HIAPTEK is an integrated steel player involved in upstream operations through Eastern Steel (a 30% owned JV entity), which produces steel slabs and billets, as well as downstream operations through its wholly-owned subsidiaries which produce steel pipes and scaffolding (amongst the biggest players in Malaysia). The group is optimistic of its future prospects amid rising global steel prices attributed to worldwide supply disruptions, industrial sector rebound, and higher raw material prices, coupled with the turnaround of Eastern Steel (on improved cost efficiency and higher selling prices). Meanwhile, the Phase 1A coke oven plant (with a capacity of 400k tonnes p.a.) is on schedule to be completed by Jun-2021 (fully operational by end 3Q21), which will result in significant improvement in the blast furnace’s production cost structure from FYE July 22 onwards. At RM0.495, HIAPTEK is trading at a trailing P/E of 12.9x (30% lower than its peers).

Bullish Cup with Handle formation. After breaking above the mid BB RM0.48 (resistance-turned-support) yesterday, we expect an impending formation of the bullish Cup with Handle (CWH) pattern, supported by bottoming up technical indicators and heavy volume transacted yesterday at 33m shares (vs 5D average 16m). The CWH is a bullish continuation pattern that marks a consolidation period followed by a breakout. A successful climb above RM0.505 hurdle would signal that a new uptrend has begun, potentially lifting the stock to retest RM0.545 and RM0.60 levels before heading to our LT objective at RM0.645. Supports are pegged at RM0.46 (50D SMA) and RM0.48. Cut loss at RM0.44.

Source: Hong Leong Investment Bank Research - 22 Apr 2021