• An integrated green building solutions provider. Today, Ajiya (listed in Dec 1996) has metamorphosed from simply being a metal-roll forming and safety-glass processing company to become an integrated green buildi ng solutions provider, with its new val ue offering via the Ajiya’s Green Integrated System (AGIBS), an eco-friendly and fast-paced way of constructing houses which will eventually revolutionise house building and property development. According to Management, in conventional construction, a house typically takes 24 months to complete but the AGIBs method can reduce the duration to eight months, hence the delivery times, construction and labour cost will be tremendously reduced.

• The company’s products cater to a wide vari ety of users from industrial commercial buildings to the common residential houses. From its core manufacturing base in Segamat, Johor, Ajiya has expanded its geographical footprint in the northern, southern, central and east coast of Malaysia. To date, the company holds a network of 19 factories and warehouses with offices throughout Malaysia and Thailand.

• Despite a weak 1H16 results, Management is cautiously optimistic that the government’s ETP, Economic corridors, Green Buildi ng Tools, affordable housing projects offered by Syarikat Perumahan Negara Bhd and PR1MA acti vities will continue to bode well for Ajiya’s products. Balance sheet is strong with RM55m netcash (or 18sen/share) as at May 16, equivalent to 23% of share price. Based on P/B benchmark, AJIYA is trading at 0.76x P/BV, in line with its 10-year historical mean of 0.8x and ASTINO’s 0.7x (its peer).

• Potential relief rally from steeply oversold levels. In tandem with the recent selldown of smallcap stocks and broader market consolidation coupled with a disappoi nting 1H16 res ults, AJIYA’s share prices tumbl ed 30.6% from a YTD high of RM1.11 (19 Jul ) to a low of RM0.775 before closing at RM0.78 last Friday. The sluggish performance was also partly due to profit taking consolidation post the 1:4 subdivision (ex-date 4 Aug) and 1:2 bonus warrants (ex-date: 22 Aug) corporate exercises.

• We see limited downside risks for AJIYA following the recent slump in share prices, supported by strong netcash/share of 18sen and deeply oversold indicators. A decisive breakout above RM0.815 (50-h SMA) will spur prices higher towards RM0.85 (23.6% FR) and our LT objective at RM0.90 (38.2% FR).

• On the flip side, key supports are RM0.76 (hourly lower Bollinger band) and RM0.74 (daily lower Bollinger band). Cut loss at RM0.72.

Source: Hong Leong Investment Bank Research - 5 Sep 2016