• LCTH Corporation Berhad, through its subsidiaries, is engaged in manufacturing and sub-assembling precision plastic parts and components, as well as the fabrication of precision moulds and dies . The stock is currently trading at 12m trailing P/E of 9.4x. Balance sheet is healthy with net cash per share is still high at 28 sen or equivalent to 43.2% of its share price.
• We opine that LCTH’s share price retracement towards 38.2% FR level from peak of RM0.825 was oversold and is likely to stage a further rebound in near term given (1) Inverted Head & Shoulder (H&S) pattern breakout yesterday on daily chart; (2) Bullish Harami candlestick pattern on weekly chart signaled reversal of recent retracement; and (3) daily and weekly oscillators (MACD, RSI and Slow Stochastics) are boos ting the s tock’s buying power.
• As such, we are targeting RM0.705, RM0.73 (measurement objective of H&S pattern) and RM0.825 (high on 16 Nov 2015). Supports are pegged at RM0.645 (neckline of H&S pattern) and RM0.63 (200-d SMA), with cut loss at RM0.615.
• Attractive risk to reward ratio with 25% upside against 6.8% downside. We see a good risk to reward ratio for investor with a theoretical entry price of RM0.66 given that the downside to the cut loss zone of RM0.615 is 4.5 sen (- 6.8%) while the upside to the LT target of RM0.825 is 16.5 sen (+25%).

Source: Hong Leong Investment Bank Research - 3 Mar 2016