Perak Transit Bhd (Trading Buy)

• PTRANS derives its revenue principally from: (a) integrated public transportation terminal operations, via the rental of advertising and promotional spaces, rental of shops and kiosks, project facilitation fee and other miscellaneous incomes; (b) the provision of public stage bus and express bus services and bus charter services; and (c) petrol stations operations.

• The Group has posted stronger year-on-year earnings in the last four years, with net profit growing at CAGR of 20.2% from RM19.2m in FY15 to RM40.0m in FY19.

• Despite facing business disruptions caused by the Covid-19 event, PTRANS made a net profit of RM16.7m (-12% YoY) in 1HFY20. Its second half performance is expected to be better due to the post-MCO back-to-normal recovery and maiden contribution from its Terminal Kampar Putra (after receiving the full certificate of completion and compliance in August 2020).

• This suggests the Group’s bottomline may surpass existing consensus projections of RM33m in FY20 and RM45m in FY21 (which, in turn, are valuing the stock at forward PERs of 13.4x this year and 9.8x next year). There are also future plans to undertake new developments at Terminal Bidor and Terminal Tronoh to drive earnings further.

• On the chart, the stock – which is presently in a consolidation mode after pulling back from a high of RM0.33 on 10 August – could resume its upward journey soon. Its share price is treading above the Fibonacci retracement level of 38.2% (as measured from a low of RM0.13 in March to its recent peak), indicating that PTRANS’ uptrend pattern remains intact.

• A probable breakout could lift the shares to test our resistance thresholds of RM0.31 (R1) and RM0.35 (R2), implying upside potentials of 17% and 32%, respectively from yesterday’s closing price of RM0.265.

• We have set our stop loss level at RM0.22 (or 17% downside risk).

FGV Holdings Bhd (Trading Buy)

• FGV offers a potential earnings turnaround story as management is embarking on a transformation programme to overhaul the strategy and operations of the plantation group.

• The Group may see its efforts starting to pay off already after reporting net profit of RM20.5m in 2QFY20 (versus net losses of RM52.2m in 2QFY19 and RM142.3m in 1QFY20). This has narrowed its first half net loss to RM121.8m.

• With CPO prices on the rise (up 20% since end-June this year to RM2,758 per tonne currently), consensus is forecasting FGV to post net loss of RM17m in FY20 before reversing to net profit of RM90m in FY21.

• From a technical perspective, after hitting a trough of RM0.72 on 19 March, the stock has charted a series of higher highs and higher lows. It closed at RM1.24 yesterday.

• Currently hovering near the lower band of the positive sloping price channel, we reckon FGV’s share price could continue its uptrend to climb towards our first resistance level of RM1.39 (R1) initially before challenging our next resistance barrier of RM1.50 (R2) thereafter. This represents upside potentials of 12% and 21%, respectively.

• Our stop loss level is pegged at RM1.09 (translating to 12% downside risk).

Source: Kenanga Research - 2 Sept 2020