• Undemanding valuations. TOPGLOV is trading at 15.1x FY17 P/E (supported by a 3.3% DY and 18.5% ROE), 16% below 10-year average P/E of 18x and 6. 8% lower than KOSSA N’s 16.2x P/E, as share price overshot on the downside after the weak 3QFY16 result.

• Our HLIB institutional Research remains upbeat on TOPGLOV, maintaining a BUY rating with a target price of RM5.27 (based on 18x FY18 EPS), or 22.6% upside. Management guided that 3QFY8/16 results was the bottom and the worst should be over for the company. Gradual earnings recovery can be expected for the subsequent quarters.

• Poised for further upside amid Tweezers bottom pattern and bottoming up indicators. Technically, the “Tweezers Bottom” candlesticks on daily charts could suggest potential reversal of downtrend. A decisive breakout above RM4.48 (20-d SMA) will spur prices higher to retest RM4.70 (10-w SMA) and RM4.90 (LT objective or 20-w SMA). Major supports are situated at RM4.18-4.28 levels. Cut loss below RM4.13.

Source: Hong Leong Investment Bank Research - 29 Jul 2016