Krono is involved in providing on-site and off-site enterprise data management (EDM) and data storage solutions to Asian businesses and has been growing in organically by acquiring Quantum Storage Hong Kong and India in FY18, contributing towards stronger 1Q19 results. Moreover, it has completed the recent acquisition of Sandz Solution, which came with a profit warrant of USD1.5m for FY19, hence the growth momentum should sustain. Technically, the stock is forming a support around RM0.52 and could be poised for a trendline breakout above RM0.565 to retest RM0.61-0.63. Cut loss at RM0.52.

Regional Enterprise Data Management (EDM) solutions provider. Kronologi Asia Berhad (Krono) is listed on the ACE market. Solutions and services that Krono provides include:- (i) on-site and off-site data backup and storage, (ii) data recovery and restoration, (iii) technical support and (iv) consultancy on process improvement for data assurance, data protection and disaster recovery. Currently, the Group has presence in the following countries - Malaysia, Singapore, Thailand, Philippines, Indonesia, India, Hong Kong, Taiwan and China.

Strong 1Q19 results. Recently, they have announced their 1Q19 results, which net profit grew 83.9% to RM3.7m on the back of lower operating cost and higher margin EDM infrastructure projects. To recap, the revenue and net profit grew by 4Y CAGR of 31.4% and 27.9% to RM163.1 and RM16.3m in FY18, respectively. In addition, Krono has rewarded its shareholders with a 2 sen dividend (ex-date 4th June).

Sandz Solutions (Singapore) Ptd Ltd acquisition. On 29 April 2019, the group had completed the Sandz acquisition (which provides IT infrastructure solution services) and may contribute positive earnings moving forward, given that it came with a warranty from the vendors that Sandz would achieve a profit after tax of USD1.5m for FY19. Hence, with the already-stellar 1Q19 results, we anticipate this acquisition may sustain its growth momentum for the rest of FY19 and eventually contribute to another record earnings year.

Downtrend line breakout. Krono has formed a short term support around RM0.52 and surged above the short term trendline last week. ADX indicator is currently positive. A successful breakout above the short term resistance around RM0.565 may spur buying interest towards RM0.61-0.63, followed by a LT target of RM0.66. Support will be pegged around RM0.525-0.535, with a cut loss set below RM0.52.

Source: Hong Leong Investment Bank Research - 17 Jun 2019