KRONO is a beneficiary of digital acceleration as customers build out their digital capability in EDM to improve efficiency and mobility as part of their operational transformation to the new normal. After a disruptive 1HFY2021 due to the Covid-19 lockdowns, Krono remains optimistic of a better 4QFY2021 and beyond in anticipation of higher demand for its EDM solutions from geographic footprint across key Asian markets. Meanwhile, the recent RM23m contract awarded last month by Baidu Cloud Computing Technology (Beijing) for an exabyte-size cloud hyper-scale supply and managed services contract in China is a testament to Krono’s strong track record and will certainly cement stronger opportunities in China. Valuation is undemanding at 1.32x P/B (27% below 5Y mean 1.8x and 35% lower than industry 2.0x), supported by a RM26m net cash pile (~8% of market cap).

A bullish triangle breakout. Following a bullish triangle breakout on 23 Nov, the stock rose to a high of RM0.655 (3 Dec) before easing at RM0.605 yesterday. As long as share prices stay above RM0.59 (100D MSA) and RM0.58 (50D SMA) supports, the stock may resume its uptrend after a brief sideways consolidation. A successful breakout above RM0.635 (50% FR) will lift prices higher towards RM0.685 (3 Sep high) before reaching our LT objective at YTD high RM0.735 (4 Aug) levels. Cut loss at RM0.56.

Source: Hong Leong Investment Bank Research - 9 Dec 2020