Highlights

Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Fri, 22 Jan 2021, 10:30 AM

 

Pantech Group Holdings - Poorer 3QFY21 Results

Author: kiasutrader   |  Publish date: Fri, 22 Jan 2021, 10:30 AM


PANTECH’s overall poorer 3QFY21 earnings (-15% YoY, - 18% QoQ), deemed within expectations nevertheless, were mostly dragged by deteriorated sales demand. Nonetheless, we are anticipating some recovery in FY22 on the back of resumption of economic activities. The group is also not expected to see operational disruption under the re-imposition of MCO in CY2021, unlike CY2020; thus, leaving our FY21-22E assumptions intact. Upgrade to MARKET PERFORM, with higher TP of RM0.45, backed by dividend yields of ~4%. However, as we are in the midst reshuffling of our stock coverage universe, we are temporarily ceasing active coverage on the stock.

9MFY21 deemed within expectations. PANTECH recorded 9MFY21 net profit of RM13.9m, coming within expectations at 74% of our, and 80% of consensus, full-year earnings forecast. The group also announced an interim dividend of 0.5 sen per share, bringing FY to- date dividend to 1.3 sen, deemed broadly within expectation.

Weaker overall earnings. Sequentially, 3QFY21 saw earnings plunging 18% QoQ to RM8.7m, dragged by: (i) softer sales demand from export markets of carbon steel, resulting in poorer manufacturing revenue, and (ii) poorer trading product mix. YoY, net profit dropped by 15%, similarly due to poorer sales.

Cumulatively, net profit declined 51% YoY. On top of weaker sales, the group was also affected by operations suspension due to the implementation of the Movement Control Order (MCO) in 1QFY21.

In gradual recovery. With FY21 being a trough year, dragged by the deteriorated sales demand as a result of the Covid-19 pandemic coupled with the low oil price environment, we believe its sales demand outlook is likely to improve going into FY22 on the back of resumption of economic activities. Furthermore, we gathered that the re-imposition of MCO in 2021 should not result in operational disruption, unlike what was witnessed in 1QFY21. As such, our FY21- 22E assumptions remain largely intact.

Upgrade to MARKET PERFORM, with raised TP of RM0.45 (from RM0.31 previously). No changes to our FY21-22E numbers. Amidst the group’s recovery trajectory, we opt to raise our ascribed valuation to 10x PER on FY22E EPS (from 7x PER previously), being closer and in-line with its historical mean valuations (versus -1SD previously). Our valuation is further backed by dividend yields of ~4%.

However, as we are in the midst of reshuffling our stock coverage universe, we are temporarily ceasing active coverage on the stock for now. Nonetheless, we will still be keeping close watch on the stock, and will be releasing updates under our “On Our Radar” series of reports from time to time, should there be any significant changes in outlook.

Risks to our call include: (i) stronger-than-anticipated sales, (ii) higher demand for manufactured products, (iii) stronger-than-expected product margin mix, and (iv) any potential M&A activities.

Source: Kenanga Research - 22 Jan 2021

Labels: PANTECH
  Be the first to like this.
 

AirAsia Group Berhad - Private Placement to Shore Up Liquidity

Author: kiasutrader   |  Publish date: Fri, 22 Jan 2021, 10:29 AM


In an announcement to Bursa Malaysia, AirAsia is proposing a private placement of 668.4m new shares or 20% of its existing outstanding shares. For illustrative purposes, based on the indicative issue price of RM0.68, the proposed private placement is expected to raise gross proceeds of up to approximately RM454.5m. We view this latest development positively as an interim measure to address its immediate cash flow requirements during this on-going pandemic. We maintain our TP of RM0.38 based on 1.07x FY21E BVPS. Maintain UNDERPERFORM.

Proposed 20% private placement. In an announcement to Bursa Malaysia, AirAsia is proposing a private placement of 668.4m new shares or 20% of its existing outstanding shares. We view this latest development positively as an interim measure to address its immediate cash flow requirements during this on-going pandemic. The issue price of the new shares is expected to be determined at a later date. For illustrative purposes, based on the indicative issue price of RM0.68, the proposed placement of the new shares could raise up to approximately RM454.5m which is expected to be utilised for fuel hedging settlement (RM146.6m), aircraft lease & maintenance payments (RM95.2m), AirAsia Digital (RM76.9m) and general working capital expenses (RM135.6m).

