Stock Picks


Steel

While the prices of various steel products have risen 5% to 10% to date,
OSK is not overly excited since this relatively small increase took place during a seasonal peak period.

Furthermore, iron ore and scrap metal prices bounced backed strongly almost immediately after the abrupt plunge in Oct 2011 and continued to stay at relatively high levels.

Although scrap metal and iron ore fine prices averaging USD450 and USD140 a tonne respectively in 2012, OSK stills expect steel prices to face downward pressure as steelmaking operations continuing to experience meager margins in the medium term.

Below are the target price/fair value and rating for selected stocks in steel sector.

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Recently, during OSK’s small cap corporate day, OSK unveiled their 2012 Jewels. OSK Jewels actually is a list of small caps stock picks by OSK. They expect OSK Jewels to perform reasonably well during 2012. For the 2012 list, there are 31 stocks in the list.

The top picks are DAYANG (FV: RM2.34), JOHORETIN (FV: RM1.51), PRESTARIANG (FV: RM1.48) and TAKAFUL (FV: RM4.42).

Below are the full list of OSK 2012 Jewels.

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For May, OSK see the risk of a global pullback increasing, following a strong performance by global markets in the past 4 months.

Coupled with the poor track record of markets during the period of May–Sept, OSK advise investors to heed the old maxim of “Sell in May and Go Away”. If markets do take an early tumble, then those with longer investment horizons should consider stocks in the Construction, O&G and Banking sectors which will benefit from the ETP.

For May, OSK recommend defensive stock such as Telcos and consumption related stocks which might benefit from a drop in commodity prices such as AirAsia (jet fuel) and Media Chinese (newsprint).

The table below is the target price for OSK’s May 2012 top picks.

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Education

OSK maintains OVERWEIGHT on the sector, as they see local education providers gaining strength in 2012, driven by the Government’s initiatives to spur the private education sector.

Meanwhile, as the PTPTN works towards sorting out its collection woes, there appears to be a growing trend among local institutions to tie up with more reputable foreign institutions, which will further enhance Malaysia’s appeal as an education hub and an alternative destination for foreign students.

SEG International is OSK top buy for its diversified course offerings, asset-light operating model and decent dividend yield. Within the small-cap space, OSK like Prestariang’s sturdy orderbook of
over RM200m and niche focus in the provision of IT-related certification for final year students in public
varsities.

Below are the target price, market capitalization and rating for selected stocks in education sector.

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In view of the bullish sentiment in global equity markets as well as the increasingly upbeat sentiment on the construction sector fuelled by the flow of positive news, OSK is maintaining OVERWEIGHT call on the sector.

There are plenty of trading opportunities in the run-up to the official awards of contracts by the Government.

Given the ruling Government’s focus on getting a two-thirds majority in the upcoming General Election, OSK do not expect further delays in the implementation of these mega billion-ringgit infrastructure projects as the ruling coalition goes all out to win the hearts and votes of the rakyat.

Below are the target price, market capitalization and rating for selected stocks in construction sector.

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