We like MTAG for its: (i) strong barrier to entry via its technical expertise with comprehensive range of printing and converting solutions for diversified customers in various industries (over 600 customers, 25% of which have dealt with the group in the past 10 years), (ii) steady FY19-22 EPS CAGR of 11%, led by a targeted doubling of its existing capacity (from 324.5m pieces to 636.8m pieces by FY22), riding on the growth of key Dyson suppliers, such as ATA IMS, SKPR, VS as well as trade diversion opportunities amid protracted US-China trade war, (iii) less labour-intensive nature of its business, and (iv) attractive valuation of 10.4x FY20E PE (36% below peers). Technically, after building a base near RM0.495-0.52, MTAG is poised for an impending downtrend line breakout to advance further towards RM0.58-0.635 zones.![](/pub/blog/bl4/capture_20200102110649.png)
Pending a downtrend line breakout. Post 1QFY20 results, MTAG has been trending sideways within RM0.495 (29 Nov) and RM0.585 (5 Dec) range before ending at RM0.53 on 29 Dec. In the near term, the stock is likely to build a base near lower BB at RM0.52 (with lower support at RM0.495) before attempting to stage a downtrend line breakout above RM0.54. A successful breakout above RM0.54 will augur well for further advance towards RM0.585 and our LT objective at RM0.635 (13 Nov high). Cut loss at RM0.485.
Source: Hong Leong Investment Bank Research - 2 Jan 2020