Outlook. However, in the fourth quarter of 2020, there has been a spike in cases in Malaysia which has led to a majority of states being placed under Conditional Movement Control Order while inter-state travel has also been banned except for essential travel. Accordingly, AirAsia Malaysia has reduced its capacity in October and November 2020. AirAsia Group is looking forward to the gradual reopening of domestic travel and international borders in recognition that air transport provides the connectivity that is essential for the resumption of economic activities. Over the medium term, we expect AirAsia to face a tough operating environment already derailed by widespread travel disruptions due to COVID-19, and hits from lower load factor. In an effort to reduce operating expenses, the group has undertaken cost cutting measures such as right sizing of manpower, salary cuts for management, staff and directors, negotiation of deferrals with lessors, suppliers and partners, and restructuring of fuel hedging positions. In Malaysia, the group is securing commitments from banks for the government guarantee loan under the Danajamin Prihatin Guarantee Scheme. Elsewhere its Philippines and Indonesia entities are currently in various stages of bank loan applications. In addition, AirAsia has on- going deliberations with a number of parties for joint ventures and collaborations that may result in additional third-party investments in specific segments of the group's businesses.

Reiterate UP. We maintain our TP of RM0.38 based on unchanged 1.07x FY21E BVPS. Reiterate UP.

Risks include higher-than-expected RASK, lower-than-expected CASK and better-than-expected load factor.

Source: Kenanga Research - 22 Jan 2021

Labels: AIRASIA
  Be the first to like this.
 

Bank Indonesia Rate Decision - Holds rate steady at 3.75%, leaves door open for further easing

Author: kiasutrader   |  Publish date: Fri, 22 Jan 2021, 10:29 AM


  • Bank Indonesia (BI) kicked off its firstBoard of Governor meeting this year by keeping the benchmark 7-day reverse repo rate unchanged at 3.75% (KIBB: 50% probability rate cut; consensus: no change)
    • The Deposit Facility rate and Lending Facility rate were also maintained at 3.00% and 4.50%, respectively.
       
  • BI statement: The decision was consistent withthelow inflation, maintained external stability, and efforts to support economic recovery.
    • BI pledged to continue supporting the economy using all policy instruments, focusing on policy coordination towards overcoming supply and demand constraints in terms of bank lending to priority sectors. This signalled that the monetary policy stance remains accommodative and open for future easing.
       
  • Rupiah remains fundamentally undervalued
    • BI believes the currency to appreciate further supported by a narrow current account deficit, low and stable inflation, attractive domestic financial assets, lower risk premium, and higher global liquidity.
       
    • As of 21 January, the rupiah appreciated by 0.7% to 14,000 compared to December last year. The currency is expected to strengthen further on the back of the global vaccine rollout and economic recovery of its major trading partners.
       
  • We still pencil in another 25 bps rate cut for 2021 to boost the economic recovery
    • The house remains cautiously optimistic of Indonesia’s growth recovery as it continues to register a record daily rise in COVID-19 cases and deaths. This may pose a threat to economic recovery. Some parts of Indonesia have recently been placed under partial lockdown from 11 January to curb the virus spread.
       
    • While latest indicators have demonstrated some improvement, such as inflation (1.68%; Nov: 1.59%) and exports (14.6%; Nov: 9.4%), the recent spike in the number of COVID-19 cases may undermine the growth trajectory. Nonetheless, we believe the timing for another rate cut would largely depend on the rupiah’s stability.

Source: Kenanga Research - 22 Jan 2021

  Be the first to like this.
 

Daily technical highlights – (SCIB, KGB)

Author: kiasutrader   |  Publish date: Fri, 22 Jan 2021, 10:28 AM


Sarawak Consolidated Industries Bhd (Trading Buy)

  • SCIB is a company that manufactures precast concrete, pipes and industrialized building systems.
     
  • The group is regionally diversified with projects located in Indonesia (to tap into the relocation of the capital city from Jakarta) and Qatar (riding on the FIFA World Cup 2022 event). On the back of its regional diversification strategy, the group has attained an orderbook size valued at RM1.4b as of 3QFY20, which would underpin forward earnings visibility.
     
