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Author: HLInvest   |   Latest post: Wed, 22 Jan 2020, 9:02 AM

 

Datasonic Group - Flag Breakout to Retest RM1.11-1.25

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As the net profit jumped 75.5% YoY to RM27.9m in 1H20 vs. RM15.9m in 1H19 on the back of higher supplies of consumables, passport and provision of personalisation services, the share price has stabilised around the RM1.00 level. Meanwhile, the group is continuing its effort to negotiate better pricing for its raw materials from its suppliers, which may contribute to mild margin expansion moving forward. Currently, its orderbook stood at RM673m which is likely to sustain its earnings for the next 2-3 years. We noticed trading volumes have picked up following the flag formation breakout yesterday. Resistance will be set around RM1.11-1.18, while support is anchored around RM0.98-1.00. Cut loss is set around RM0.97.

Strong quarterly results. DSONIC registered net profit of RM27.9m in 1H20 vs. RM15.9m in 1H19, a jump of 75.5% YoY on the back of higher supplies of consumables, passport and provision of personalisation services.

Stable prospects. In its quarterly prospects’ commentary, management has indicated that the Group will continue to negotiate better pricing for its required materials and services from suppliers, which may contribute to improvement in margins moving forward. Currently, DSONIC’s orderbook as of 2Q20 stood at RM673m which should sustain its earnings for the next 2-3 years.

Flag formation breakout. From our indicator, we noticed that the uptrend is intact with the momentum picking up over the past few sessions. DSONIC has been supported along RM1.00 over the past two weeks and formed a flag formation breakout yesterday above RM1.04 level. We believe the buying interest would sustain and likely to retest resistance around RM1.11-1.18, followed by a LT TP of RM1.25. Support is located around RM0.98-1.00. Cut loss will be set around RM0.97.


 

Source: Hong Leong Investment Bank Research - 6 Dec 2019

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