Keep an eye on good small-cap stocks: OSK

INVESTORS should start keeping an eye out for good small-cap stocks to buy in the next one or two months, as this is when interest is expected to return to the
stock market, says OSK Research.

Its top five picks are QL Resources, Kossan Rubber, KPJ Healthcare, Hektar-REIT and Wah Seong.

"Now is about the right time to keep your eye on the good small caps. You should start positioning yourself to buy in one or two months' time," head of research Chris Eng told Business Times.

He expects the market to fall towards the end of this month ahead of the May corporate earnings season, which is expected to be bleak.

OSK, in its latest annual compilation of small-cap "jewels", singled out 50 stocks with a market capitalisation of under RM1 billion for investors' consideration.

Among these, the top five were liked for their "safe haven" characteristics, promising dividends and resilient business models.

"We believe (they) would appeal to a broad spectrum of investors with differing risk appetite and risk-reward profiles," OSK said in a note to clients yesterday.

Of the five, QL Resources, a diversified agriculture group, and rubber glove maker Kossan Rubber are already widely followed by the investment community because of their recession-proof businesses.

QL, Asia's biggest producer of semi-processed raw fish paste, has managed to grow revenue for the last 20 straight years and is poised to do the same this year, buoyed by the extended growth of its marine-product manufacturing segment.

Kossan, which OSK says is one of the most efficient manufacturers of nitrile rubber gloves, is expected to yield margins that are higher than conventional natural rubber gloves.

KPJ, meanwhile, is OSK's top exposure to the healthcare sector given its expanding portfolio of hospitals nationwide and overseas.

"We feel that the prospects of the healthcare sector in the country remain bright due to the scarcity of medical services," it remarked.

Hektar-REIT, meanwhile, is liked for its generous dividend yield of 12 per cent, the highest of OSK's 50 small-cap companies.

As for oil and gas firm Wah Seong, it is seen as well-poised to capture a bigger slice of the worldwide pipe-coating and compressor business.

OSK has a "buy" recommendation on all five stocks.

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