• Share prices tumbled 23% from monthly high of RM1.77 to a 52-week low of RM1.36 before closing at RM1.41 amid weak earnings guidance and ahead of 1QFY17 results. SKPETRO’s share prices faced fierce selldown in tandem with the broader market correction and a retreat in oil prices. To recap, Brent oil prices hit a YTD high of US$52.86 on 9 June and corrected 11.2% to a low of US$46.94 on 18 June before steadily climbing back to end at US$51 yesterday. Compounding the selling spree was recent dismal guidance by management on its FY17/FY18 prospects and cautious undertone ahead of its 1QFY17 results next week.

• Technically speaking. Ahead of its 1QFY17 results next week, we see near term price consolidation at RM1.36. Failure to hold the support will accentuate further selldown to RM1.30 (psychological support) and a more solid floor near RM1.26 (138.2% FR).

• Neutral but will turn positive if share prices swiftly reclaim RM1.50. On the flip side, SKPETRO’s near term outlook will turn positive if share prices can stage a strong relief rally to quickly reclaim above RM1.50 (10-d SMA), which will lift prices higher towards RM1.58 (200-h SMA/30-d SMA) and RM1.64 (61.8% FR) levels, respectively.

Source: Hong Leong Investment Bank Research - 24 Jun 2016