Malaysian Resources Corporation Bhd (Trading Buy)

• A short-term trend reversal could be on the cards for MRCB after its share price pierced through a negative sloping trendline recently.

• This is supported by the share price crossover of the 100-day SMA line at the beginning of December as the stock extended its rebound from a low of RM0.355 in early November.

• Riding on the upward bias, we reckon MRCB shares will probably climb towards our resistance thresholds of RM0.57 (R1; 16% upside potential) and RM0.67 (R2; 37% upside potential).

• Our stop loss price is set at RM0.41 (or 16% downside risk from its last traded price of RM0.49).

• From a fundamental perspective, the Group – which has three main business segments, namely (i) property development & investment, (ii) engineering, construction & environment, and (iii) facilities management & parking – saw its bottomline reversing from a net loss of RM219.6m in 2QFY20 to a slight net profit of RM0.9m in 3QFY20.

• The recovery pace is expected to continue as consensus is expecting MRCB to log net earnings of RM12m in FY20 and RM54m in FY21, translating to forward PERs of 180x this year and 40x next year, respectively.

PCCS Group Bhd (Trading Buy)

• PCCS has just entered into a memorandum of understanding (MOU) with China’s Shanghai Shenqi Medical Co Ltd to jointly pursue potential healthcare business opportunities within the Asia-Pacific region with the intention to develop the commercialization of cardiology related medical device technologies.

• If the business diversification plan materialises, it would pave the way for PCCS (which is currently involved in the manufacturing & marketing of apparels and the printing of labels & stickers for garment and other products) to venture into the medical and healthcare industry

• This comes as the Group reported a marginal net loss of RM0.7m in 1HFY21 (versus a net profit of RM4.8m previously) amid the business disruptions in the wake of the Covid-19 pandemic.

• Nonetheless, its financial position remains stable with net cash holdings of RM14m (or 6.6 sen per share) as of endSeptember 2020.

• On the chart, PCCS’ share price remains in an upward trajectory even after pulling back from a high of RM0.625 in October this year to close at RM0.435 yesterday.

• The positive technical outlook is backed by an ascending trendline with the stock still treading above the 50% Fibonacci retracement threshold (as measured from a trough of RM0.16 in March to a peak of RM0.625 in October this year).

• We have set our resistance hurdles at RM0.49 (R1; 13% upside potential) and RM0.54 (R2; 24% upside potential) for PCCS shares to test going forward.

• Our stop loss level is placed at RM0.39 (or 10% downside risk).

Source: Kenanga Research - 16 Dec 2020