Kuala lumpur: RHB Investment Bank Bhd (RHB IB) has identified five Malaysian companies-Binastra Corporation Bhd, Eco-Shop Marketing Bhd, Kelington Group Bhd, LAC Med Bhd, and MR DIY Group (M) Bhd-as the top picks for environmental, social, and governance (ESG) investment in 2026, labeling them as 'Diamonds in the Rough.'

According to BERNAMA News Agency, RHB IB's 11th edition of its annual thematic research note outlines that the stock selections were based on five key criteria: a return on equity (ROE) of 15 percent or higher, net debt/shareholder funds below 0.7 times in 2026, expanding margins in 2026 compared to 2025, valuations below their respective industry averages, and ESG scores above their country medians. The selected Malaysian companies met all these criteria, comparable to their ASEAN counterparts.

RHB IB detailed that their selection process involved both quantitative and qualitative methodologies, ensuring a deep understanding of the business models, financial health, and management track records of the selected stocks. For Binastra, RHB IB projected a strong ROE of 43.8 percent in FY2027, supported by a significant unbilled orderbook and ongoing projects, particularly in Johor Bahru and data center projects.

The bank expects Binastra to maintain a net cash position in FY2027, enabling it to pursue further projects beyond data centers. Binastra's net margins are anticipated to stay above seven percent from FY2027 to FY2029.

For Eco-Shop Marketing, RHB IB forecasted a return on average equity (ROAE) above 26 percent in FY2027-FY2028, driven by store expansion and favorable foreign exchange rates. The company's net margin is expected to stabilize at nine percent in the FY2027-2028 forecast.

Kelington Group is projected to see its ROEs improve to 28.9 percent and 29.7 percent in FY2026 and FY2027, respectively, due to strong orderbook replenishment and new market access.

RHB IB expects LAC Med's ROE to exceed 21 percent from 2026 to 2028, despite potential moderation due to the expansion of its equipment-as-a-service segment. Net margins are anticipated to remain stable at approximately 11.4 to 11.5 percent during the same period.

For MR DIY Group, the ROAE is projected to expand to 36 to 39 percent in 2026-2028, supported by earnings delivery and outlet expansion. The company's commitment to maintaining a dividend payout ratio above 100 percent is expected to lead to a more efficient capital structure. Its net margin is projected to remain solid at 13.2 to 13.5 percent in the 2026-2028 forecast.