Under Budget 2020, tax incentives will be provided to promote high-value added activities in the E&E industry to transition into 5G digital economies and IR4.0. Hence we anticipate more companies to embrace for automation, potentially resulting in higher demand for automation-related services companies. Under this space, lookout for stocks related to automation such as PENTA, VITROX, ISTONE, GREATEC as we believe their services may be in interest moving forward.

ISTONE: Share price has been hovering sideways since July and the ADX indicator is suggesting that the positive momentum is intact (+DMI > -DMI). Hence, we believe it may perform a sideways consolidation breakout above RM0.20, targeting RM0.225- 0.235, with a LT TP set around RM0.25. Support will be at RM0.165-0.17, with a cut loss point anchored around RM0.16.

GREATEC: It has been upward trending since listing. At this juncture, the ADX indicator is still positive and we may anticipate further upside based on uptrend definition (higher high and higher low are intact). Hence, we expect the following target to be located around RM1.90-2.00, followed by a LT TP of RM2.20. Support is envisaged around RM1.65-1.70, with a cut loss point set at RM1.60.

Source: Hong Leong Investment Bank Research - 14 Oct 2019