• 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. Based on 1HFY15, MMSV distributes its products within the domestic market (26%) and to overseas market, including the United States (40%), Asia (33%), Australia (0.18%) and Europe (0.01%).
• Net beneficiary from stronger USD against MYR. Circa 70% of its revenue is denominated in USD which provides natural hedge to its raw materials purchases at circa 20% of total production cost. Based on its FY14 annual report, every 5% strengthening of USD against MYR would translate into RM0.378m or 3.6% increase in its FY14 profit after tax.
• Strong net cash. MMSV has net cash of RM17.5m or approximately 10.7 sen per share, allowing the company more flexibility in regards to business decisions and potential investments .
• Undemanding Valuation. At current share price of RM0.75 per share, MMSV is trading at trailing 12 months P/E of 10.5x following sharp drop in share price. Ex-cash P/E is only 9x.
• Weekly chart shows that the downtrend breakout with high volume has ignited resumption of long-term uptrend. Coupled with buying strength picking up pace (as substantiated by reading from RSI, MACD and Slow Stochastics), we expect share price to move higher towards RM0.815 and RM0.85, with a longterm objective of RM0.89. Supports are pegged at RM0.73 (10-d SMA) and RM0.72, with cut loss below RM0.71 (30-d SMA).
• Attractive risk to reward ratio with 18.6% upside against 5.3% downside. All in, we see an attractive risk to reward ratio for investor with a theoretical entry price of RM0.75 given that the downside to the cut loss zone of RM0.71 is 4 sen (-5.3%) while the upside to the LT price objective of RM0.89 is 14 sen (+18.6%).

Source: Hong Leong Investment Bank Research - 25 Nov 2015