Sarawak-related stocks in focus

KUALA LUMPUR: Sarawak-based companies came under the radar of investors on Jan 11 following news that foreign direct investment (FDI) from China of up to US$11 billion (RM36.74 billion) will be flowing into the country’s largest state.

Some Sarawak counters ended the day higher compared to their closing prices for 2009 just over a week ago.

HOCK SENG LEE BHD [], which specialises in reclamation and dredging, ended on Jan 11 up 7% at RM1.13 versus RM1.06 on Dec 31, 2009.

DAYANG ENTERPRISE HOLDINGS BHD [] rose 5% to RM1.82 from RM1.73 on Dec 31. The oil and gas services provider’s shares touched a 52-week high of RM1.84 last Wednesday.

Also on the rise is Kuching-based engineering company KKB ENGINEERING BHD [] whose share price jumped 6% within a span of six trading days to close at RM3.20 on Jan 11. Ending last year at RM3.01, KKB had touched its 52-week high of RM3.24 last Tuesday.

Sarawak PLANTATION [] Bhd closed at RM2.20 on Jan 11, up nine sen from Dec 31 while TRC SYNERGY BHD [] ended at RM1.38, up three sen over the same period.

State-controlled CAHYA MATA SARAWAK BHD [] (CMSB) closed 20% higher at RM1.78 on Jan 11 compared with its close of RM1.48 six trading days ago.

While the jump in its stock price could be due to the positive vibes surrounding Sarawak of late, it could also be because of CMSB’s recent corporate development.

Last Friday, CMSB announced that it would be selling its 37.21% stake in UBG BHD [] to PetroSaudi International Ltd for RM465.52 million which CMS had noted could be used for higher-yielding investment opportunities.

Not only are investors excited by the Sarawak play, even heads of research too are singing the Sarawak tune.

“We are quite positive on the Sarawak theme play. Unlike some of the other growth corridors that are dependent on attracting investment in services, Score (Sarawak Corridor of Renewable Energy) is fashioned on the tried-and-tested formula of attracting investments in manufacturing, specifically heavy industries.

“Our stock picks for this are Hock Seng Lee, Naim (Holdings Bhd), KKB and Leader Universal Bhd … they’ll likely be beneficiaries of Score and even from the potential US$11 billion foreign direct investment that is said to flow into the state. CMSB is also a potential beneficiary from all this,” OSK’s head of research Chris Eng told The Edge Financial Daily.

“Looking at Sarawakian boys, they have not gone for big things but have been quietly running their respective businesses and been profitable year after year.

“They are not into big-scale projects… but focus on projects like flood mitigation, roads. They have been quietly doing their jobs and delivering it in the process. They have been generally focused on Sarawak jobs and that itself is quite a large market,” Eng added.

Kenanga’s head of research Yeonzon Yeow also believes things are looking up for Sarawak companies.

“Score is the only real economic corridor where there are natural resources that will be tapped to create value, and that is cheap power. That itself is a huge catalyst for the growth of the state.

“Also, with quite a large part of the state still under-developed, there is a need for the development of ancillary infrastructure to tap the cheap power source and for the development of the Score projects, thereby providing potential contracts for the local companies,” he said.

Meanwhile, Maybank Investment Bank Research said it expected CONSTRUCTION [] awards in Sarawak to be stronger in 2010 with a higher development expenditure by the federal government.

“The 10th state election is due by May 2011; the last state election was on May 20, 2006. This may speed up the award of basic social-infrastructure works for roads, schools and healthcare centres in the state in 2010.

“In addition, PM Datuk Seri Najib Razak had in September 2009 reaffirmed a higher development allocation for Sarawak under the 10MP (10th Malaysia Plan). Allocation for Sarawak rose 18% during the 9MP with the state taking up 7% of the total allocations for the country,” it said in a recent research note.

http://www.theedgemalaysia.com/business-news/157267-sarawak-related-stocks-in-focus.html