PETALING JAYA: Yinson Holdings Bhd and Rubberex Corp (M) Bhd could be dropped from the Securities Commission’s new syariah-compliant securities list, which is expected to be unveiled on Nov 26.

       RHB Research Institute head of regional equity research Alexander Chia said both companies are at the risk of exclusion for failing to meet the 33% cash and debt ratios threshold.

       Yinson is a floating production storage and offloading player, while Rubberex is a glove maker.

       RHB Research Institute has a “neutral” call on Yinson and a “sell” call on Rubberex.

       “After screening the financial metrics of the syariah-compliant stocks under our coverage, we flag two stocks – Yinson and Rubberex – which have failed to meet the financial ratios requirement.

       “Enquiries made with their respective managements do not indicate that there are any significant components of syariah-compliant cash or debt to mitigate this risk,” Chia said in RHB Research’s latest Syariah-Compliant Securities Semi-Annual Review.

       The syariah rules specify that the debt and cash ratios – intended to measure riba and riba-based elements within a company’s financial position – must be less than 33% of total assets.

       Meanwhile, three stocks are likely to be added into the new syariah-compliant securities list. These are Tan Chong Motor Holdings Bhd, NTPN Holdings Bhd and Tasco Bhd.

       “Tan Chong Motor and Tasco’s debt ratios have now fallen below the permissible threshold.

       “While NTPN’s nominal debt levels exceed 33%, we understand this includes an Islamic debt component.

       Stripping this out brings its debt ratio to below 33% of total assets,” Chia noted.

       Commenting on the market outlook, Chia said Cukai Makmur or the prosperity tax will wipe out nominal FBM KLCI earnings growth for the financial year of 2022.

       This would then raise market valuation by a one time price-to earnings ratio. Cukai Makmur is a one-off tax that will only be applicable on super-profitable companies with chargeable income of above RM100mil for the tax assessment year of 2022.

       For the first RM100mil, companies will be subjected to the existing income tax rate of 24%, while the remaining chargeable income will be subject to a tax rate of 33%.

       Looking ahead, Chia said the investment strategy in 2022 will centre around astute stock picking, nibbling value, and cyclical names on weakness, with core holdings in growth, defensive, and high-yielding stocks.

       “Clarity on the prospects for 2023 will only become apparent in the latter part of 2022, in our view.

       “In the meantime, the tone of Budget 2022, suggests that policy and regulatory risks will remain elevated for some time,” he said.

       On the global front, he pointed out that the macro risks remain in focus, centred on the global inflation picture and worries on China’s economic growth trajectory.

       “If global inflation stays higher for longer, the key risk for emerging market equities is a disorderly transition to a tighter liquidity environment should the United States Federal Reserve bring forward its tapering and rate hike schedule,” according to him.