Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Mon, 23 Nov 2020, 11:51 AM


Daily technical highlights – (ARBB, SERBA)

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ARB Bhd (Trading Buy)

  • Post the disposal of its remaining 51% interest in the loss-making timber business Aturmaju (Sabah) Holdings Sdn Bhd (AHSB) for RM5.6m on 24th June 2020, ARB has fully transformed itself to be involved in the IT business, focussing mainly on the Enterprise Resource Planning (ERP). Since the transformation started in 4Q18 when the group decided to diversify into the IT segment, it has then experienced a significant jump in its FY19 earnings to RM34.8m (+828%YoY). The higher earnings was attributed to sales from: (i) Small and Medium Enterprise (SMEs) (given their low adoption of business digitalisation), and (ii) Government-linked Companies in South East Asia.
  • The stock (which was unchanged at RM0.32 yesterday) has recently been trending sideway after retracing from a high of RM0.42.
  • From an Ichimoku technical perspective, the stock is currently staging a potential “Kumo Breakout”, which could head towards our resistance target of RM0.39 (+21.8% potential upside). Meanwhile, should the buying momentum persist the next resistance level can be seen at RM0.42 (+31.2%).
  • Our stop loss level is pegged at RM0.265 (or 17.1% downside risk).
  • From a fundamental perspective, the group is currently trading at an undemanding PER of 3.3x (based on historical earnings) with a net cash position of 8.6 sen/share (representing c.30% of its share price)

Serba Dinamik Holdings Bhd (Trading Buy)

  • SERBA has recently won: (i) EPCC job from Malaysia, (ii) 2 ICT contracts from Zambia (worth c.RM543.5m), and (iii) 7 O&M contracts locally. The ICT contract win is positive as it brings the group closer to its goal of diversifying into a third business in addition to O&M and EPCC, given the uncertain nature of the Oil and Gas industry.
  • Chart-wise, the stock appears to be trending sideways between R1 and S1. However, given the recent “Kumo Twist”, we believe the stock could be staging an upward bias and test its resistance target of RM1.90 (R1) (+11.1% potential upside) and RM2.00 (R2) (+16.9% potential upside).
  • Our stop loss level is set at RM1.55 (or -9.3% downside risk).
  • Fundamentally, the stock has continued to grow its net income to RM133.7m (+19.1%, YoY) in 1QFY20, despite the challenging business environment. It is currently trading at a 1-year forward PER of 13.7x which is at a c.50% discount compared to its peers in the KLENG index

Source: Kenanga Research - 10 Jul 2020

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Related Stocks

Chart Stock Name Last Change Volume 
SERBADK 1.70 +0.03 (1.80%) 11,062,800 
ARBB 0.295 -0.01 (3.28%) 8,054,200 

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