KUALA LUMPUR (June 11): TA Securities recommends retaining the same five small-cap growth stocks for the second half of 2026 after the counters outperformed the broader market and are expected to continue doing so.
In a note, the research house had recommended Exsim Hospitality Bhd (KL:EXSIMHB), CBH Engineering Holding Bhd (KL:CBHB), Southern Score Builders Bhd (KL:SSB8), PGF Capital Bhd (KL:PGF) and SkyWorld Development Bhd (KL:SKYWLD) at the start of 2026 — all of which largely beat the market with an average gain of 11.6%.
Rising geopolitical tensions and artificial intelligence-driven market enthusiasm have increased equity volatility, with the FBM KLCI sliding 2.3% in May, underperforming the FBM Small Cap Index, which slipped 1.0%, noted TA Securities.
Nonetheless, TA Securities proposes shielding portfolios from external shocks while positioning for growth through a defensive yet tactical approach, utilising diversification rather than concentrated exposure solely to the five recommended small-cap stocks.
“In our view, investors should aim to build diversified portfolios that include both blue-chip and small-cap names, thereby optimising return potential while managing overall risk. Our recommendation should therefore be viewed as a selective alpha strategy rather than a call for concentrated exposure solely to the five recommended small-cap stocks,” it said in a note on Thursday.
The recommendation is based on a 2027 price-earnings multiple of 14.6 times, alongside future earnings growth of 5.5% and an expected FBM KLCI target of 1,760 by the end of the year.
TA Securities assigned target prices (TPs) of 56 sen to Exsim Hospitality and 80 sen to CBH Engineering, while having TPs of 78 sen for Southern Score, RM2.90 for PGF Capital and 68 sen for Skyworld.
Headwinds mostly negligible towards the five stocks
As long as “operating fundamentals remain sufficiently resilient to withstand near-term macro headwinds”, potential currency movements and conflict in the Middle East should be mostly negligible towards the five companies, said TA Securities.
Of the five selected, Exsim Hospitality and CBH Engineering previously performed the most exemplarily, with a total earnings growth of approximately 100% year-on-year.
In the first half of 2026 (1H2026), Exsim Hospitality saw its shares rise as much as 63% while CBH Engineering gained 43%. This offset the smaller declines seen in the other three stocks.
Shares of Southern Score fell 12%, PGF Capital declined 19% and SkyWorld dropped 17% in 1H2026, due to tempered sentiment from the rising input costs of plastics, fuel and other materials.
While average gains outperformed the market, SkyWorld notably did the worst in terms of earnings so far this year, which decreased 74% year-on-year to RM3.8 million. However, there is trust that the company’s earnings growth “should improve more meaningfully from FY2027 onwards”, according to TA Securities.
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