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Investment Themes - Malaysia

sopskysalat said...
dali, given the many investment theme being played, going into 2007, oil and commodities may continue to be in focus. looking into the domestic scene, the boom in property sector happening in singapore and malaysia may well put the construction into the limelight with many const. co. being badly battled down for the past 4 years or so. infrastructure deal are popping everywhere. therefore, isn't it time to seriously consider const. co. again? my view is yes. what's yours?

Usually, I am averse to construction as it is cyclical, and in Malaysia's case, a lot depends on who you know rather than what you can do. Still, there have been winds of change over the last 3 years, as projects dried up and the better ones had to venture overseas to secure a better portfolio. Those who stayed back and keep begging for crumbs are not the ones to buy and hold. Leverage on your expertise, we can do a lot of thing well, even in construction, and our cost structure is undemanding compared to construction firms in the region.

However, due to the "inefficient operations" of many construction companies, we should see a lot more M&A activity as only the big ones will survive in the end. IJM and Roadbuilder will win favours with local and foreign investors, and will get bigger and better. Others who have their heads above water include: Gamuda and YTL Corp. As for those who will benefit with M&A buzz activity: MTD Capital, UEM Builders, UEM World and MRCB.

The dominant themes for the 2007 first quarter should still be plantations (I think CPO prices have a lot more upside), followed by M&A activity in banks (Affin, RHB Cap) and companies involved in REITs (not those listed already but those having the capacity to piece together/buy a good portfolio for REITs). I believe there will be significantly more foreign participation in REITs in the coming months. Do not think that REITs is a small thing. Just have a look at Singapore (and to a certain extent HK as well), REITs have been flourishing there. More importantly, REITs frees up huge amounts of capital to be reinvested in other areas of the economy. This adds a huge impetus to the velocity of money swishing in the system. We need SC, Bank Negara and the Minister of Finance to work together on this to remove the "obstacles" dampening the growth of REITs in Malaysia asap... (the tax issue, the repatriation of dividends, etc... foreign participation, equity issue, etc..). Believe you me, we do this one well, watch the domino effect.


Jomaropol said…
Dali, SJ Counters, something on, tom..
Salvatore_Dali said…
sj theme may come back, but needs a catalyst, needs a kick in the butt ... we were among the first to buy into Tebrau, which did well for readers of the blog ... after the announcement, no follow through ... the plan is substantial... so i would wait for a catalyst - you need news or rumours that Disney has signed up or something major like that, or Capitaland has inked a RM3bn jv with a couple of the landowners in sj ... something like that, because without a catalyst you will be buying on HOPE alone, you know... the Catholic birth control method .... hope & pray. If you can identify the catalyst and can see it coming up, then buy.
gsg said…
i do believe that with the malaysian govt at this right juncture doing the right things to lure/improve foreign interest in malaysia, will eventually do the necessarily to make malaysia competitive in terms of REITs.....

so yes, it will be something to watch for,.....the smart companies are waiting for the right time to REIT their assets

any suggestions on which in KLSE will benefit?
Jomaropol said…
Dali, my salah. Someone in gomen told me that an announcement is out going to be announced 1-2 weeks ago detailing how the SJER will affect the individual companies. They must have thought the correction at that time was not the right time. Maybe very soon.

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