VS (Trading Buy)

• VS is the largest listed EMS (Electronics manufacturing service) player in Malaysia in terms of revenue and market cap.
• Their list of clients includes well-known MNCs within the (i) household appliances, (ii) coffee brewer, (iii) pool cleaning and (iv) disinfectant industry.
• A beneficiary of the US-China trade war which has seen on-boarding of 5 new customers since 2019. They had recently purchased a 414k sf land (+25% in production floor space) in Oct-20 to cater for a new customer and their new headquarters.
• Consensus has projected FY7/21 and FY7/22 core net profit of RM230m/RM306m, representing respectable annual YoY growth of +98%/+33% respectively.
• Technically, the stock had broken out from its key resistance level of RM2.50 on the 2nd of December (last week) to its alltime high levels and is currently undergoing a retracement providing an opportunistic entry.
• We think there is a high chance for the stock to continue its uptrend and break to new record levels. Our immediate target is pegged at RM2.95 (+12%) and we have placed our stop loss below the previous resistant-turn-support at RM2.45 (-7% downside).

MTAG (Trading Buy)

• MTAG derives their main income by printing labels and stickers as well as converting a variety of materials into predefined shapes and sizes. Such materials include adhesive tapes, papers, mesh, plastics, foams and metal.
• They serve more than 600 customers from various industries including electrical & electronics (“E&E”), automotive, precision tooling, construction, and mechanical & engineering.
• With their key clients being EMS players (such as VS) growing rapidly from the supply chain rerouting out of China; MTAG is an indirect beneficiary of this structural change.
• They sit on a healthy net cash of RM104.7m as of Sep-20 (or RM0.153/share) – making up c.20% of existing market cap.
• Technically, MTAG is currently hovering above at 2 key supports; (i) the trough of an ascending channel and (ii) 50sma line – providing opportunistic entry, in our view.
• Our target is pegged at the upper channel line of RM0.83 (+10% upside) while stop loss is at RM0.71 (-6% downside)

Source: Kenanga Research - 11 Dec 2020