OpenSys (M) (Trading Buy)

• OPENSYS has four business revenue models, namely: (i) outright sales of cash recycling machines and cheque deposit machines to financial institutions, (ii) software development services, (iii) outsourcing services via the deployment of bill payment kiosks to utility, insurance and telecommunication companies, and (iv) maintenance services of the machines.
• In addition, the Group runs a dedicated online solar energy platform (buySolar), which is an online marketplace for renewable energy focussing on solar solutions and financing. It has recently signed a collaborative agreement with ACE Market-listed EPCC provider Solarvest Holdings to provide solar solutions referral to the latter.
• The Group’s bottomline has risen every year between FY16 and FY19, up from RM6.0m to RM11.1m over the past three years. For the 9-month ended September 2020, its net profit continued to grow by 21% YoY to RM7.3m while net cash & short-term investments stood at RM30.5m (or 6.8 sen per share) as of end-September this year.
• On the chart, OPENSYS shares – treading above the key 50-day and 100-day SMA lines – are currently riding on a positive momentum amid strong trading interest.
• With a symmetrical triangle possibly in the making, the stock could stage a technical breakout and trend higher to extend the continuation pattern.
• We have set our resistance targets at RM0.71 (R1; 11% upside potential) and RM0.81 (R2; 27% upside potential) for OPENSYS’ share price to test going forward.
• Our stop loss price is pegged at RM0.57 (or 11% below yesterday’s closing price of RM0.64).

JCY International Bhd (Trading Buy)

• JCY is a key supplier and contract manufacturer of precision components and sub-assembly for the hard disk drive (HDD) industry with production plants located in Malaysia, Thailand and China.
• In the red for the last two financial years, the Group is on track to return to the black after posting net profit of RM11.5m in the 9-month ended June 2020 (from a net loss of RM52.0m previously). The turnaround performance was mainly attributable to higher margins as a result of cost rationalisation efforts and better exchange rates.
• Financially stable, the Group was in a net cash position of RM304.7m (or 14.5 sen per share) as of June this year.
• Technically speaking, the ongoing share price weakness – which has slid from RM0.78 in early November to close at RM0.64 yesterday – presents a buying-on-weakness opportunity to accumulate the stock.
• With the positive trend still intact as JCY shares continue to hover above the 38.2% Fibonacci retracement line, the stock could climb towards our resistance thresholds of RM0.73 (R1) and RM0.81 (R2) when buying interest resumes. This implies upside potentials of 14% and 27%, respectively.
• We have set our stop loss price at RM0.57 (or 11% downside risk).

Source: Kenanga Research - 24 Nov 2020