KUALA LUMPUR (Feb 9): Small-cap stocks are set to stage a comeback in 2026 after a bruising 2025, with TA Securities tipping the segment to outperform the broader market as improving sentiment and earnings growth revive risk appetite.

The house noted that in 2025, the FBM Small Cap Index (FBMSC) fell to 12.2%, underperforming the FBM KLCI Index by 14.5 points.

“The FBMSC has historically outperformed the FBM KLCI during bull market phases, with a 57% probability of beating the benchmark when the broader market posts gains. 

“Since 2000, small caps have delivered stronger upside during recovery cycles, supported by higher earnings growth potential, albeit with greater volatility,” said the research house in a note on Monday. 

Screening its universe for companies with market capitalisations of RM200 million to RM3 billion, “buy” recommendations, strong capital upside and robust earnings growth between 2025 and 2028, TA Securities identified five standout picks: 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).

TA Securities said Exsim Hospitality stands to benefit from resilient tourism trends, supported by the scaling up of its Mana Mana Airbnb platform, contributions from hotel assets and steady growth in its interior fit-out segment. 

Earnings visibility is underpinned by a consistent annual order book replenishment of around RM250 million, with net margins of 15%–20%. The stock carries a target price of 40 sen, implying 57% upside from 25.5 sen.

For CBH Engineering, the research house highlighted Malaysia’s emergence as a key data centre hub in Asia-Pacific, which continues to drive strong demand for mechanical and electrical engineering services. 

The group’s prospects are supported by an outstanding order book of about RM681 million, alongside potential annual replenishment of roughly RM600 million. TA Securities set a target price of 82 sen, representing 62% upside from 50.5 sen.

Southern Score Builders is expected to ride on robust construction activity tied to data centre investments, with total project values estimated at RM144 billion between 2021 and March 2025 and capacity projected to exceed 4GW beyond 2026. Earnings growth is backed by a solid order book of nearly RM1.5 billion, supported by recurring projects from key clients. The stock’s target price is 81 sen, implying 45% upside from 56 sen.

Meanwhile, PGF Capital is poised to benefit from structural demand for insulation materials amid global decarbonisation efforts. 

Growth is driven by strong glass wool demand in Australia and capacity expansion to 60,000 metric tonnes per year by 2027, up from 25,000 tonnes currently, alongside new property launches in Tanjung Malim. TA Securities assigned a target price of RM2.92, translating to 64% upside from RM1.79.

As for SkyWorld Development, the brokerage said the property developer is supported by resilient residential demand arising from industrial expansion in the Johor-Singapore SEZ, Malaysia Vision Valley 2.0, and Penang’s manufacturing hub.

The group plans RM2 billion worth of launches in 2026, while unbilled sales of RM589 million are expected to exceed RM1 billion by end-2026 and approach RM2.5 billion by 2028, underpinning a projected 35% core net profit compound annual growth rate. The stock has a target price of 70 sen, offering 44% upside from 48.5 sen.