FoundPac Group Bhd (Trading Buy)

• A proxy to the fast-growing technology industry, FPGROUP is principally involved in the manufacturing and sale of precision engineering parts (namely stiffeners, test sockets, hand lids & related accessories) and laser stencils.

• The Group’s customers comprise primarily large multinational semiconductor manufacturers, outsourced semiconductor assembly and test companies (OSATs) and printed circuit board (PCB) design houses.

• FPGROUP has been consistently making money with its bottomline fluctuating between RM7.5m and RM16.4m from FY15 to FY19. In the latest FY ended June 2020, the Group recorded net profit of RM16.1m (up 36% YoY).

• An added positive is the Group’s debt-free balance sheet with cash holdings of RM51.1m (or 9.4 sen per share) as of endJune this year.

• Technically speaking, FPGROUP shares – which attracted strong buying interest yesterday – could resume its uptrend by breaking out from a bullish pennant pattern.

• On the way up, we have set our resistance thresholds at RM1.13 (R1; 11% upside potential) and RM1.23 (R2; 21% upside potential).

• Our stop loss level is pegged at RM0.91 (or 11% downside risk from its last traded price of RM1.02).

Datasonic Bhd (Trading Buy)

• DSONIC is a provider of security-based Information and Communications Technology (ICT) solutions, supplying customised smart cards and machine-readable passports.

• The Group has raked in annual earnings of RM60m+ in four of the last five years. However, its 1QFY21 results (with net profit dropping 66% YoY to RM4.8m) were hit by the Movement Control Order imposed by the government to curb the Covid-19 pandemic spread.

• Consensus is presently projecting DSONIC to make net profit of RM28m in FY March 21 and RM75m in FY March 22, which implies forward PERs of 50x and 19x, respectively.

• The weak 1QFY21 performance might be already reflected in the share price, which plunged from a high of RM0.79 in early August to a low of RM0.49 in late September.

• With the RSI indicator reversing from an oversold territory, DSONIC shares – which were actively traded yesterday – could be due for a technical rebound soon.

• This will then set the stage for the stock to climb towards our resistance thresholds of RM0.61 (R1) and RM0.70 (R2), which represents upside potentials of 15% and 32%, respectively.

• We have placed our stop loss level at RM0.47 (or 11% downside risk from yesterday’s closing price of RM0.53).

Source: Kenanga Research - 7 Oct 2020