• Company profile. AYS Ventures Berhad is involved in two main business divisions, namely i) Trading division - trades and markets a diverse range of steel products and construction materials, and ii) Manufacturing division - manufactures and trades pressed steel and fiberglass reinforced polyester sectional water tanks, steel purlin and wire products.

• New revenue stream. AYS is installing a fully automatic CNC structural steel facility to produce steel structure components. Also, in this new facility, AYS will be able to develop industrialised building system (IBS) and will be able to create a new income avenue for the Group.

• Weaker 1QFY18 results, but trading at a discount against its peers. AYS has announced a softer 1QFY18 results amid weakening market demand. However, the average selling prices were higher due to firmer steel prices over the past two quarters. We think the sentiments on the construction sector should be able to recover amid the start of the LRT3 contract awards, coupled with the potential awards of few mega projects such as MRT2, ECRL and HSR in CY18. Currently, AYS is trading at ~8.3x trailing-12M P/E (peers P/E: 13.8x, 40% discount).
• Potential sideways consolidation breakout. AYS has been trending sideway within the RM0.48-0.51 levels over the past two weeks. The MACD Indicator is trending higher towards zero, while the RSI and Stochastics are improving above 50. AYS may experience a breakout above RM0.51, targeting RM0.56-0.59, with a LT target of RM0.63. Meanwhile, support will be pegged around RM0.47-0.48. Cut loss will be set around RM0.465.

Source: Hong Leong Investment Bank Research - 16 Oct 2017