Suria Capital Holdings Bhd (Trading Buy)

• SURIA is a Sabah-based entity with diversified businesses in port operations (covering 8 ports in Sabah), property development, seaport passenger gateway & construction and logistics & bunkering services.

• The Group has been profitable with yearly earnings of at least RM50m since 2009. Annualising its 1QFY20 net profit of RM10.5m (-33% YoY), the stock is currently trading at a PER of 7.7x this year.

• The Company’s historical DPS has ranged between 5.0 sen to 7.0 sen p.a. over the past 5 years. Assuming an arbitrary DPS of 4.0 sen (which is lower than FY19’s 5.0 sen to reflect the anticipated earnings drop this year), its dividend yield works out to be 4.3%. The financial capacity to pay dividends is backed by its net cash & short-term investments of RM77.7m (or 22 sen per share, representing nearly a quarter of its existing share price) as of end-March 2020.

• On the chart, SURIA’s share price – after tumbling from RM1.42 to as low as RM0.82 during the March market sell-down – has rebounded to reach a high of RM1.08 before entering a consolidation phase thereafter.

• At yesterday’s closing price of RM0.93, the stock offers an attractive risk-reward proposition. A technical rebound – which seems likely as the share price is on the verge of overcoming a downward sloping trendline – could lift the stock towards our resistance thresholds of RM1.06 (R1) and RM1.21 (R2). This translates to upside potentials of 14% and 30%, respectively.

• Our stop loss level is pegged at RM0.85 (9% downside risk).

TSH Resources Bhd (Trading Buy)

• TSH – a plantation group in the business of oil palm cultivation and processing of fresh fruit bunches into crude palm oil (CPO) and palm kernel – is a proxy to rising CPO price (which saw its spot month futures contract rising 17% since beginning July to RM2,774 per tonne currently).

• The Group – which has announced net profit of RM2.3m in 1QFY20 (-83% YoY, depressed by a lumpy foreign exchange loss of RM26.2m) – is forecasted to post net earnings of RM63m in FY Dec 20 and RM76m in FY Dec 21 based on consensus expectations. This implies forward PERs of 21.0x this year and 17.4x next year.

• After bouncing up from a trough of RM0.56 on 19 March this year, the stock subsequently plotted a series of higher lows on the chart. It ended at RM0.96 yesterday.

• Driven by the positive sloping trendline, TSH’s share price will likely continue its upward journey ahead, possibly eyeing the resistance thresholds of RM1.08 (R1) and RM1.18 (R2). This represents upside potentials of 13% and 23%, respectively.

• We have set our stop loss level at RM0.86 (or 10% downside risk)

Source: Kenanga Research - 18 Aug 2020