MClean Technologies Bhd (Trading Buy)

• MCLEAN provides surface treatment, precision cleaning and packaging services mainly for the hard disk drive (HDD), consumer electronics and oil & gas industries. Its operations are in Malaysia, Singapore, Thailand and China.

• With about 70% of last year’s revenue coming from the HDD industry, MCLEAN is an indirect beneficiary of the rising demand for storage for enterprise and cloud data.

• On the back of its brighter prospects, the Group – which made a small profit of RM0.3m in 2QFY20 (vs net loss of RM1.2m in 2QFY19), taking 1HFY20’s net loss to RM0.5m (vs 1HFY19’s net loss of RM2.8m) – could be turning around soon after registering losses in the past three years. Financially, it is in a slight net cash position of RM1.0m as of end-June this year.

• Technically speaking, after pulling back from a high of RM0.32 on 26 August to find support at the 38.2% Fibonacci retracement level of RM0.22 (see chart), the stock may attempt to break away from its prevailing consolidation pattern amid renewed buying interest.

• A likely breakout could then lift MCLEAN shares towards our resistance thresholds of RM0.28 (R1) and RM0.33 (R2), which represents upside potentials of 19% and 40%, respectively from yesterday’s closing price of RM0.235.

• Our stop loss level is set at RM0.20 (or 15% downside risk).

Radiant GlobalTech Bhd (Trading Buy)

• RGTECH is an integrated provider of technology solutions, which are used in the retail sector to automate customers’ operations, such as for capturing and processing payments, inventory management, analytics & reporting, as well as sales & marketing.

• Via its retail management portal AX Retail B2B, the platform facilitates back-end transactions seamlessly between retail chain outlets (e.g. 99 Speedmart, 7-Eleven Malaysia, Aeon Big, Aeon TopValu, Giant, Parkson, Cold Storage, Guardian) and their suppliers, the number of which is expected to rise from 3,850 in March to 5,000 by year-end. Essentially, RGTECH stands to benefit from a shifting trend of retailers changing from manual processes to digitalisation of business operations following the Covid-19 pandemic.

• The Group was hit by Covid-19 related disruptions when it made a marginal loss of RM0.5m in 2QFY20 (2QFY19: net profit of RM1.2m), taking 1HFY20’s net loss to RM0.5m (1HFY19: net profit of RM1.8m). Nonetheless, forward earnings are expected to pick up amid a recovery in business activities post the Covid-19 lockdown. Historically, RGTECH has turned in annual net earnings ranging between RM3m and RM10m over the past five years.

• The Group’s balance sheet is strong with net cash holdings & short-term investments of RM33.9m (or 6.5 sen per share) as of end-June this year.

• On the chart, the stock – which has recovered from a low of RM0.18 in March this year to plot higher lows since then – is attempting to climb further inside an upward sloping channel pattern.

• In view of the positive momentum, RGTECH shares could test our resistance thresholds of RM0.42 (R1) and RM0.48 (R2) ahead. This translates to upside potentials of 14% and 30%, respectively from yesterday’s closing price of RM0.37.

• We have pegged our stop loss level at RM0.32 (or 14% downside risk).

Source: Kenanga Research - 3 Sept 2020