• HSL is one of the HLIB construction picks with an institutional target price of RM2.53, or 24% upside. On the back of a 2-day record size contract wins (i.e the RM1.2bn package of the Pan Borneo Highway on 18 Mar and RM563m Kuching Was tewater Sys tem job on 17 Mar), HSL’s s hare price hit a 52-week high of RM2.14 on 21 Mar before closing at RM2.04 last Friday on profit taking. We feel that the market has yet to fully digest the significance of these wins, perhaps due to its sheer size in such a short time span.
• We advise investors to take advantage of the relatively muted share price reaction to jump on the bandwagon as there could be further job wins from other infrastructure projects including SCORE as we inch closer to Sarawak election expected to be held in Apr/May 2016.
• May stage a mild technical rebound to retest RM2.10-2.14 in the near term. Since the retracement of HSL’s share price to RM2.02 on 25 Mar from 52 -week high of RM2.14, the stock is in the midst of building its base at 30-d SMA (S1 at RM1.99), with lower support S2 at RM1.93 (100-d SMA) and stop loss level at RM1.91. Overall, we expect a brief rebound in the near term after a 6.4% weekly profit taking pullback, reflected by the Marubozu white candlestick on 25 Mar hourly chart and upticks in technical indicators. Technical rebound targets are RM2.10 (daily upper Bollinger band) and RM2.14.
• Poised to scale greater heights towards with a LT target at RM2.38 following the triple bottoms breakout. A decisive breakout above RM2.14 will spur prices higher towards RM2.18 (21 May 2013) and our LT objective (a triple bottoms breakout) in weekly chart at RM2.38.
• Attractive risk to reward ratio with 16.7% upside against 6.4% downside. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM2.04 given that the downside to the cut loss zone of RM1.91 is 13 sen (-6.4%) while the upside to the LT target of RM2.38 is 34 sen (+16.7%).

Source: Hong Leong Investment Bank Research - 28 Mar 2016