May 14

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Undervalued Stocks in Malaysia 2020: Inspiring Top Picks

By Ian Bong

May 14, 2020


Disclaimer: This article is not meant as an advisory or call to buy. Readers should analyse and make decision on your own.

Since the start of the year, Covid-19 has ravaged economy. What this means though, is that there should be plenty of opportunities to find undervalued stocks in the market. The following stocks are a list of what I believe to be a good starting point for undervalued stocks in Malaysia 2020. I will use this list to focus my research and select a few to invest in starting from 2020.

Screening Criteria

Market Capitalization: RM100 million and above
Price to Earnings ratio: Less than 10
5-year Return to Equity ratio: More than 13%
Debt to Equity ratio: Equal or less than 0.2 or 20%
Dividend yield: More than 3-5%

The above criteria is adapted from Ricky Yeo’s Musing Zebra blog, which remains on the list of blogs I follow.

Using FT’s equity tracker, the screening criteria above yielded 10 stocks from Bursa Malaysia. Feel free to use other screeners or drop your recommendations if you are using other better ones.

undervalued stocks in malaysia 2020

Undervalued Stocks in Malaysia 2020: My Top 3 Picks

DIcslaimer: PLEASE do your own research, don’t trust my word blindly! This is not a call to buy .

If I have a spare RM10,000 lying around, I would pick the following 3 stocks based off a quick glance using Simply Wall Street’s colourful and easy-to-understand research.

  • Lii Hen
  • Syarikat Takaful Malaysia Berhad
  • Magni-Tech

All the above share similar traits that I look for when picking a stock to invest in over the long-term. The topmost consideration is having ability to sustain dividend payout. Judging from these companies’ strong balance sheet and consistent earnings growth over the past 5 years, I have a fair degree of confidence that they would be able to maintain their dividend policies.

Performance

This 3-stock portfolio performed really well in 2020 as of 31st December 2020. I created a demo portfolio assuming a RM10,000 initial capital, with almost equal allocation across 3 stocks.

Using the end of day price on 14th May 2020 (the day this article is written), the portfolio has gained more 34.97% excluding brokerage fees etc. The portfolio details can be found on my public i3 portfolio page. https://klse.i3investor.com/servlets/pfs/159512.jsp

Conclusion

This article is not meant to delve in-depth into stock selection methodologies, as I simply intend to share my thoughts on how I would go about choosing 3 good-quality and potentially undervalued stocks in Malaysia for the year 2020 and beyond.

Feel free to leave a comment below!

About the author

Chief Writer at Fiholic. Doctor by day, personal finance addict by night.

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