• Profile: GRANFLO (listed in 2004), is a leading integrated tracking solution's provider, consisting of EDCCS (Enterprise Data Collection and Collation System) & labels production. GRANFLO has an established regional network in Malaysia, Thailand, Vietnam, Singapore, Hong Kong and China, and a reputable clientele mainly comprising of MNCs & GLCs. This division contributed 79% to 1HFY15 revenue and 65% to profit after tax.
• To enhance shareholders ’ value, GRANFLO ventured into the property development sector in mid-2013. The Group has two ongoing projects at pres ent, namely ‘Vortex Bus iness Park’ (GDV R M220m) and ‘The Glades ’ (GDV RM63m). The ‘Vortex Business Park’ (at Bukit Tambun, Penang) is the Group’s first commercial and industrial project that features 60 units of 4-storey semidetached (semi-D) shop offices and 52 units of 4-storey light industrial factories. The Glades ’ at Alma, Bukit Mertajam consis ts of 76 units of 2- and 3-storey semi-D and zero-lot bungalows on a 3.3 hectare land within vicinity of notable landmarks such as the Juru Autocity.
• Limited downside risks. At RM0.275, GRANFLO is trading at P/B of 1.2x (vs peers ’ 3.6x), s upported by a decent dividend yield of 3.6% (FIG1). In 1HFY15 results review, GRANFLO maintains its positive outlook for FY15 despite the challenging economic conditions locally and regionally as six months earnings of RM6m already accounted for 97% of FY14 earnings. We believe management’s positive earnings outlook, improving technical readings and active share buyback program (GRANFLO bought back about 2.4m shares YTD against 1.2 m shares in 2014) would provide sufficient margin of safety and cushion further sharp share price decline.
• Upside bias following downtrend line breakout. The stock moved above the short term resistance trend line on the back of rising volume yesterday. Prices also swung past its 10-d/20-d/30-d/50-d SMAs along the way. This is likely a precursor to more upside ahead as the downtrend mode could be at the tail end as prices formed a double bottom formations (FIG1), supported by bottoming up daily and weekly indicators.
• We expect prices to take out immediate resistance of RM0.28 (200-d SMA), which would likely lead to a move towards the RM0.295 (61.8% FR) and RM0.31 (76.4% FR) levels. Long term price objective is RM0.33 (52-week high). Key supports are RM0.265 (23.8% FR) and RM0.255 (S2). Cut loss at RM0.245

Source: Hong Leong Investment Bank Research - 27 Oct 2015