ASTINO’s share price has tumbled 13% from its all-time high of RM1.67 to a low of RM1.16 before ending at RM1.45 yesterday, weighed down by correction in steel related stocks as well as the negative impact from FMCO. However, we see a more favourable risk-reward profile now, supported by undemanding 7.9x (ex-RM0.15 netcash: 7.1x) FY21E P/E (about 60% lower than peers) and the proposed 4 for 5 bonus issue (entitlement date likely by mid-July). While the building construction industry is still facing headwinds, we believe ASTINO would be able to sail through the challenging times, underpinned by (1) an outstanding track record and management team with uninterrupted net profit since its listing in 2003; (2) diversified clientele over 5000 customers to mitigate over-reliance on certain industries; (3) growing international presence (targeting to export 10-15% of its revenue vs 3-4% since listing), (4) strong netcash of RM40m (or 15% to share price); and (5) expectation of solid FY21-22 earnings in anticipation of firm steel prices and stronger pent up demand post Covid-19 pandemic.

Poised for a bullish Cup with Handle formation. After correcting 30% from the all time high of RM1.67 to a low of RM1.16, ASTINO’s share prices had staged a steady rebound along the 50D SMA before settling at RM1.45 yesterday. We expect an impending formation of the bullish Cup with Handle (CWH) pattern, supported by bottoming up technical indicators. The CWH is a bullish continuation pattern that marks a consolidation period followed by a breakout. A successful climb above RM1.55 neckline resistance would signal that a new uptrend has begun, potentially lifting the stock to retest RM1.67 and our LT objective at RM1.71 (weekly upper BB). Supports are pegged at RM1.40 and RM1.34 (38.2% FR). Cut loss at RM1.31.

Source: Hong Leong Investment Bank Research - 23 Jun 2021