Technology sector

Cloud computing; a sunrise industry

• Following the outbreak of Covid-19 pandemic, the adoption of cloud services and digitalisation has been on an upward scale across the globe. The new normal of remote working is expected to remain in place even if lockdowns were to be lifted as individuals and corporates are both conducting more e-learning, online meetings, e-ecommerce and various activities through the screen.

• According to GlobalData, the cloud computing industry in the Asia Pacific region is projected to grow 117% from USD$133.0bn recorded in 2019 to US$288.0bn in 2024, while the transformation to 5G will be a cutting edge for multi-access edge computing (MEC), network slicing, and private network.

Trading Catalyst

• Kronologi Asia Bhd’s (KRONO) 1QFY20 sank into the red, mainly dragged down by one-off non-cash impairment to property plant and equipment (PPE) of RM11.6m. We see the move as a pre-emptive measure amid the uncertainty over the economic slowdown posed by Covid-19. Moving forward, the group aims to improve the margins by increasing pricing through offering bundling certain services or value engineering. Meanwhile, demand is expect to accelerate as businesses are migrating to online processes. Already, 1QFY20 revenue jumped 59.9% YoY to RM52.0m, underscoring the thriving business.

Technical Outlook

• KRONO has been consolidating over the past months after coming up from the slump in mid-March 2020. For now, we may anticipate a potential symmetrical triangle breakout above RM0.58, targeting the resistance of RM0.635-RM0.68, with long term target at RM0.75. Support is pegged at around RM0.535, while cut loss is set at RM0.52.

Trading Catalyst

• K-One Technology Bhd (K1) wholly-owned cloud computing arm G-AsiaPacific Sdn Bhd is an integrated cloud advisory and brokerage firm that represents four principals, namely Amazon Web Services (AWS), Google Cloud, Microsoft Cloud and Alibaba Cloud. Cloud services have now evolved from a backup storage to become essential as businesses are more analytically based and production-based, which require high-performance solutions. At the same time, K1’s effort to diversify into production of medical ventilators in 3QFY20 bodes well for the current surge in demand for medical products and services.

Technical Outlook

• After surging to the highest level since January 2007 at RM0.595, K1 is on the retracement phase. Price is currently attempting to find stability with selling pressure easing over the past weeks. A trendline breakout above RM0.415 may see price recovering towards the RM0.47-RM0.51, with long term target at RM0.595. Support is located at around RM0.355, while cut loss point is pegged at RM0.35.

Source: Mplus Research - 22 Jul 2020