HLBank Research Highlights
Trading Idea: OKA - Poised to test RM0.90-0.97 levels after bullish breakout
- Beneficiary of rising infrastructure developments: We like OKA for its strong presence in Peninsular Malaysia and better earnings visibility as it can ride on rising infrastructure developments in Malaysia. OKA is one of the largest precast concrete manufacturers in Malaysia. Listed in 2002 and headquartered in Ipoh, Perak, it has six factories in Peninsular Malaysia, with two plants in Batu Gajah (Perak) and one plant each in Sungai Petani (Kedah), Nilai (Negeri Sembilan), Senai (Johor) and Kuantan (Pahang).
- The precast concrete products manufactured by the group are used in the drainage, sewerage, buildings and water related infrastructure works. Some of the notable projects which had utilized OKA products were Formula One Circuit, Sepang; Guthrie Corridor Expressway; KLIA2; Pasir Panjang Terminal, Singapore; MRT and LRT projects; Shah Alam Expressway; East West Highway; Karak Highway; Damansara - Puchong Highway; Westport Pulau Indah; Lumut Maritime Port etc. Valuation is undemanding at 8.3x FY16E P/E, still below the stock’s 10-year average P/E of 11x.
- Poised to test RM0.90-0.97 levels after bullish breakout. After hitting all time high of RM1.08 on 19 Mar, share price corrected 27% to a low of RM0.79 on 15 June before gradually trending upwards to end at RM0.85 yesterday. OKA broke above the downtrend line resistance on the back of heavy volume of 854k, 57% and 50% higher than average 5-d volume of 542k and 1-month volume of 570k, respectively.
- As share prices also swung past 10-d SMA (RM0.83) and 20-d SMA (RM0.84) along the way, this is likely a precursor to more upside ahead, supported by golden cross in MACD while RSI and slow stochastic has hooked upwards sharply. Key resistance is 200-d SMA near RM0.88. A decisive breakout above RM0.88 will spur prices higher to take out RM0.93 (50% FR) next and our long term objective of RM0.97 (61.8% FR). Cut loss at RM0.78.
Source: Hong Leong Investment Bank Research - 15 Jul 2015
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