Taliworks Corporation Bhd (Trading Buy)

• TALIWRK’s maiden foray into the renewable energy market – via the acquisition of majority economic interest in four solar projects with an aggregate capacity of 19MW peak within the vicinity of the Kuala Lumpur International Airport for RM144m – will appeal to investors in search of ESG (Environment, Social & Governance) thematic plays. The proposed acquisitions are projected to contribute an incremental net profit of RM10m-RM11m p.a. post one-off adjustments (for impairment loss on receivables and acquisition-related expenses).
• The stock also offers an attractive dividend yield of 8.3% based on consensus FY21 DPS of 6.6 sen. The Company has declared cumulative DPS of 4.95 sen so far this year (comprising three quarterly payments of 1.65 sen each) after paying out annual DPS of 4.8 sen in the last four years. Future dividend visibility will be supported by its net cash holdings & investments of RM106.6m (or 5.3 sen per share) as of end-September 2020.
• TALIWRK – an infrastructure group engaged in operation & maintenance of water treatment plant, highway & toll management, waste management and construction & engineering – will also derive additional cash flows from its recurring income given the consensus pre-acquisition net profit forecasts of RM63m in FY20 and RM55m in FY21.
• Technically speaking, after testing and bouncing off its 50% Fibonacci retracement line recently, the stock could see a trend reversal ahead with the DMI+ crossing over the DMI- to trigger a bullish signal.
• Riding on the positive momentum, TALIWRK’s share price (which saw increased trading interest yesterday) is expected to continue its upward trajectory to reach our resistance thresholds of RM0.88 (R1; 10% upside potential) and RM0.99 (R2; 24% upside potential).
• Our stop loss price is placed at RM0.73 (or 9% downside risk from its last close of RM0.80)

Pantech Group Holdings Bhd (Trading Buy)

• PANTECH – which is involved in the manufacturing and trading of pipes, valves & fittings (PVF) – has shown positive earnings delivery in spite of the challenging times.
• After posting annual net earnings of between RM30m and RM47m over the past five years, the Group reported net profit of RM10.7m (+49% YoY) in 2QFY21, lifting its bottomline to RM5.2m (-72% YoY) in the first half ended August 2020.
• From a technical perspective, after tumbling from a high of RM0.50 on 21 October to as low as RM0.34 in the beginning of November this year, PANTECH is set to ride on a share price recovery ahead.
• A technical rebound is now probable following the stock’s breakout from both the 50-day and 100-day SMA lines. Together with the faster moving average line crossing above the slower moving average line, this signals a bullish technical outlook.
• That being the case, PANTECH shares could be on the way to climb towards our resistance hurdles of RM0.45 (R1) initially and RM0.49 (R2) thereafter, which represents upside potentials of 14% and 24%, respectively.
• We have pegged our stop loss price at RM0.35 (or 11% downside risk from yesterday’s close of RM0.395).

Source: Kenanga Research - 2 Dec 2020