• Business profile. MMS Ventures Berhad (MMSV), through its subsidiaries, manufactures industrial automation systems, designs die sets, jigs and fixtures, and develops computer software. MMSV has two subsidiaries: Micro Modular System Sdn Bhd, which is engaged in the manufacture of automated systems and machinery, and Evolusys Technologies (Malaysia) Sdn Bhd, which is engaged in the development of software.
• Net beneficiary from stronger USD against MYR. 70% of its revenue is denominated in USD with natural hedge from its raw materials purchases at 20% of total cost. Based on its FY14 annual report, every 5% of strengthening USD against MYR would translate into RM0.378m or 3.6% increase in its FY14 profit after tax.
• Earnings outlook remains positive. According to LEDinside, the LED lighting market value is estimated to grow at a 4-year CAGR of 18% through 2018. We believe that this will boost MMSV’s earnings outlook as approximately 90% of its products are catered for LED applications.
• Healthy balance sheet and strong net cash. MMSV is at a strong net cash of RM16.5m or approximately 10 sen net cash per share on hand, allowing the company more flexibility in regards to business decisions and potential investments.
• Technically, share price is facing a solid support at RM0.68 after hitting an alltime peak of RM0.89 on 18 May 2015. Thus, some buying interests have been attracted, substantiated by Hammer candlestick on 16 Jun 2015. We opine that share price is expected to gain stronger momentum as reading from RSI, MACD and Slow Stochastics showed potential reversal of recent retracement.  Since long-term uptrend line is still intact, we expect share price to bottom out from oversold level. We are targeting RM0.78 (23.6%), RM0.83 (Upper- Bollinger band) and RM0.89 (long-term objective). Supports are placed at RM0.72 (Lower-Bollinger band) and RM0.70 (38.2%), with cut loss at RM0.68 (red horizontal line).

Source: Hong Leong Investment Bank Research - 19 Jun 2015