• Business profile. Power Root Berhad (PWROOT), together with its subsidiaries, is engaged in the manufacture and sale of beverage products. It is a leading company to develop and promote herbal energy drinks fortified with two main rainforest herbs: Eurycoma longifolia Jack or commonly known as "Tongkat Ali" and Labisia Pumilia and Pathoina or "Kacip Fatimah". Its operation is divided into local and export market. The local and export markets relate to sales to customers within Malaysia and Middle East Asia respectively.
• We like PWROOT as: (1) it is currently trading at 14x trailing PE which is lower than Oldtown’s 16x trailing PE; (2) net cash per share of 6 sen which is equivalent to 4% of its share price; and (3) attractive dividend yield of 5.5%. Based on its FYE14 annual report, the total dividends paid for FYE 2014 is 9.0 sen per share amounting to RM27.1m, representing a dividend payout ratio of approximately 69.7%.
• On technical front, the share price is expected to go higher as: (1) the share price made lower low while all indicators (MACD, RSI & Slow Stochastic) made higher low on daily chart, triggering a “Positive Divergence” which indicates weakness in the downtrend momentum and selling pressures are exhausted; (2) subsequently, the downtrend breakout on weekly chart suggested a reversal of the downtrend; and (3) reading from all daily and weekly oscillators showed that share price is bottoming up!
• Further upside targets are at RM1.69 (Upper-Bollinger band) and RM1.77 (38.2% FR), with a long term objective of RM1.90 (50% FR). Conversely, immediate supports are at RM1.61 (23.6% FR) and RM1.57. Cut loss below RM1.54 (100-d SMA).

Source: Hong Leong Investment Bank Research - 12 Mar 2015