• 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. The shift in investor focus away from export-oriented companies to domestic plays given the strengthening of the Ringgit should generate interest in construction and building materials stocks.
• 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. At RM1.01, OKA is trading at 8.6x FY17E P/E, s till below the s tock’s 10-year average P/E of 13x.

• Poised to test RM1.08-1.28 territory following a bullish ascending triangle breakout. Yesterday, share price jumped 6.9% to RM1.01, accompanied by heavy volume of 1.59m shares (6.1x higher against 1-month average and 1.6x higher against 3-month average) and closed above all daily key SMAs and upper Bollinger band, signaling more upside ahead amid bullish Marubozu pattern and neckline resistance breakout. We expect prices to break the immediate resistance of RM1.04 and RM1.08 soon.
• On the weekly chart, OKA has also staged a bullish ascending triangle breakout, which can spur share prices higher in the medium to long term to our price target of RM1.28. Key supports are RM0.955 (30-d SMA) and RM0.94 (weekly uptrend line). Cut loss at RM0.925.
• Attractive risk to reward ratio with 26.7% upside against 8.4% downside. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM1.01 given that the downside to the cut loss zone of RM0.925 is 8.5 sen (-8.4%) while the upside to the LT target of RM1.28 is 27 sen (+26.7%).

Source: Hong Leong Investment Bank Research - 24 Mar 2016