ORNAPAPER Bhd (Trading Buy)

• ORNA is a company that manufactures and supplies corrugated boards and carton boxes with its customers mainly being located in Malaysia. The group’s main contracts come from customers in the (i) paper industry, (ii) furniture, rubber, hardware & steel and the (iii) food based, beverage & Tobacco industry.

• QoQ, the group’s revenue increased to RM84.1m (+32%, QoQ) as of 3QFY20, given the pent-up sales after the lifting of the Movement Control Order (MCO). Meanwhile, the group’s net income jumped to RM4.9m (+350%, QoQ) due to better control of its operating costs and economies of scale achieved through better sales volumes.

• Coupled with the recent developments on the vaccine front, we thus believe the group would benefit from the resumption of business activities from its customers post-Covid.

• Chart-wise, the stock has been on an uptrend since the March crash this year, with this uptrend remaining intact through respecting the 100-day SMA. With the uptick in RSI and shorter key-SMA which continues to respect its longer-term key SMA, we thus believe the buying interest will persist.

• With that, our overhead resistance levels are positioned at RM1.68 (R1:+9%, upside potential) and RM1.79 (+16% upside potential)

• Our stop loss level is pegged at RM1.43 (-7%, downside risk).

HEVEA Group Bhd (Trading Buy)

• HEVEA is a company involved in the manufacturing, trading and distribution of wide-range particleboard and particleboardbased products. The group also has a ready-to-assemble segment which is involved in the business of manufacturing and trading of ready-to-assemble furniture.

• We believe the group is poised to benefit from the rising work from home trend given the current pandemic which has increased the demand for furniture’s. In addition, these “RTA” ready to assemble furniture are easy to assemble and compact enough to distribute making it suitable for the shift in trend from bulk-buying to online shopping.

• QoQ, the group’s sales increased to RM111m (+79%,QoQ) in 3QFY20 given the resumption of its factories’ operation post the MCO. Meanwhile, the group’s net income turned from a net loss of RM4.5m to a net gain of RM8.2m as of 3QFY20 as the better selling volume resulted in the group being able to achieve its optimum production capacity.

• Chart-wise the stock has been on an uptrend since the March crash this year. With the stock continually finding support near its 20-day SMA from early-August till early-November before breaking out, with that we thus believe the stock can find support at its current level (near the 20-Day SMA).

• Should the buying momentum persist, our overhead resistance are plotted at RM0.795 (R1:+8% upside potential) and RM0.835 (R2:+14%, upside potential)

• Meanwhile, our stop loss level is pegged at RM0.685 (-7%, downside risk)

Source: Kenanga Research - 8 Dec 2020