• Company profile. AYS Ventures Group is involved in two business segments, namely trading and manufacturing of construction materials. Under the trading and marketing arm, AYS provides steel products and all types of construction materials such as cement, bricks, timber, plywood, floor and wall tiles, and precast products. On the manufacturing business, AYS manufactures panels, galvanized steel purlin, steel wire and bars which are used in the packaging and building industries.

• Stellar earnings contributed by recovering steel prices – AYS cumulative 9MFY17 profit stood at RM21.5m vs. RM8.8m in the similar corresponding period, which translates to an EPS of 5.64 sen. We opine that AYS should continue to benefit from the recovering steel prices, coupled with the positive outlook in construction and infrastructure sectors, which will reinforce its current business activities covering building materials for the domestic construction market.

• Undemanding valuations. Based on the current share price, AYS is trading at 7.9x P/E, which is 23% discount from the industry peers. Given the commendable results over the past three quarters, we can anticipate a better 4QFY17 amid firmer steel prices.

• Technical outlook. AYS has experienced a breakout two trading days ago above the RM0.42 level with high volumes. The MACD Indicator has expanded positively above zero. Meanwhile, the RSI is trending above 50. Monitor for a breakout above RM0.445, targeting RM0.50-RM0.52, followed by a LT target of RM0.55 (pegging 10x P/E on Trailing-12M EPS of 5.51 sen). Support will be around RM0.40-0.425. Cut loss at RM0.375.

Source: Hong Leong Investment Bank Research - 4 May 2017