• A globally competitive MRO service provider. Destini is currently one of the leading maintenance, repair, overhaul (MRO) service providers in the country focusing primarily on four sectors, namely aviation, marine, land transport (for both the defense and commercial sectors) and the O&G sectors. Overall, marine division contributes about 70% to revenue, followed by aviation (20%), oil & gas (8%) and others (1%). Its geographical footprint now encompasses the Asian, Oceania, Middle East and European regions. Currently, Destini’s single largest shareholder is Dato’ Rozabil Abdul Rahman (MD), followed by Aroma Teraju (19.4%), a wholly-owned subsidiary of the Ministry of Finance.

• Expanding orderbook. On the back of recent smallcap stocks pullback and 3Q16 earnings setback, Destini’s share price nosedived 32% from 3M high of RM0.89 (25 Oct) to a low of RM0.60 (30 Dec) before ending at RM0.64 yesterday. Despite the recent earnings woes, we continue to like Destini for: a) its significant earnings re-rating potential arising from an impending over RM1bn MRO contract win, and b) its high barriers-to-entry business model. Currently, Destini is trading at 11.4x FY17P/E, 36% below its average 10-year P/E of 18x, supported by a robust 2016- 2018 EPS CAGR of 48% and healthy orderbook over RM600m.

• Ripe for potential downtrend reversal amid bullish Harami formation. Given the bullish Harami candle formation (both daily and weekly charts) near the tail end of a downtrend channel and supported by uptick in indicators, we expect prices to sustain its gains despite a 6.7% relief rally yesterday.

• A decisive breakout above the immediate resistance of RM0.655 (10-d SMA) will likely to lift share prices higher towards RM0.68 (200-d SMA) and RM0.72 (7 Dec high) before testing our LT objective at RM0.75 (50% FR). On the flip side, key supports are RM0.615 (3 Jan low) and RM0.60. Cut loss at RM0.59.

Source: Hong Leong Investment Bank Research - 4 Jan 2017