• Company profile. FoundPac Group Berhad (FPG) is principally involved in the design, development, manufacture, marketing and sale of precision engineering parts such as stiffeners and accessories for stiffeners, test socket, hand lids and accessories for test sockets. While FPG is based in Penang, the group’s products are mostly exported to international markets, which include Europe and US. The group is working with Broadcom Limited, Qualcomm Technologies, and several others MNCs.

• Rising trend of mobile and IoT devices. With the rising adoption of more advance mobile devices and gadget, coupled with the increasing trend of IoT, FPG could be a proxy for the semiconductor industry that benefits from inter-connectivity of physical devices, vehicles, buildings, and other items embedded with electronics, software and sensors.

• Weaker ringgit may benefit FPG. Most of FPG’s products are exported to Europe and US, accounting for nearly 90% of their historical revenue. With FPG expanding their presence in Milan, Italy and California, we believe this will benefit FPG over the near term as the trend of the ringgit is likely to hover between the RM4.20-4.40/US$ levels into 4Q17.

• Technical outlook. FPG has experienced a breakout above the RM0.89 level after consolidating sideways along the RM0.88 level over the past two weeks. Both the MACD Line and RSI indicators are trending higher – indicating a pick-up in momentum. We believe the trading interest should sustain over the near term towards RM0.94-RM0.98, with a LT target price of RM1.05. Support will be set around RM0.87-0.88. Cut loss will be pegged around RM0.86.

Source: Hong Leong Investment Bank Research - 1 Aug 2017