• HLIB Institutional Research maintains its BUY rating on BRAHIMS with lower target price of RM0.77 (based on 0.75x P/BV), or 30.5% upside. BRAHIMS share prices nosedived 63% from 52-week high of RM1.61 (10 Nov 14) to a 52-week low of RM0.555 (9 Sep 15) before ending at RM0.59 yesterday. The selldown was mainly attributed to expectations of less favourable new catering agreement with MAS and a sluggish 2Q15 results. We had changed our valuation methodology to P/B in order to better reflect embedded asset value amid challenging earnings outlook.
• Share prices are bottoming up. At RM0.59, BRAHIMS is trading at undemanding valuation of 0.57X P/BV (46% below its 10-year historical average 1.06x). We believe such valuations have provided a sufficient margin of safety and cushion further sharp share price decline, supported by deeply oversold daily and weekly indicators.
• BRAHIMS is deeply oversold after recent slump in share price. Currently, BRAHIMS is building its base near RM0.555, with lower support at RM0.52 (daily lower Bollinger band). As technicals are on the mend, we expect share prices to stage a relief rally towards RM0.615 (the RM0.68-0.615 gap down on 24 Aug). A decisive breakout above RM0.615 could provide further impetus for share prices to retest our medium to long term objectives of RM0.68 and RM0.73 levels, respectively. Cut loss at RM0.51.

Source: Hong Leong Investment Bank Research - 15 Sep 2015