Tek Seng Holdings Bhd (Trading Buy)

• TEKSENG is engaged in the manufacturing and trading of: (i) Polyvinyl Chloride (PVC) related and non-woven related products, and (ii) solar cells, solar panels, solar modules and solar-related products.
   
• After posting losses in the preceding two years, the Group is on track to return to the black this year with net profit coming in at RM8.1m in 3QFY20 (compared with 3QFY19’s RM0.2m). This took YTD earnings to RM19.2m (versus a net loss of RM3.3m previously) for the nine-month period ended September 2020 mainly thanks to stronger contributions from the PVC segment (which saw higher selling prices and increased demand for non-woven products such as face masks and gowns as well as from the furniture industry).
   
• In addition, its balance sheet is backed by net cash holdings of RM37.8m (or 10.5 sen per share) as of end-September last year.
   
• Technically speaking, after moving broadly sideways for the past five months following its correction from a high of RM1.44 in early August, the stock is poised to break out from the existing consolidation phase.
   
• Driven by the bullish signals arising from the crossover of the DMI+ above the DMI- and the momentum indicator climbing above the zero line, a probable lift could propel the stock towards our resistance thresholds of RM0.85 (R1; 16% upside potential) and RM1.00 (R2; 36% upside potential).
   
• We have set our stop loss price at RM0.63 (or 14% downside risk from yesterday’s close of RM0.735).

Omesti Bhd (Trading Buy)

• Looking technically interesting, OMESTI’s share price is showing promising signs of resuming its upward trajectory soon.
   
• The stock has bounced up from a low of RM0.455 in the beginning of November last year to plot a sequence of higher highs and higher lows subsequently.
   
• With the momentum indicator on the rise above the zero line and the share price cutting over the 50-day SMA recently, the positive signals could drive the stock to continue its upswing along the ascending price channel
   
• On the chart, OMESTI shares will probably climb to challenge our resistance targets of RM0.62 (R1) and RM0.70 (R2). This represents upside potentials of 13% and 27%, respectively.
   
• Our stop loss price is pegged at RM0.48 (or 13% downside risk from its last traded price of RM0.55)
   
• On the fundamental front, OMESTI (comprising a grouping of ICT companies with activities that are focused on the development and delivery of solutions to assist clients achieve their digital transformation strategies) has remained profitable with net profit of RM1.1m in the six-month period ended September 2020, compared with 1HFY20’s earnings of RM24.3m (which benefitted from a one-off gain of RM24.6m arising from the disposal of a subsidiary).

Source: Kenanga Research - 20 Jan 2021