KUALA LUMPUR: Local stocks have undergone a remarkable rally, leading Malaysia to emerge as one of the best-performing markets in Asean.
RHB Banking Group said its list of Malaysia's top 20 small cap jewels had outperformed the broad market, delivering a holding period return of 46.4 per cent to outperform the benchmark FBM KLCI and FBM Small Cap index's returns of 13.0 per cent and 21.4 per cent last year.
Lee Meng Horng, who led the RHB Malaysia small cap research, said the local capital market's resilience had shone amid the economic uncertainties and geopolitical tensions.
The local bourse, Lee added, had benefitted from a better economic outlook in 2024, a stable political environment, accompanied by stronger fund flows into the emerging markets amid the peak of the US Federal Funds rate,
"Undoubtedly, the robust year-to-date performance of small-cap stocks, which has narrowed the valuation gap between small-cap and large-cap stocks, posed a challenge in curating the 20th anniversary edition of Top 20 Malaysia Small Cap Jewels," he said at the launch of the report here today.
However, opportunities persist for those who are willing to navigate the market with diligence and insight, he added.
"Drawing on our decades of experience, rigorous analysis, and unwavering dedication, we present a curated selection of small-cap gems poised to deliver exceptional returns in the years ahead," he said.
RHB's top 20 small cap gems include YBS International Bhd, which is principally engaged in precision machining and stamping of components.
YBS has co-invested in the first production line, as well as provided the building and labour as specified in the manufacturing agreement, with volume undertaking from Enovix.
Based on the outlook guidance by Enovix, high-volume production of EX-1M Cells is expected to begin in the second quarter of 2024 for certain smartphone and Internet of Things (IoT) product launches in 2024 and 2025, followed by EX2M Cells in the fourth quarter of 2024 and first half of 2025.
"The accelerated installation of a second line and beyond by Enovix points to a highly promising outlook for YBS, and its confidence in securing customers' orders. We understand that YBS can achieve positive operational profit, even during the ramp-up period.
"This profit should grow exponentially once the production volume scales upwards. The biggest growth catalyst should come from the proliferation of Enovix products, in our view," RHB said.
YBS has seven manufacturing operations – three in Johor, two in Penang, one in Ho Chi Minh City, Vietnam and one in Kerala, India.
Spanning nine diverse sectors, RHB's top 20 small cap picks boast an average market capitalisation of RM545 million and return on equity of 11.2 per cent.
"Names from the industrial products and services, technology, construction, consumer products and services sectors make up 70 per cent of our picks," it said.
Of the 20 names featured, all but four – which are listed on the ACE Market – are Main Market counters.
To maintain the novelty and introduce less-followed prospects, none of the 20 companies featured this year are in RHB Research's existing coverage universe.
The RHB Small Cap Top 20 Jewels 2024 Edition forms part of the larger RHB Regional Small Cap Compendium, annually listing stock investment ideas from RHB Investment Bank Bhd research teams in Malaysia, Indonesia, Singapore and Thailand.
