Muda Holdings Bhd (Trading Buy)

• MUDA – which is involved in the production of industrial paper (from recycled fibre) and paper packaging products (such as paper boxes, paper boards and paper-based food packaging) – is a proxy to higher paper prices. It also operates more than 100 school bookshops and online bookstore in Singapore.

• The Group reported net earnings of RM37.1m (+390% YoY / +48% QoQ) in 4QFY20, which lifted its bottomline to RM90.0m (+129% YoY) for FY Dec 2020 as overall performance was boosted mainly by lower raw material cost and the absence of impairment losses on capital work-in-progress and receivables (amounted to RM20.5m that was previously recognised in FY19).

• As consensus forecast is not available, assuming MUDA could maintain similar net profit level in FY21, its shares are currently trading at undemanding forward PER of 9.5x.

• On the chart, after sliding from a peak of RM3.83 in late February this year to close at RM2.81 yesterday, the stock is poised to resume its upward trajectory that initially started from a trough of RM0.835 in March last year.

• A probable share price run-up is anticipated based on the following bullish technical signals: (i) the parabolic value has recently crossed under the stock price, and (ii) the momentum indicator is still increasing after cutting above the zero line.

• As such, MUDA shares will likely climb to challenge our resistance thresholds of RM3.26 (R1; 16% upside potential) and RM3.56 (R2; 27% upside potential).

• Our stop loss price is placed at RM2.48 (or 12% downside risk).

Tune Protect Group Bhd (Trading Buy)

• As a financial holding company that provides underwriting and reinsurance services for non-life insurance products (such as motor personal accident protection, fire insurance, insurance plans for foreign workers, global travel protection), TUNEPRO stands to benefit from the pent-up demand for tourism activity with the eventual opening of international borders for air travel in the near future.

• After registering net profit of RM18.4m (-64% YoY) in FY December 2020 (as the business was hit by higher underwriting loss due to a significant drop in net earned premium from both travel and non-travel segments), the Group’s bottomline is expected to rebound with consensus currently forecasting net earnings of RM29.6m for FY21 and RM37.8m for FY22. This translates to forward PERs of 11.8x this year and 9.2x next year, respectively.

• From a technical perspective, the stock – which gapped up from a low of RM0.30 in November last year to break past the 100- day SMA – has charted higher lows since then.

• Guided by the ascending trendline and the 100-day SMA line, TUNEPRO shares are expected to continue riding on the upward trajectory ahead.

• And following the appearance of bullish dragonfly doji candlesticks lately, the share price could climb to challenge our resistance targets of RM0.54 (R1) and RM0.61 (R2), which represent upside potentials of 16% and 31%, respectively.

• We have pegged our stop loss price at RM0.40 (or 14% downside risk from the last traded price of RM0.465).

Source: Kenanga Research - 13 Apr 2021