Technical Commentary

SIGGAS  has  consolidated  sideways  within  a  symmetrical  triangle  formation  over  the  past three months. Price has started to spike-up above the RM0.725 level with improved volumes on 22 nd September. The MACD Line is hovering above zero, while the RSI has just crossed below  70,  hovering  above  50.  Both  indicators  are  still  suggesting  that  the  momentum  is positive.  Price  may  surge  above  the  upper  trendline  of  the  symmetrical  triangle  formation, targeting the RM1.00 level.

Strategy

Traders  may  take  a  small  position  above  the  RM0.725  level.  If  the  price  breaches  above RM0.765, traders may add on their position  with the anticipation of  a  price rally towards the target  of  the  RM0.875  and  RM1.00  levels.  Cut  loss,  however,  will  be  initiated  if  the  price violates below the RM0.70 level.

Stock Information

SIGGAS is an industrial gas solutions and service provider. The Group is mainly engaged in the manufacturing, refilling and distribution of all kinds of industrial gases in Malaysia.

These  gases  include  oxygen,  nitrogen,  argon,  carbon  dioxide,  acetylene,  gas  mixture, specialty  gases,  refrigerant  products  and  gas-related  services  equipment.  The  Group’s products  are  used  in  various  industries,  including  iron  and  steel,  chemicals,  oil  and  gas, healthcare, pharmaceutical, electronics, food, metal fabrication, shipbuilding, manufacturing, building and construction and other industries.

In addition, the Group provides supporting services, which includes the  provision of cylinder sales, rental, maintenance and delivery services.

Acquiring More Business – Earnings Expansion

SIG  Gases  Bhd  has  entered  into  a Memorandum  of  Understanding  (MoU)  to acquire 100% equity interest in Piasau Gas Sdn Bhd (PGSB) from Shin Yang Corp Sdn Bhd and few other parties, namely,  Tan Sri Ling  Chiong  Ho  (Chairman  of  Shin  Yang Shipping  Corp  Bhd),  Ling  Chiong  Sing (Managing  Director  of  Shin  Yang  Shipping Corp Bhd), Geo Sepadu Sdn Bhd, Pui Voon Poh and Hong Ken Choon.

The  primary  business  of  PGSB  is  the manufacturing, distribution and marketing of  industrial  gases  as  well  as  the provision  of  services  and  maintenance and  trading  in  welding  equipment  and machinery,  which  are  all  in  line  with  the business operations of SIG Gases.

In  its  most  recent  results,  SIG  Gasses’ 1H2014  net profit jumped 245% to RM4.9 mln,  mainly  due  to  the  higher  sales  of industrial  gases  to  the  fabrication  and engineering sectors.

Source: Malacca Securities Research - 25 Sep 2014