  • The group has generated a revenue of RM330.4m (+478% YoY) in 9MFY20 thanks to better construction contribution from the EPCC segment. Meanwhile, its net profit increased to RM20.1m (+900% YoY) mainly attributable to higher recognition of construction billings.
     
  • Interestingly, the group is issuing 1 free warrant for every 2 existing shares held with the last day of lodgment scheduled on 3 rd Feb 2021. Take note that the warrants (with an exercise price of RM1.77) are already in the money.
     
  • Chart-wise, the stock has recently tested its 50-day SMA before staging a rebound thereafter. With the shorter-term key SMA still treading above the longer-term key SMA (which indicates a healthy uptrend), we thus expect its upward movement to persist.
     
  • Based on our Fibonacci projections, our resistance levels are set at RM2.41 (R1; +14% upside potential) and RM2.54 (R2; +20% upside potential).
     
  • Meanwhile, our stop loss is set at RM1.81 (-14% downside risk).

Kelington Group Bhd (Trading Buy)

  • KGB provides gas and chemical delivery solutions to the technology industry. The company supplies to on-site gas generators which are used in the electronics, semiconductor and oil and gas industries.
     
  • With China’s initiative to develop its own semiconductor eco-system after seeing the likes of Huawei being banned by U.S. from sourcing from TSMC (the world’s biggest chip maker), this bodes well for the group. For example, SMIC (China’s chip maker) has continued to award more contracts to the group, which has provided earnings visibility for KGB until June 2021.
     
  • QoQ, the group’s revenue has increased to RM98.3m (+27% QoQ) in 3QFY20 following the resumption of operations post MCO with its net income increased in tandem to RM4.9m (+786% QoQ). • Ichimoku-wise, the stock has continued to trend up after finding support at the Kumo-Cloud from late December last year until early January this year. With the bullish Kumo-Clouds still displaying an upward bias, we thus expect the uptrend to persist.
     
  • Ichimoku-wise, the stock has continued to trend up after finding support at the Kumo-Cloud from late December last year until early January this year. With the bullish Kumo-Clouds still displaying an upward bias, we thus expect the uptrend to persist.
     
  • With that, based on our Fibonacci projections, our key resistance levels are set at RM2.55 (R1; +14% upside potential) and RM2.70 (R2; +21% upside potential).
     
  • Meanwhile, our stop loss is pegged at RM1.95 (-13% downside risk).

Source: Kenanga Research - 22 Jan 2021

Labels: SCIB, KGB
  Be the first to like this.
 

JHM Consolidation - Recovery Momentum to Continue

Author: kiasutrader   |  Publish date: Thu, 21 Jan 2021, 11:53 AM


The group is eyeing 25% YoY growth for its automotive segment, excluding new potential customers still at the qualification phase. Its industrial segment is anticipated to grow 40-50% YoY thanks to higher order forecasts from existing customers as well as a new US customer involved in fibre optics. JHM is finalising a 13.8 acre land acquisition in Batu Kawan in anticipation of more orders (up to 4x current forecast) from the new optic fibre customer in 2022. The JV with MASS Precision to fabricate front-end equipment is prepped to take on its first delivery in July 2021. Maintain MARKET PERFORM with revised TP of RM2.35.

Final financial quarter to see improvement. We anticipate its upcoming 4QFY20 to see growth, QoQ and YoY, as orders from key customers have resumed to pre-Covid-19 levels. Moreover, the 4QFY is a seasonally strong quarter for the group as higher number of car sales typically take place during the year-end festive season due to attractive rebates offered by car manufacturers.

Automotive segment’s recovery momentum will continue in FY21 as the group is eyeing a 25% YoY order growth from its existing customer, thanks to improving car sales. This could potentially increase further as there are 2-3 more new prospects which are still at the qualification phase.

New customer acquired. The group has recently engaged a new US customer who is involved in fibre optics, to fabricate mechanical parts and enclosures. The current orders at hand is estimated to be c.8% of the group’s FY21 revenue and could potentially grow 4x by 2022 upon securing the supply of PCBA and module assembly which will require high-end SMT machines. Given the customer’s commitment to grow along with JHM, the group has announced a 13.8 acres land acquisition in Batu Kawan worth RM27m to accommodate capacity expansion. This would allow the group to take on more orders as the new customer is aggressively looking to diversify their supply chain to Malaysia and JHM is preparing to be their one-stop solution.

