Edge Weekly Undervalued, underfollowed ACE stocks to keep an eye on

• Edge Weekly
  

Undervalued, underfollowed ACE stocks to keep an eye on

By Tan Choe Choe / theedgemarkets.com   | May 14, 2016 : 1:07 PM MYT


KUALA LUMPUR: Most, if not all things, start small. Some of the biggest companies in the world today started out very, very small, as evidenced by the incredible and now legendary growth stories of multibillion-dollar companies like Apple, Amazon, Hewlett-Packard, Dell, Google, and more.
Similarly, many of today's fastest-growing companies in Malaysia today started out in less than impressive sizes. But as their businesses grew, their shareholders' wealth grew in tandem.
Case in point? Inari Amertron Bhd, an electronics manufacturing services provider which graduated from the ACE Market to the Main Market of Bursa MAlaysia in 2014 after doubling its net profit for two consecutive years, wrote The Edge Malaysia's latest cover story today for the week of May 16-May 22.
But to spot that early winner, that rough diamond, is no easy feat, particularly as most of the Aces have low-priced, illiquid shares that are riskier and more volatile. Many of the companies themselves also do not have particularly strong fundamentals, and most are not covered by analysts.
"In fact, the ACE Market as a whole is loss-making and about half of the 109 companies are in the red. With only nine companies currently covered by analysts, the lack of research and analysis also makes it difficult for investors to make informed decisions," the weekly noted.
"The negative connotations associated with penny stocks notwithstanding, the segment is highly fragmented and inadequately covered by analysts, resulting in inefficient markets. This opens up opportunities for experienced investors to generate alpha, or excess returns on a risk-adjusted basis, through active stock selection," it stated.
So the potential to make money is there and the possibility of rapid growth and immense success definitely make the ACEs worth looking at. But what's the trick? And what are the top ACEs that will go places?
The Edge Malaysia, based on historical fundamental data, has compiled 10 stocks that show growth potential or offer attractive yields. 
These are also the companies that have been consistently profitable in the past three years, with nine out of 10 of them showing positive revenue and earnings growth, have a strong balance sheet, and with net gearing ratios of less than 10%.
Who are they? Where are they from? What do they do? What are the risks inherent in the stocks? 
Among the listed are OpenSys (M) Bhd, Mikro MSC Bhd, Eduspec Holdings Bhd and Vivocom Intl Holdings Bhd.
To find out more, pick up a copy of The Edge Malaysia today from newsstands around you. 
P/S: Don't forget — The Edge Malaysia can also be downloaded from Apple's AppStore and Androids' Google Play.
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