• Company profile. D & O Green Technologies Berhad is involved in semiconductor business, which manufactures semiconductor components and machineries. Also, through one of its subsidiaries, Dominant Opto Technologies Sdn. Bhd (DOT, one of the leading SMT LED manufacturers in the world), it offers comprehensive product range for diverse industries and various lighting applications in the automotive, consumer and communications sectors under the brand of DOMINANT.

• Epistar Corp (Taiwan LED manufacturer) and D&O partnership – Epistar has bought 10% stake in DOT back in Sep 2015, which we believe that it will generate synergies and produce more sales as D&O could tap into the sales channels covering customers across the world.

• Automotive segment, the driver of future growth – Since 3 years ago, D&O has started to gradually exit the general lighting and LED TV markets (13% of FY16 revenue) and shifted towards automotive segments (87% of FY16 revenue). Consequently, operating profit grew at a 61% CAGR from RM8m (FY13) to RM32m (FY16). We may expect future growth to be sustainable with the emergence of the Epistar Corp as one of the shareholders in DOT.

• Technical outlook. D&O experienced a breakout above RM0.64 with higher volumes yesterday. With the surge in prices, the MACD Histogram has turned green, while the RSI is trending towards 50. We can expect buying interest to pick up and to retest the RM0.70-0.735 levels. Support will be pegged around RM0.61-0.615. Cut loss will be at RM0.60.

Source: Hong Leong Investment Bank Research - 27 Apr 2017