JV with MASS Precision will enable the group to move up the supply chain as it ventures into the front-end semiconductor space. The JV will be setting up a c.50k sq ft plant with state-of-the-art robotics production line to produce front-end semiconductor equipment. The group is expected to start delivery of the first shipment in July 2021. Overall, the industrial segment is expected to grow 40-50% YoY.

Maintain FY20E and FY21E NP of RM24.0m and RM49.8m, respectively.

We keep our MARKET PERFORM recommendation with a revised Target Price of RM2.35 (previously RM2.00). Our valuation is based on FY21 PER of 26x (previously 22x), representing +1SD from 3-year mean as we factor in greater interest from institutional clients post its Main Market transfer.

Risks to our call include: (i) reduced orders from key customer, (ii) delay in 5G rollout, and (iii) higher-than-expected input costs.

Source: Kenanga Research - 21 Jan 2021

Labels: JHM
  Be the first to like this.
 

Daily technical highlights – (MBMR, SLVEST)

Author: kiasutrader   |  Publish date: Thu, 21 Jan 2021, 11:53 AM


 

MBM Resources Berhad (Trading Buy)

  • MBMR is principally involved in the trading, marketing and distribution of motor vehicles and related spare parts. They also provide hire purchase and lease financing facilities.
     
  • As a proxy to national carmakers with a 22.58% stake in Perodua, MBMR could benefit from the prevailing low financing costs and the government’s extension of sales tax exemptions for motor vehicles (until end-June 2021).
     
  • Going forward, consensus is expecting MBMR to make a net profit of RM145.7m in FY Dec 2020 and RM177.2m in FY Dec 2021, which translates to undemanding forward PERs of 8.9x and 7.3x, respectively.
     
  • Technically speaking, the stock appears to be making higher lows, as: (i) the November 2020 bottom is marginally higher than the March 2020 bottom, and (ii) the most current swing low is a higher low than the November 2020 low.
     
  • Over the last few days, the emergence of several hammer candlesticks is also a positive indicator, signalling the rejection of lower prices.
     
  • Bouncing off the recent swing low, MBMR’s share price could hit the resistance levels of RM3.70 (R1; 15% upside potential) and RM4.06 (R2; 26% upside potential).
     
  • We have pegged our stop loss price at RM2.75 (15% downside risk).

 


Solarvest Holdings Bhd (Trading Buy)

  • SLVEST provides engineering, procurement, construction, commissioning (EPCC), as well as management, operation and maintenance services for solar projects.
     
  • The Group’s EPCC project tenders are increasing as businesses increasingly turn to solar energy for its economic benefits while fulfilling their sustainability goal. The future looks bright for the Group as they are a potential beneficiary of the rolling out of the upcoming large scale solar (LSS) projects.
     
  • Since the sharp price correction in March 2020, its share price has subsequently been riding on a steady uptrend, forming higher highs and higher lows.
  • In the most recent swing low, the long tail wicks suggest rejection of lower prices.
     
  • Based on the Fibonacci Retracement, of which the share price has respected on numerous occasions, the shares could reach new heights as it continues its current upward momentum.
     
  • With the MACD line crossing above the signal line, the stock will probably continue to rise and challenge our resistance targets of RM2.30 (R1; 13% upside potential) and RM2.50 (R2; 23% upside potential).
     
  • We have pegged our stop loss at RM1.79 (12% downside risk).

Source: Kenanga Research - 21 Jan 2021

Labels: MBMR, SLVEST
  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View candlestick stock charts with Technical indicators
MQ Affiliate
Be rewarded by being an MQ Affiliate
 
 

201  678  603  1032 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 DNEX 0.285+0.025 
 XOX-WC 0.02+0.015 
 QES 0.365-0.015 
 LUSTER 0.20+0.015 
 BIOHLDG 0.305+0.005 
 SAPNRG 0.120.00 
 GLOTEC 0.51+0.06 
 GLOTEC-WA 0.105+0.025 
 AT 0.175-0.005 
 VIZIONE 0.23-0.04 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS