• Riding on the tower boom and infrastructure heat in the ASEAN region. Rohas Tecnic Berhad (Rohas) was formed after Rohas-Euco Industries Sdn Bhd (REI) underwent a reverse takeover of Tecnic Group Berhad in March 2017. The group is involved in the fabrication of steel towers used for power transmission and telecommunications industries. It also provides galvanising services, fabrication of electrical substation structures and EPCC works.

• HLIB has a BUY rating with institutional TP of RM1.74, or 29.9% upside. We like Rohas for its exposure to ASEAN which is one of the fastest growing economic regions in the world. Infrastructure investment needs are expected to be robust in the foreseeable future and this will generate steady demand for the products of the company. Moreover, the acquisition of HG Power Transmission S/B (HGPT is a turnkey solutions for high voltage transmission lines and substations in Malaysia and overseas) will open up more EPCC contract opportunities for Rohas in new markets such as Bangladesh, Papua New Guinea and Indonesia. Meanwhile, HGPT would also benefit from Rohas EPCC exposures in Vietnam and Laos.

• Anticipate robust 30% FY17-19 EPS CAGR. Earnings are expected to grow significantly yoy due to contribution from RM300m Laos EPCC project and full year contribution of HGPT. Moreover, Rohas is aiming to double its job replenishment this year to c.RM800m which we deem achievable given strong balance sheet of the company. Besides, we opine that expectation of admission into the Shariah list this year further increase buying interest of the stock.

• Downside limited with good support near 200d SMA. Rohas share prices tumbled 19.6% from historical high of RM1.58 (9 Jan) to a low of RM1.27 (6 Feb) before closing at RM1.34 yesterday. We see limited downside risks with a floor near RM1.30 (or 200d SMA) and RM1.27, supported by oversold indicators and its positive prospects. A successful breakout above RM1.40 (downtrend resistance) will spur prices higher towards RM1.52 (6 Feb high) and our LT target at RM1.58.

• On the flip side, failure to hold near RM1.27 levels may weaken share prices lower towards RM1.20 zones. Cut loss at RM1.25.

Source: Hong Leong Investment Bank Research - 21 Mar 2018