic SMEs in Budget 2020. This bodes well for the group, which is a
key player in the domestic Factory Automation Solution market.

CGS-CIMB also believe that the move will help eq uipment makers such as
Pentamaster to diversify beyond the semiconductor market.

The earnings accretive acquisitions such as TP Concept, new customer
wins and a weaker ringgit versus the US dollar are potential re -rating
catalysts for Pentamaster.

Yinson Holdings Bhd

Price: 6.48

2020 is expected to be a good year for Yinson. It was recently awarded by
Petrobras with the Marlim-2 Floating Production Storage and Offloading
(FPSO) contract, with strong returns expected. In addition, the Parque and
Pecan FPSO contracts may follow suit.

We have an “Add” on Yinson with an unchanged some of parts -based
target price of RM9.18, as its earnings in 2020 will benefit from the
commissioning of two new FSPO contracts.Despite the downtrend in its
earnings, Yinson’s share price has done very well because the market is

confident that the company could win more FPSO contracts, priced
attractively and profitably.

Also, two existing projects have been/will be delivered soon, resulting in
an estimated strong earnings growth in FY21. These include the FPSO
Helang based offshore Sarawak, which has recently started work, and the
FPSO Abigail-Joseph in Nigeria, which is expected to be commissioned by
the end of first quarter FY21 (Feb -Apr 2020).

Petrobras’ Marlim-2 FPSO which is a 25-year contract, has a time charter
value of US$5,400mil (US$591,780/day), and based on a capex of
US$1.1bil. CGS-CIMB has estimated that Yinson will earn a projected
internal rate of return of 13% over 25 years, commencing from first oil in
2023, which the brokerage described as very good.

Our target price assumes that Yinson will hold a 75% stake in FSPO
Marlim-2, and two potential FPSO contract wins, for example the FPSO
Parque das Baleias from Petrobras in six months time (also a 75% stake),
and the FPSO Pecan contract from Aker Energy in Ghana (a 100% stake).
Our target price deducts RM0.15/share for a potential RM500mil equity
issue to fund the new projects.

The downside risks include the challenge of project execution in the
unfamiliar environment in Brazil.

Thomas Yong(pic)

CEO, Fortress Capital Asset Management

Stock picks: Airasia Group Bhd and NTPM HOLDINGS BHD

NTPM Holdings Bhd

Price: 50 sen

NTPM manufactures and retails consumer tissue and personal care
products. Its portfolio of household brands includes Premier, Royal Gold,
Cutie, Intimate and Diapex.

While recent profitability has been negatively affected by rising raw
material costs of paper pulp, we expect profit margin to recover given that
pulp prices have declined by more than 20% in 2019. This low pulp price
environment appears to be sustainable in 2020 as global pulp demand is
not expected to catch up with the recent capacity additi on by global pulp
players. Pulp costs account for a substantial 30% of its revenue and the
company holds 5 to 6 of pulp inventories.

Aside from the recovery in profit margins, we expect revenue growth in
2020 to be driven by a tissue paper capacity expans ion in its Vietnamese
plant, which now accounts for close to 30% of total capacity. The
utilization rate of this Vietnamese plant, which targets the broader South
East Asian market, is expected to escalate going forward and allowing
some economies of scale benefits.

While liquidity for the stock is limited as a result of the lack of analyst
coverage and institutional following, valuation has not priced in any
potential recovery in earnings at the current price level.

Kenny Yee (pic)

Head of Research

Rakuten Trade

Stock picks: RCE Capital Bhd and Vertice Bhd

RCE Capital Bhd

Price: RM1.65

One of our stock picks for the year is financial services firm RCE Capital
Bhd, given that it provides financing to over 80,000 civil servant customers
via its salary deduction scheme.

We also believe the group has plenty of room to grow in 2020, with its 5%
market share vis-a-vis Malaysia’s civil servant population.

RCE Capital has shown consistent improvements in asset quality over the
years, while its non-performing loans (NPL) ratio stands at a healthy rate
of about 4%.

The group also has a net interest margin of about 8%, which is higher than
its industry peers.

