Despite rallying 44% YTD, PESTECH is expected to scale higher, backed by its sizeable order-book of RM1.63bn and robust earnings growth (34% EPS CAGR for FY18-20), riding on the fast growing regional (ASEAN, especially Cambodia and Myanmar) demand for electricity and rail related infrastructure, coupled with the call for greater implementation of renewable energy. In Malaysia, the revival of mega transportation infrastructure projects and the Large Scale Solar 3 projects presents positive prospects. The stock is trading at undemanding valuations at 10.5x FY20 P/E (16% below 5Y mean) as well as 1.96x P/B (15% below 5Y average), respectively. Technically, the bullish flag breakout bodes well for further price appreciation towards RM1.51-1.80 in the mid- to long-term.

Poised for further advance amid bullish flag breakout. After falling 11% from YTD high of RM1.55 (11 July) to a low of RM1.36 (26 Aug), PESTECH’s share prices rebounded 5% to end at RM1.43 yesterday. The stock broke out of its bullish flag pattern yesterday on rising volume and we think it is ripe for further recovery, supported by bottoming up indicators. Immediate resistance is RM1.51 (50% FR), followed by RM1.64 (61.8% FR) and our LT objective at RM1.80 (76.4% FR). Key supports fall on RM1.38 (38.2% FR) and RM1.32 (50D SMA). Cut loss at RM1.29.

Source: Hong Leong Investment Bank Research - 28 Aug 2019