• HLIB institutional research has a BUY rating with SOP TP of RM0.76, or 43% upside. Pesona (listed in Oct 2012 via the RTO of Mithril) offers investors exposure to a pure construction play with an incoming stream of recurring earnings from SEP (concessionaire of UNIMAP hostel). Its orderbook stands at a healthy RM1.7bn, translating to a 4.5x cover on FY16 construction revenue, supported by robust earnings growth (FY16- 19 earnings CAGR of 35%).

• Building a base near RM0.50-0.51 after sliding from 52-week high of RM0.735. PESONA’s share prices slid 32% from 52-week high of RM0.735 (5 Apr) to a low of RM0.50 (5 Oct) before closing at RM0.53 yesterday. The sluggish performance was attributable to slow jobs replenishment with nil secured YTD after losing out on 3 building jobs that it initially targeted for as the margins were too low for comfort. Nevertheless, the impending issuance of the remaining 12m shares at RM0.70/share (2 nd tranche acquisition of SEP-concessionaire of UNIMAP hostel) should set a new minimum benchmark valuation for the stock.

• Pending a downtrend line breakout. PESONA’s share prices are likely to stage a breakout above RM0.56 (50-d SMA) in the near term after building a base near RM0.50-0.51 territory in the last three weeks. A successful breakout above RM0.56 will spur prices higher towards RM0.59 (downtrend line) and our LT objective at RM0.635 (200-d SMA). Conversely, a breakdown below RM0.50 will trigger further selldown towards RM0.44-0.45 zones. Cut loss at RM0.49.

Source: Hong Leong Investment Bank Research - 27 Oct 2017