Malaysian firms attractive bet for foreign investors

Malaysia stocks form the current surprise package of the South East Asian region, according to Coupland Cardiff fund manager Rory Dixon. Malaysian companies, he says, have always been perceived as small and “a bit dull”, so unlikely to attract much interest from foreign fund houses.

Although the 28m population looks very small when compared to that of China, Indonesia and even Taiwan, it is fast-growing and youthful. Also, convenient for Mr Dixon’s Singapore base, it is very close by for him to conduct company visits.

One favourite stock is Malaysia’s leading healthcare company KPJ, with a significant national network of hospitals, recently transformed into a well-managed, highly professional group.

Many companies have recently had their ownership transferred from that of the central government to mini sovereign wealth funds such as Johor Corp, investment arm of the Southern state of Johor, whose reputation has vastly increased since the dark days of the Asian crisis. The Malaysian franchise of chicken fryers KFC, which has undergone many changes of ownership during the last 10 years, has become an industry leader since its management was restructured by Johor Corp, says Mr Dixon.

He also likes hypermarket operator Aeon Berhad, which runs 20 outlets in Malaysia. “It is the sort of business most people look at and fall asleep,” he says. “But it has consistent 8 to 12 per cent earnings growth year after year, and now that the free cash flow has been used up to re-invest in new stores, it is finally falling off into a nice dividend yield.”