With the recent two new IoT SEPCM contract worth RM18m and RM60.4m being awarded to ARBB, we believe it will generate higher earnings for ARBB. In addition, ARBB has acquired a re-energy business for a Green Project for 30 years concession period to perform the installation, operation and management of the Solar PV System, which is likely to generate decent cash flow for ARBB moving forward. Technically, it has performed a flag breakout last week and could be targeting RM0.51-0.605, followed by LT target of RM0.88, support will be at RM0.42-0.43, with a cut loss set around RM0.40.

Company profile. ARBB is involved in manufacturing in various types of woods, software development, contract logging, leasing scows and tugboats, provision of management services and investment holding. In view of the tough environment, ARBB has diversified into IT solutions, developing ERP system to cater for SMEs and manufacturing business operations in Malaysia.

Adding on towards the turnaround for ARBB with the IoT segment. Following the profitable FY18 and 2 consecutive quarters of strong earnings for ARBB, we believe that the diversification from timber business into IT related services (ERP solutions) have been gaining traction and is likely to bring record earnings for ARBB.

IoT segment gaining traction. With the expansion in the IoT segment, they have been awarded with two contracts. On 29-May, ARBB was awarded with RM18m contract to undertake whole IoT system, engineering, procurement, commissioning and management (SEPCM) of for 1 year. Meanwhile, another contract worth RM60.4m has been awarded to ARBB to be completed within the next 18 months. We view this as a positive catalyst to the already-turnaround company in FY19.

Acquired 51% in C&M Renewable Technology Sdn Bhd. The acquisition will open up the re-energy solution segment and ARBB’s role is to provide the technology equipment and assets and perform the installation, operation and management of the Solar PV System.

To accumulate along RM0.44-0.46. To recap, we have issued a technical tracker on ARBB in May and investors could accumulate around RM0.44-0.46. It has retraced from the peak around RM0.605 to RM0.365 on 24-May, before forming a flag breakout on Friday, the ADX indicator has turned positive and buying support may lift ARBB towards resistance around RM0.51-RM0.605. Support will be anchored around RM0.42-0.43 and the cut loss point will be set around RM0.40.

Source: Hong Leong Investment Bank Research - 10 Jun 2019