Friday, March 4, 2011

Bursa Malaysia: Analysts' stock picks in the bear market 2011

Investors should buy stocks with a low price to earnings (PE) ratio, and those from the property sector, to benefit from the current bearish market, analysts said.

The stock market's main benchmark, the FTSE Bursa Malaysia KLCI Index has lost 1.8 per cent so far this year.

Mercury Securities Sdn Bhd's head of research Edmund Tham said low PE stocks trading below the RM1 mark provides opportunities, and minimal downside risk.

Those on his radar are fire-fighting equipment supplier Fitters Diversified Bhd and jewellery group Tomei Consolidated Bhd. Fitters closed the day at 73 sen while Tomei ended the day at 63.5 sen a share.

"These are stocks that are trading below (a PE) of eight," said Tham.
Fitters is expected to register a net profit of RM35.5 million this year, according to RHB Research, and based on its current price, the stock is trading at a PE of below seven.

"I attended a Tomei briefing. The company is expected to register around RM25 million in net profit this year. Their PE ratio is only about five times," said Tham.

Jupiter Securities head of research Pong Teng Siew, meanwhile, said investors should not look at sectors now as stocks from across the board have come down.

"I suppose there is value everywhere, but the third liner stocks - those listed on the ACE Market have felt the brunt of the selldown," said Pong.

He estimates the ACE Market have come down as much as 17 per cent from its peak, while the benchmark index have shed slightly more than 90 points from its January peak.

"Some of the second liner stocks worth having a look at are Coastal Contracts Bhd and SEG International Bhd," said Pong.

Sector-wise, according to Pong, investors could take a look at property stocks if they want to bargain-hunt. The sector is down by slightly more than 9 per cent since the KLCI closed at its peak on January 17 this year.

AmResearch yesterday maintained its "buy" call on SP Setia Bhd, with a fair value of RM7.38 a share. ECM Libra Capital Sdn Bhd's Bernard Ching also likes SP Setia.

Ching said although property stocks look attractive, investors still need to be cautious as interest rates could rise, implying the sector has reached the top of its cycle.

Souuce: Business Times, 4 March 2011

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