Highlight Signature, Tune Ins, Karex are CIMB’s top 3 small-cap picks

Highlight Signature, Tune Ins, Karex are CIMB’s top 3 small-cap picks
Business & Markets 2013
Written by Jonathan Gan at theedgemalaysia.com
Wednesday, 11 December 2013 17:51

KUALA LUMPUR (Dec 11): Signature International Bhd, Tune Insurance Holdings Bhd and Karex Bhd have been featured as the top 3 picks for the small cap segment in CIMB’s “Navigating Malaysia” yearbook.

Signature International is the country’s largest modular kitchen player. With an order book of RM200 million, CIMB expects more jobs in the pipeline for the company over the next few years.

CIMB Research has given an “add” rating on the stock with a target price (TP) of RM2.63, with a very high upside potential. The stock rose 7 sen to RM1.30 at market close today.

Riding on the industry trend of built-in kitchens, the company is favoured primarily due to its ease of scaling up and debt free balance sheet.

“The company has been in a net-cash position since its listing in 2008 and could raise its net cash position to RM86.7 million from the current RM36.3 million if its proposed sale of Kota Damansara factory land is achieved,” said Nigel Foo, analyst at CIMB Research.

CIMB sees Tune Insurance as a niche player in the fast-growing travel insurance segment with an exposure to 16 markets.

Being tied up with AirAsia Bhd, the research house feels that this is a significant strength as it would not be easily replicated by its competitors.

Placing an “add” rating on the stock, CIMB has set the TP for the company at RM2.55 with a potential upside of 34.9%. The stock closed flat at RM1.89 today.

The key catalysts for the company would be swift expansion in travel insurance, EPS accretive mergers & acquisitions (M&A) in Indonesia and the improving underwriting margins for the non-life business in Malaysia.

Winson Ng, analyst of CIMB Research commented: “Based on our forecasts, Tune will record a healthy net profit growth of 15.8% in FY14 on the back of a 10.1% rise in gross premium.

“The premium growth will be strong at a projected 18% for the travel insurance business compared to 8% for the non-life unit in Malaysia.”

On Karex, CIMB said it is the world largest condom maker with an annual capacity of 3 billion pieces per annum and an estimated 10% share of global output.

Incorporated in 1988 in Johor, Malaysia, the group’s market sales cover more than 110 countries across the major regions of Africa, Asia, Europe and America.

The target price for the stock was RM4.54 representing a 20% upside with an add rating by CIMB. The stock closed up 5 sen at RM3.65 today.

Terrence Wong, analyst at CIMB Research says “Given Karex’s position and plans to double its capacity by 2015, it should be well-positioned to grow in tandem with the industry, at the very least.”