We also note that the financial services firm has been enjoying cheaper
cost of funding via its recent sukuk programme amounting to RM2bil.

Another reason we will be watching this stock is it undemanding valuation,
given its current price to book value (P/BV) ratio of 0.9x, backed by an
anticipated dividend yield of about 5%.

The stock performed well in 2019 – we saw buying momentum building up
and we expect this to intensify in 2020.

While other non-bank financial institutions have also seen their stocks
gain interest from investors, we believe RCE Capital provides an even
better platform for investors.

Its salary deduction scheme for civil servants minimises the chances for
NPLs, and the group is also careful about the quality of loans it provides,
which allows it to maintain its NPLs at good levels.

Vertice Bhd

Price: 87.5sen

Our second stock pick for 2020 is construction firm Vertice Bhd, which
was formerly known as VOIR HOLDINGS BHD.

We are looking at this stock as the group is expected to return to
profitability after streamlining its operations to focus on construction.

Last year was a transitional year for the group, following the sale of its
majority stake in its fashion retailing business in 2018.

The outlook for the group’s construction business is bright, given Vertice’s
alliance with the main contractor of the RM6. 3bil Penang Transport
Masterplan project, Consortium Zenith Construction Sdn Bhd.

There are four construction packages under main contractor, with Package
2, worth RM815mil having been awarded to Vertice.

Package 2 involves the construction of a by-pass from Bandar Ayer Hitam
to Lebuhraya Tun Dr Lim Chong Eu.

The groups alliance with the main contractor of the project also provides
the possibility of Vertice securing further work packages.

We also expect a boom in the construction sector this year, with mega
infrastructure projects like Bandar Malaysia coming up, and this should be
beneficial for Vertice.

Its participation in the construction scene in Penang is also positive, given
that Penang is among the states with the most construction activities in
the pipeline.

Overall we are optimistic on Vertice given its strong outstanding orderbook
of RM1bil, and as the works on the Penang Transport Master Plan project

will keep the group busy, providing earnings visibility for the next three to
five years.

Vincent Lau

Rakuten Trade Sdn Bhd vice-president of research

Stock picks: Supercomnet Technologies Bhd (Scomnet)

Price: 74sen

Few are aware that Malaysia is the world’s leading producer and exporter
of medical devices such as catheters and supplies 80% of global demand.

One example of a listed Malaysian medical device company is Scomnet,
which has been quietly delivering stellar results over the last eight
quarters.

More importantly, Scomnet counts blue chip companies such as New York
listed Edward Lifesciences Corp, and Denmark listed Ambu AS as its
major clients.

Scomnet has served both these companies for more than ten years, with
the orders rising over the last few years. Earnings visibility has been clear,
and management has so far delivered on its guidance.

Scomnet supplies catheters, cannulas and urine bags for its medical
devices division.

For the next three years, Scomnet’s earnings are set to rise, as orders
from both these companies further increase.

Scomnet’s fortunes only changed after it acquired the remainder 80% of
its medical subsidiary, Supercomal Medical Products Sdn Bhd in early
2018.

Prior to that, its earnings were volatile as it was predominantly involved in
the manufacturing of PVC compound and cables and wires for electronic
devices and data control switches.

For the most part of 2019, the stock has rested despite strong earnings
momentum. As the company continues to deliver strong results, it will be a
matter of time before investors perk up and recognize this as the next
growth stock.

Earnings-wise, Scomnet has delivered a 40.5% increase in net profit to
RM14.3mil for its nine months to Sep 30,2019. Revenue increased 48% to
RM90.57mil.

The catalysts going forward would be a potential dividend, and more
stellar earnings in the next few quarters.

Ang Kok Heng

Chief Investment Officer

Phillip Capital Management

Stock picks: Malayan Banking Bhd, Da tasonic Bhd and VIZIONE Bhd

Datasonic Group Bhd

Price: RM1.48

The company that is in the provision of solutions for immigration -related
services saw a rebound in its share price following improvements in its
bottom line last year.

This was a change compared with 2018 where its profitability was on a
downtrend.

