KUALA LUMPUR: CIMB Equities Research has added Sime Darby, Maybank, YTL Corp and IJM Corp, Genting Malaysia to its top big cap picks, replacing Heineken (M), Mah Sing, UOA Development and DRB Hicom.

In its strategy report issued on Friday, it said the selected stocks were AirAsia Bhd, Gamuda, Genting Malaysia, Genting Plantations, IJM Corp, Malayan Banking, RHB Bank, Sime Darby, Tenaga Nasional Bhd and YTL Power.

Below are highlights of its report:

AirAsia

We expect AirAsia to sell an 80% stake in its leasing arm, AAC, and use the proceeds to pay a special dividend of more than RM1/share. The sale is expected to be completed by 2Q17. While the competitive environment has become tougher, and the ringgit is weak, we expect the special dividend to help re-rate the stock.

Gamuda

Gamuda is the biggest rail play among the contractors under our coverage. The group is gunning for RM3bn-4bn worth of jobs that are predominantly rail-based, which could bump up its order book by 20-30%. On top of that, sizeable packages from the ECRL and HSR projects are possibilities too. A resolution to the sale of 40%-owned SPLASH would also be positive for the stock, as it is likely to fetch better valuations.

Genting Malaysia

Genting Malaysia's share price outperformance is expected to continue into 2017 as its new gaming capacity opens and the various attractions open in 2017. It could also be a potential indirect beneficiary of the weak ringgit through increased tourist visits to Malaysia.

Genting Plantations

Genting Plantations offers one of the highest output growth potential among the Malaysian planters due to its young estates. On top of this, the group is a potential beneficiary of KL-Singapore High-Speed Rail (HSR) project as the Batu Pahat station for the HSR could be located on its land. The stock offers
10% upside to our SOP target price of RM11.80.

IJM Corp
 
Execution of existing civil/infra outstanding order book will underpin IJM Corp's construction earnings. Matured concessions assets under its stable are generating strong cash flow, now that the New Pantai Expressway (NPE) is debt free. Its plantation business will continue to benefit from CPO price recovery and the strengthening of the US dollar. A 15-20% upside to RM8.2bn order book underpins better construction prospects in 2017.

Maybank

The normalisation of the credit cost would help to rejuvenate net profit growth in 4Q16 and 2017. Other earnings catalysts would come from the benefits of the regionalisation of its operations in various countries and the regional expansion of its Islamic banking and insurance businesses. Also, its exposure to underpenetrated markets like Indonesia and the Philippines would help to support its earnings growth in the longer term.

RHB Bank

We like RHB Bank for the positive changes under its IGNITE 17 transformation programme. The programme would help RHB Bank to improve its operating efficiency and fee income growth, and increase its market shares in the SME and mass affluent segments. Its valuations are attractive with below-sector CY17 P/E of about 9x and P/BV of 0.8x.

Sime Darby

We like Sime Darby as we expect the share price to re-rate on potential plans to unlock value and better earnings prospects in view of the higher CPO and coal prices in the future quarters. Sime plans to unlock shareholder value via a listing or demerger of its key business segments. We expect these exercises to boost sentiment on the stock. The stock offers 16% upside to our SOP value of RM9.43.
 
Tenaga Nasional

Management is reviewing the company's dividend policy to improve its capital structure. As Tenaga's balance sheet is under-geared, we believe raising its dividend payout is a necessary step for Tenaga to optimise its capital structure. Assuming that Tenaga raises its payout ratio to 60% from 25% currently, its dividend yield could increase to c.6%.

YTL Power

YTL Power offers an attractive potential dividend yield of 6% in FY17. It is a beneficiary of the weak ringgit as almost all of its earnings are derived from its assets in the UK and Singapore. On top of that, the group is building a power plant in Indonesia, which has not been reflected in YTL Power's share price yet, in our view.