My E.G. Services Berhad (Trading Buy)

• MYEG provides e-services between the Malaysian government and its citizens and businesses. The Group’s services include electronic delivery of driver and vehicle registrations, licensing and summons, and utility bill payments.

• In our recently published non-rated thematic note on MYEG, we pointed out that MYEG stands to benefit from a series of catalysts, one of which includes revenue growth from its digital health pass system (MySafeTravel), which facilitates travellers’ entry into Malaysia during the pandemic.

• Moving forward, consensus expects MYEG to achieve a core net profit of RM328m and RM360m in FY21 and FY22, respectively. At the current share price, these imply forward PERs of 21.7x and 19.8x respectively, both of which are below its 5-year historical average of 24.4x.

• Technically speaking, the share price has been hovering above the support of RM1.97, where the appearance of several hammer candlesticks indicates rejection of lower prices.

• With the MACD line recovering and poised to break above the signal line, an anticipated upward moment in the share price could challenge our resistance levels of RM2.21 (R1; 12% upside potential) and RM2.34 (R2; 19% upside potential).

• We have pegged our stop loss price at RM1.74 (12% downside risk).

United U-Li Corp Berhad (Trading Buy)

• ULICORP manufactures and trades cable support systems, integrated ceiling systems, steel roof battens, electrical lighting and fittings, and related industrial metal products.

• ULICORP is poised to benefit from economic reopening in the region and a recovery in construction activity. Demand for the Group’s products remain strong because (i) some competitors have shut down as a result of the pandemic, allowing ULICORP to grab a larger market share, (ii) there is an order backlog as a result of lockdown restrictions.

• Despite rising steel prices, ULICORP is able to pass on its higher costs by raising their selling prices, not only due to a broadbased increase in prices of steel-based products, but also due to ULICORP’s better product pricing power.

• Moving forward, we expect the Group to achieve core net profit of RM31.3m and RM37.1m in FY21 and FY22, respectively. These imply forward PERs of 6.7x and 5.6x, below our ascribed 10x PER.

• Technically speaking, its share price is hovering above the support level of RM0.935, with yesterday’s close forming a hammer candlestick.

• The rising %K line also appears to be rising faster than the %D line, signalling strengthening momentum.

• With the MACD line above the signal line and heading upwards, an anticipated upward movement in share price could challenge our resistance levels of RM1.07 (R1; 12% upside potential) and RM1.22 (R2; 27% upside potential).

• We have pegged our stop loss price at RM0.85 (12% downside risk).

Source: Kenanga Research - 1 Apr 2021