Since inception, we have six stocks under our coverage, and we intend to expand our coverage shortly. Currently, we have two stocks with BUY ratings, three stocks with NEUTRAL ratings and one stock with a SELL rating. Our top pick is Kim Hin Industry Berhad in our list.
Stock Performance is largely in line with our expectations with the exception of Fima Corporation Berhad. We believe downside risk is more than 20%, but since initiation, it has a return of c. 2% which is underperforming the FTSE Bursa Malaysia Small Cap Index (FBMSC). Apart from assessing the absolute performance, we also look at the relative performance against FMBSC to give a complete picture (rebasing the prices to 100 to ensure comparability).
Kim Hin Industry Berhad was our first stock with BUY call (share price was RM 1.69), and since then, it has generated a return of 24%. Over the same period, FBMSC produced a return of 6%.
Favco was our second stock with BUY rating (share price back then was RM 2.33) and generated a return of 18.5%. We subsequently downgraded to Neutral considering.
We first assigned OKA with a Neutral as we believe the price was not low enough to justify for a BUY rating. Subsequently, the share price dropped by 10% leading to an upgrade to BUY as we believe there is an acceptable discount. Since then, the share price has delivered a return of 23% while FBMSC gained 14% (refer to third Bloomberg graph), our BUY call outperformed the market. It has now hit our target price.
We gave Jaycorp a NEUTRAL rating after considering the upside is limited. Since then, it has traded sideway. Slightly underperform the market.
We were right and wrong at the same time. We gave a target price of RM 1.70 and expected the share price to decline by more than 20%. Since coverage, FBMSC gained 6% while Fima Corporation delivered an increase of 2.3% (underperforming). We believe that it is attributable to favourable prospect for CPO that we failed to consider.
When we first covered Latitude Tree, we gave a target price of RM 5.90 with a BUY rating. Subsequently we downgraded the target price to RM 5.60 after adjusting our FY17 and FY18 forecast. The share price has hit our target price and has over-perform the FBMSC (15.4% return against 9.1% return).