• Business profile. Heng Huat Resources Group (HHGROUP), which was listed on the ACE market of Bursa Malaysia on 25 July 2014, is engaged in the manufacturing and trading of biomass material and value-added products focusing on oil palm EFB fibre, coconut fibre and value-added products. The Group is also a manufacturer and distributor of its own brands of mattres ses and related products.
• Prospects remain buoyant. According to IMR report by Protégé Associates, the biomass material market for coconut fibre and oil palm EFB in Malaysia is estimated to grow at a CAGR of 14.3% from 2013 to 2018 to reach RM180.4m in 2018. Hence, management expects growth to be driven by (1) rising demand in China; (2) population growth and greater affluence spurring demand for endproducts; and (3) growing applications of natural fibre.

• Seasonality. HHGroup typically experiences higher sales of mattresses and related products prior to major festive season such as Hari Raya in tandem with the expected increase in household spending for such items during such periods.
• Technically speaking. The stock is likely to stage a strong spike up in share price in near term as the bullish signals, triggered by the long white marubozu candlestick in the region of hourly Upper-Bollinger band, could lead to Ascending Triangle breakout on daily chart. Noticeably, reading from hourly and daily oscillators (MACD, RSI and Stochastics) showed that the stock is gaining stronger buying momentum. Hence, we are targeting RM0.445 and RM0.465, with a longterm objective of RM0.495 (measurement objective of Ascending Triangle pattern). Immediate supports are pegged at RM0.40 and RM0.39. Cut loss below RM0.385.
• Attractive risk to reward ratio with 20.7% upside against 6.1% downside. We see a good risk to reward ratio for investor with a theoretical entry price of RM0.41 given that the downside to the cut loss zone of RM0.385 is 2.5 sen (-6.1%) while the upside to the LT target of RM0.495 is 8.5 sen (+20.7%).

Source: Hong Leong Investment Bank Research - 19 Apr 2016