Datasonic supplies chips for passports and identity cards, which is a
critical component for the documents.

People passing through the electronic gates at the Immigration po ints in
the airport would sometimes see Datasonic personnel at hand to assist
passengers.

Going forward, Datasonic is in the running for two major border control
projects under the Immigration Department. One of them is the provision
of e-Visa services for foreign national from China, India and other
countries.

It is learnt that the proposal by Datasonic is for the revenue to be shared
with the government in return for the company providing the infrastructure
and maintaining the system.

The other project for Datasonic is an integrated system for the Immigration
Department where all segments of border control are in communication
with each other to trace fugitives coming in or leaving the country. This
was previously known as the Sistem Kawalan Immigration Nasional or the
SKIN project which is up for re-tender.

Although the share price of Datasonic has risen in recent months following
its better results and speculation of upcoming projects, I feel that
Datasonic still has some room to go pending the announ cements of the
two projects.

At the moment, its supply of chips for passports and identity cards already
provides the company with a stable income.

Datasonic also has a new shareholder and new management team.

Vizione Holdings Bhd

Price: 87 sen

It is one of the few construction companies that continues to be profitable
even though the sector had been badly hit by the change in government in
May 2018.

The contractor, which is now steering its attention towards building
infrastructure, managed to achieve decent margins of more than 10 %,
which is higher than most other players in the sector.

Previously Vizione, which is led by Datuk Ng Aun Hooi, was focused on
building affordable homes.

On Oct 16 last year, Vizione received a big break when the c ompany was
awarded a letter of intent from Jabatan Air Negeri Sabah for the
construction of the Papar Dam.

So far, not many details are available on the project but Ang views it as a
game changer for Vizione. He says that it would more than double the
order book and will firmly put Vizione as a contractor of infrastructure
instead of just affordable homes.

The Papar Dam project is to replace the Kaidun Dam that was proposed
by the previous government. The Kaidun Dam project was to provide
1,000 MLD of water to Penampang and generate 37MW of hydroelectric. It
was to cost some RM2.7bil.

However, the Kaidun project did not take off and eventually was shelved.
The new Papar Dam is expected to have capacity of 1,000 MLD but would
supply 100MW of renewable energy.

Apart from the dam project in Sabah, Vizione is also a 50% partner for the
construction of a RM815mil highway on Penang Island that is part of the
traffic dispersal system for the tunnel project between Butterworth and
Gurney Drive on the island. It also is actively seeking to build hospitals for
the government.

Serba Dinamik Holdings Bhd

Price: RM2.33

Among the large oil and gas companies, Serba Dinamik is said to be the
cheapest large market-capitalised oil and gas stock.

While other large market-capitalised stocks trade at price earnings
multiple of more than 20 times, Serba Dinamik is trading at midteens.

Ang likes the company for its aggressiveness in bidding for contracts and
its business model that is aimed at providing engineering services to
companies with operations within the country and overseas.

In Malaysia, Serba Dinamik has, among others, secured more than
RM1.5bil worth of jobs in Pengerang from building office spaces to the
provision of maintenance, repair and overhaul (MRO) servic es to oil and
gas companies there. The bulk of its revenue comes from MRO as well as
the inspection, repair and maintenance works.

Ang says Serba Dinamik’s is looking at an additional RM8bil for its order
book this year.

“‘Even if it secures half of it, it will be a big increment from the current
order book of RM10bil,” says Ang.

Serba Dinamik is largely managed by its major shareholder Datuk Mohd
Abdul Karim Abdullah who holds a 24% stake in the company.

Last year, Abdul Karim made headlines in the corporate world by taking up
major stakes in Sarawak Concrete Industries Bhd (SCIB) and Kumpulan
Powernet Bhd.

His foray into the two other listed companies raised concerns on his
expansion outside the oil and gas industry.

But a fund manager says Mohd Karim has some non -oil and gas related
projects from Pengerang that he had wanted to inject into Serba Dinamik.
But the funds did not like the idea.

These projects may be injected into Kumpulan Powernet and SCIB.