Penny stocks that soared in 2019

Amid volatility and uncertainty, investors saw their investments soaring 280% to over 400% over the year


PENNY stocks were a major attraction for retail investors in 2019, with the small-cap index rising some 28% or 3,115 points to 14,224 points at the close yesterday, while the benchmark FTSE Bursa Malaysia KLCI remained in negative territory for the year, falling 4.4% year-to-date (YTD).

Amid all the volatility and uncertainty, investors in some penny stocks saw their investments soaring 280% to over 400% over the year.

According to Bloomberg data, oil and gas (O&G) service provider Dayang Enterprise Holdings Bhd’s share price has soared as much as 414.24% YTD.

The stocks started the year at 49 sen per share and were priced at RM2.55 yesterday, a year-high. The stocks advanced 406% in the past 52 weeks, while the benchmark index lost 4.5%.

Dayang Enterprise trades at 15 times its estimated earnings per share for the coming year and the analyst consensus one-year target price (TP) for the company is RM2.29 for a potential loss of 10%.

Analysts raised the target by 50% in the past three months, Bloomberg data shows.

Kenanga Research analyst Steven Chan in a research note recently said the company recorded one of its best-ever quarters in the third quarter of 2019 (3Q19), blowing away expectations thanks to strong work orders from offshore maintenance, on top of high vessel utilisation.

“This trajectory means financial year 2019 (FY19) is likely to be one of its strongest ever year, despite 4Q19 expected to be seasonally weaker, with high demand for work orders to flow well into FY20.

“With outlook remaining exciting, we maintain ‘Outperform’, with higher TP of RM2.35,” Chan added.

Analysts like Dayang Enterprise as a prime beneficiary of increased upstream activities, giving it a very exciting earnings outlook moving forward.

“Going into FY20, we believe strong demand for topside maintenance work orders could translate into an even better year earnings-wise. This is on top of its current group-wide debt restructuring plan, which could see further interest savings costs, as well as increased competitiveness given an optimised capital structure,” Chan said.

According to the company’s financial report, its orderbook amounts to RM2.5 billion as of September 2019 and this is expected to last until 2023.

Dayang Enterprise’s current market capitalisation is RM2.71 billion, a substantial increase from RM496.88 million in January this year.

Sarawak Consolidated Industries Bhd’s — Sarawak and Sabah’s sole spun pile and industrialised building system hollow core and panel wall manufacturer — share price has soared as much as 289.58% in the past 12 months to RM1.88 as of yesterday, giving it four times higher market capitalisation of RM161.46 million.

This rally comes after Serba Dinamik Holdings Bhd founder Datuk Mohd Abdul Karim Abdullah became its controlling shareholder with a 42.84% stake in June this year.

He also made a takeover offer to buy the remaining shares in warp-knitted fabric manufacturer, Kumpulan Powernet Bhd (KPB), at RM1 each.

KPB started the year with stock valued at 38 sen a piece. As of yesterday, KPB closed at 276% higher at RM1.41, valuing four times more at RM107.37 million.

The company had recently returned to the black in its first quarter ended Sept 30, 2019 (1QFY20), where the group posted a net profit of RM948,000 compared to a net loss of RM328,000 a year ago.

Revenue jumped more than seven times to RM11.16 million from just RM1.46 million a year ago.

The group had also won a letter of award from Signvest Sdn Bhd last month for the construction and upgrading works of sewerage treatment facilities, as well as the construction of a 12-floor green building, worth RM254.32 million.

This, together with existing projects secured, brings its current orderbook to RM265 million.

According to its past Bursa filing, by the end of the current financial year ending June 30, 2020, KPB is targeting an orderbook of RM1 billion, which is also expected to bring about better net profit this year.

Its tender book stands at RM2.5 billion, comprising projects in the energy and utilities segment.

Petra Energy Bhd is another O&G contractor that soared amid the improving outlook for the sector. The stock price is up 285.71% YTD to RM1.38 from 35 sen a piece in January.

Petra returned to the black with a net profit of RM25.04 million for 3Q19, from a net loss of RM26.97 million recorded a year ago. Its 3Q19 revenue jumped 82.92% year-on-year to RM219.01 million.