They are decent defensive bets in an unpredictable environment, although investors have to be prepared to stomach volatile price swings, often amplified by the lack of tradable shares in the market.
A stockbroker recently took 13 small and mid-cap companies for a roadshow to meet fund managers. There were a few interesting soundbites from a report by conference organiser CIMB Research.
For instance, it noted that the event provided the opportunity for some fund managers to meet the management of CI Holdings Bhd (CIH) for the first time. The maker and distributor of soft drink and fruit juices has had a long relationship with PepsiCo that started in 1973.
It has moved on from its torrid years in the early part of the decade. Over the past three years, profits have been on a rising trend.
CIMB Research analyst Norziana Mohd Inon has forecast that CIH’s earnings will hit a new high of RM35mil in fiscal year ended June 30, 2010.
A projected 10 sen dividend payout would give a decent yield of 4.3%. This will match the 12-month yield of Nestle (M) Bhd, which has a market value of RM8bil. CIH’s market capitalisation stands at RM340mil.
Another company, Daibochi Plastics & Packaging Bhd, offers an interesting mix of earnings growth and a steady dividend rate that comes at a relatively cheap entry price, particularly after a recent decline in its share price. Records show that the company has been paying dividends twice a year for over a decade.
At RM3.08 a share, the stock offered a hefty dividend yield of 7% and good upside potential for capital appreciation.
Daibochi’s current market value is about RM235mil, but average daily volume transacted is less than 100,000 shares.
Meanwhile, a quick search on the Bloomberg terminal revealed that a number of recently listed companies are already promising high payouts.
Telco giant Maxis Bhd and computer hard disk maker JCY International Bhd are the big companies with decent yields, but these are actually mature businesses that recently went public.
A small firm with a big dividend yield is rubber hose maker Wellcall Holdings Bhd. The Ipoh-based firm went public in 2006 and had been paying dividends to shareholders every year since.
At the current market price and based on analyst estimates, its total dividend payout for this year will be a massive 12%. That is triple the return compared to putting cash in the safety of fixed deposits.
Investing in small cap stocks, however, can be treacherous. But companies with healthy track records are investors’ best bet in navigating for bargains in the small cap universe.
To help investors make informed investment decisions, the exchange provides free investment research on certain listed companies under its CMDF-Bursa Research Scheme. The research coverage is paid for by Bursa Malaysia and the listed company itself.
A stockbroker that is big on promoting small-cap stocks is OSK Research. For the past five years, it had published an annual book compiling write-ups on a selection of small-cap companies. This is on top of regular updates issued to clients.
This year’s edition was launched in May and featured a list of 50 companies dubbed the “50 Jewels.’’ It is a gold mine for investors looking to invest in so-called undiscovered gems.
Meanwhile, CIMB Research issues its Small Cap Monitor to clients on a regular basis, which provides reviews on selected companies that usually fly below the radar of most investors.