HLBank Research Highlights

ARBB - Accumulate Near the Support at RM0.44-0.46

Publish date: Thu, 02 May 2019, 09:53 AM
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This blog publishes research reports from Hong Leong Investment Bank

ARBB is involved in several business segments, which include timber related, Enterprise Resource Planning (ERP) and IoT equipment and may expand into re-energy solutions this year. We view this as a trading idea on the back of turnaround story since FY18, accompanied by a healthy 1Q19 results and we believe the expansion plans in ARBB could mark a decent year in FY19 for the Group. Besides, it has shown two quarters net profit of RM5.0m and RM5.1m in 4Q18 and 1Q19, respectively. With the strong gap-up formation on Tuesday, surpassing the resistance of RM0.51, the uptrend could sustain towards RM0.88 (LT target). Cut loss will be located around RM0.43.

Company profile. ARBB is involved in several business segments, which include manufacturing in various types of woods, software development, contract logging, leasing scows and tugboats, provision of management services and investment holding. In view of the tough environment, ARBB has diversified into IT solutions, developing ERP system to cater for SMEs and cater for manufacturing business operations in Malaysia.

Turnaround seen in ARBB. After diversifying into IT solutions business in 3Q18, specialised in providing ERP solutions to produce optimal environment for production enhancements for clients, it has seen a huge contribution of RM8m or 52% towards FY18’s revenue. Besides, the FY18’s EPS stood at 6 sen (vs. 6 sen loss in FY17).

Steady financial results in 1Q19, second profitable quarter. It has recorded RM5.1m in 1Q19 on the back of higher revenue at RM12.4m contributed by the Enterprise Resource Planning (ERP) software system and the IT segment is expected to continue in contributing the major portion of the sales and profits to the Group.

Outlook. With contracts being secured by ARBB worth RM6.9m in 3Q18 and RM20m in Jan-19, we believe it may contribute to decent topline and bottomline growth. In addition, ARB has entered into a MoU with Perkasa Selalu Sdn Bhd to provide IoT solutions; this will open up another business venture, which is likely to contribute positively towards ARB. In addition to the IoT business, they are exploring into re energy solutions this year and we could see that as an expansion towards their revenue and earnings moving forward.

Sideways consolidation breakout with high volumes. Over the past few months, volumes have been improving on ARBB, within a slight upward price channel. Despite the recent price increase from RM0.295, we believe the upward trend is intact as MACD indicator is hovering in the positive region. We may expect the upward move to resume after a healthy retracement over the near term towards the support of RM0.44-46. The resistance is envisaged around RM0.61-0.65, followed by a LT target of RM0.88. Cut loss will be set around RM0.43.

Source: Hong Leong Investment Bank Research - 2 May 2019

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Sharmila Rao

Has the price reached its limit or should i buy some more?

2019-05-02 15:34



2019-05-05 20:29

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