• Values emerge after selldown. In the wake of fizzling thematic play on Sarawak state election (7 May) and a disappointing 1Q16 results (26 May), SCABLE’s share price tumbled 15.9% from 3M high of RM1.51 to a low of RM1.27 on 24 June before closing at RM1.30 yesterday. Whilst 1Q16 results was a disappointment, HLIB retains a BUY rating (pending the release of 2Q16 results on 26 Aug) with a SOP TP of RM1.92, in anticipation of a pickup in earnings over the coming quarters.

• We opine that current share price 30.5% correction from 52-week high of RM1.87 offers opportunity for LT investors to accumulate SCABLE, given its undemanding valuation of 9x FY17 P/E (against HLIB’s average 12x construction’s P/E) and 1.25x P/B (10-year average 1.7x), supported by a steady 2015-18 earnings CAGR of 11% and decent FY17 yield of 3.3%.

• Pending a bullish wedge pattern. In the next 2-4 weeks, SCABLE is likely forming a bullish wedge pattern, breaking the wedge resistance (near RM1.36) and advance further towards RM1.42 (200-d SMA) and LT objective at RM1.50 (50% FR). However, in the short term, SCABLE may undergo a brief sideways consolidation with key supports at RM1.27 and RM1.23 (weekly lower Bollinger band), as share prices closed below key 10-d/20-d/30-d/50-d SMA supports yesterday. Cut loss at RM1.22.

Source: Hong Leong Investment Bank Research - 11 Aug 2016