HLT Global Bhd (Trading Buy)

• HLT is a proxy to the growth story of the gloves sector. In the business of manufacturing glove-dipping machines, it is poised to ride on the capacity expansion plans of glove manufacturers to meet the rising demand. The Group is also involved in the manufacturing and trading of rubber gloves following its acquisition of a 55%-stake in HL Rubber Industries in May 2018.
• The stock has surged from a trough of RM0.10 on 19 March 2020 to hit a high of RM1.01 in early June. It subsequently came off to as low as RM0.55 (which coincided with the Fibonacci retracement level of 50%) after entering a consolidation phase.
• On the chart, a resumption of the share price uptrend may be in the offing. In which case, the stock (which ended at RM0.655 yesterday) could be challenging our resistance thresholds of RM0.79 (R1) and RM0.89 (R2), which represent potential upsides of 21% and 36%, respectively.
• We have set our stop loss level at RM0.53 (or 19% downside risk).
• Fundamentally speaking, the Group posted net earnings of RM2.6m in 1QFY20 compared with 1QFY19’s RM1.3m. On the balance sheet, the Group has net cash and short-term investments of RM31.1m (or 6.1 sen per share) as of end March 2020.

ES Ceramics Technology Bhd (Trading Buy)

• ESCERAM – whose core business is in the manufacturing of hand formers or glove moulds – is a potential beneficiary of capacity upgrades by glove manufacturers who are striving to boost supply to cater for the increased gloves usage.
• Its share price has shot up from RM0.13 on 19 March this year to peak at RM0.74 at the beginning of June before pulling back to as low as RM0.41 (which is near the Fibonacci retracement level of 50%).
• Technically speaking, following yesterday’s price increase on heavy volume to close at RM0.555, the stock could ride on the buying momentum to test our resistance target of RM0.67 (+21% potential upside). A further breakout may then lift the share price to RM0.74 (+33% potential upside).
• Our stop loss level is pegged at RM0.45 (or 19% downside risk).
• From a fundamental perspective, ESCERAM reported net earnings of RM0.7m in 3QFY20, compared with a net loss of RM0.6m in 3QFY19, taking 9-month FY20 net profit to RM2.7m (versus a net loss of RM0.1m previously). On the balance sheet, the Group is in a net cash position of RM19.4m (or 9.4 sen per share) as of end-April 2020.

Source: Kenanga Research - 14 Jul 2020