A-Knight is involved in manufacturing of plastic injection moulding, and has acquired 60% into Rapid Growth Technology (RGT) in order to facilitate with the uplifting of PN17 status. The acquisition comes with a profit guarantee of RM20m for FY17 and FY18. It has sustained two quarters of profit recently and is a net cash company (RM20.6m) at this juncture. Should there be a strong breakout above RM0.185, next resistance will be at RM0.22-0.24, with a LT target of RM0.26. Support will be at RM0.15-0.16, with the cut loss set around RM0.145.

Company profile. A-Knight is involved primarily in the manufacturing of moulded plastic products through its wholly-owned subsidiary, T-Venture Industries (M) Sdn Bhd. The manufacturing of moulded plastic products is the core business of the Group in FY17 and approximately 15% of the group’s revenue was contributed by export sales to customers principally based in South East Asia Region in FY17. It has acquired Rapid Growth Technology (RGT) in 2017, which provides fully-integrated manufacturing solutions for plastic products including injection moulding, assembly and liquid-filling. Their product categories include air care, skin care and hygiene & cleaning products, serving global customers within China, Japan, India, Korea, Australia, North and South America, Europe and Africa.

Rapid Growth Technology to assist the uplifting of PN17 status? In Oct 2014, A Knight went into PN17 and has been submitting regularisation plan to Bursa Malaysia all these years. During August 2017, A-Knight planned to undertake a share capital reduction and bought a 60% stake in a plastic products producer, Rapid Growth Technology (RGT) for RM48m, together with a rights issue with warrants to raise about RM34.9m to part finance the purchase, to regularise its Practice Note 17 (PN17) status. The planned acquisition comes with a net profit guarantee of RM20m for two financial years ending FY2017 and FY2018.

Two consecutive quarters or profit. Since the acquisition of 60% in RGT, A-Knight has recorded two quarters of net profit, registering PATAMI of RM1.17m and RM1.27m in 4Q18 and 1Q19, respectively and it is a net cash company.

Sideways consolidation above the long term SMA200. A-Knight has trend sideways over the past 5 months within the range of RM0.13-0.185 and the SMA200 has been trending higher. The ADX indicator has formed a cross; indicating that the momentum is positive. Should there be a breakout above RM0.185, next target will be located around RM0.22-0.24, followed by a LT target of RM0.26. Support will be located around RM0.15-0.16, with a cut loss set below RM0.145.

Source: Hong Leong Investment Bank Research - 5 Nov 2018