• HLIB has a BUY rating with SOP target price of RM3.77. GKent is a key rail play with exposure to the LRT extension, LRT3 and MRT2. It also boasts solid financials with 3-year earnings CAGR of 28%, above industry ROE of 20.9% and net cash position of RM0.58/share (20% of share price). Following the RM365m of hospital contract in Dec 2016, GKENT’s estimated orderbook now stood at ~RM6bn. This translates to a superior cover ratio of 14.5x on FY16 construction revenue.

• Further selldown unlikely amid undemanding valuation and huge orderbook. After surging to all-time high at RM3.13 on 6 Jan 2017, share prices retraced 8.6% to end at RM2.86 yesterday on healthy profit taking. Although GKENT’s share prices may witness near term consolidation as daily MACD histogram remained in the red, further sharp fall is likely to be cushioned by its huge orderbook, undemanding P/E valuations at 10.8x on an ex-cash basis coupled with grossly oversold daily RSI/slow stochastic. Key supports are RM2.82 (100-d SMA) and RM2.76 (50% FR). Cut loss at RM2.72.

• Getting oversold and ripe for a rebound. On the flip side, GKENT is ripe for a technical rebound, reflected by the bottoming up hour indicators. A decisive breakout above RM2.90 (daily lower Bollinger band) will likely to stage a relief rally towards RM2.96 (23.6% FR) and RM3.03 (30-d SMA) before testing our LT objective at RM3.16 (monthly upper Bollinger band).

Source: Hong Leong Investment Bank Research - 8 Feb 2017