• Shaping up for more rewarding years ahead. Listed in 1997, KUB (being a GLC conglomerate with MoF owns a 22.6% stake) has a diverse range of businesses in agro, liquified petroleum gas (LPG), ICT, food, property, power, construction and engineering. It also has a 40% interes t in KUB-Berjaya Enviro Sdn Bhd (KUB-BE) which will build, operate, maintain and manage the Bukit Tagar sanitary landfill over a 40-year concession period. In 2014, KUB-BE was also awarded a 30-year concession (expiring in 2044) to handle municipal solid waste and otehr non-toxic waste for the Central region of Selangor and KL.
• Having mostly suffered erratic performance in the last decade, KUB has been undergoing restructuring over the past 5 years in an effort to turn around the company. With its transformation plan starting to show tangible results, KUB is concentrating its efforts via core businesses in LPG, ICT and agro to anchor further earnings growth in the next 3 years.
• Undemanding valuation with limited downside risk. As management has started to demonstrate sharper strategic focus and deliver a more convincing turnaround story in the company, downside should be limited with risks largely priced in, cushioned by a 7sen netcash/share. The stock is currently trading at 0.82x P/B, about 18% below its 10-year average of 1x.
• Poised for a triangle breakout. After falling 14% from 52-week high of RM0.46 (19 Aug) to a low of RM0.395 (12 Oct), we expect the stock to take out the triangle pattern soon, supported by heavy volume of 6.3m shares (1.33x higher against 3M average) and upticks in technical indicators.? A strong breakout above RM0.445 (22 Sep high) will push share prices towards RM0.46 and our LT objective at RM0.50 psychological barrier. Key supports are RM0.41 (10-d SMA) and RM0.395. Cut loss at RM0.385.

Source: Hong Leong Investment Bank Research - 20 Oct 2016