PETALING JAYA: Investor are expected to revisit the China foreign direct investment (FDI) theme, driven by catalysts like China’s Belt & Road summit and the Chinese premier’s potential visit to Malaysia by Aug 17, said UOB KayHian.
This is despite the temporary set-back in sentiments caused by the recent surprise cancellation of IWC-CREC’s stake acquisition in the Bandar Malaysia project, by the Malaysian government.
“The potential impact of this investment theme on selected stocks was aptly demonstrated in March’s surge of a handful of e-commerce related stocks during Alibaba founder Jack Ma’s visit to Malaysia.
“We expect the Belt & Road conference to lift interests in some of the 14 Malaysia-Sino agreements worth almost RM144bil, which were signed last November.
“Event catalysts for the China FDI thematic investment also include the announcement of the first land sale at Bandar Malaysia, which is expected to be in the second quarter of the year and tenders for East Coast Rail Link (ECRL),” said UOB Kay Hian in a regional note.
The research house added that the China FDI theme could still provide big hauls to selected beneficiaries under identified sub-themes like mega infrastructure, iconic property development, e-commerce, as well as mergers and acquisitions (M&A).
Mega infrastructure and iconic property development themes would benefit the construction and building material sectors, while the e-commerce theme could benefit related IT and logistics companies.
In addition, UOB KayHian expects specific interest in iconic projects like Bandar Malaysia, ECRL, highspeed rail (HSR) and privately promoted iconic property projects Impression City and Xiamen University.
Bandar Malaysia benefits Malaysian Resources Corp Bhd (MRCB), who is the developer of the logistics terminal, and Ekovest Bhd, which is involved in highway concession and possibly construction jobs.
On the other hand, Impression City and Xiamen University will benefit benefit Yong Tai Bhd and Sunsuria Bhd, respectively.
Besides Pos Malaysia Bhd and GD Express Carrier Bhd being beneficiaries of the e-commerce sub-theme, GHL Systems Bhd also stands to benefit, being the non-exclusive partners of Alipay for e-payment services.
GHL will ride on long-term growth trend of merchant payment terminals, which are of low penetration in South-East Asia.
Meanwhile, large contractors such as Gamuda Bhd and IJM Corp Bhd, mid-sized contractors like Sunway Construction Bhd, niche constructor Econpile Bhd, as well as connected companies like
Gabungan AQRS Bhd and WCT Bhd stand to be beneficiaries for the ECRL and HSR projects.
“A notable M&A beneficiary could include Dialog Bhd, for its prized oil storage business in Rapid, Iskandar region.
“There appears to be strong demand for Dialog’s planned Phase 3 oil storage expansion program, which is expected to have five-million cubic metre capacity. “The accretion to our sum-of-total-parts (SOTP) valuation is up to 90 sen per share or 47% of market capitalisation,” said UOB Kay Hian.
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