Econpile Holdings Berhad (Trading Buy)

• ECONBHD is a specialised foundation and civil engineering contractor in Malaysia. The Company’s services include foundation and geotechnical works, civil engineering works, structure works and design and build packages.

• At the beginning of 2021, the announcement of MCO 2.0 has sparked fears of a derailed economic recovery, causing its shares to tumble. Since then, the share price has recovered on the hopes of the government’s revival of mega infrastructure projects to pump prime the economic recovery.

• Moving forward, consensus is expecting ECONBHD to make net profit of RM32m and RM43m in FY21 and FY22, respectively. These translate into forward PERs of 21x and 15.8x, respectively.

• Technically speaking, since bottoming out in November 2020, the share price has rebounded to form higher lows. Since March 2021, the stock has been treading in a range bound pattern, with the most recent closing price at the bottom of the range.

• At the current price level, there have been the emergence of several candlesticks with long downside tails, suggesting the rejection of lower prices to pave the way for an ensuing price uptick.

• With the price finding support along the 100-day SMA, an anticipated upward movement could lift the share price to challenge our resistance levels of RM0.53 (R1; 12% upside potential) and RM0.58 (R2; 22% upside potential).

• We have pegged our stop loss price at RM0.42 (12% downside risk).

UMW Holdings Berhad (Trading Buy)

• UMW principally imports, assembles and markets passenger and commercial vehicles and related spare parts. UMW also provides after-sales, financing and insurance services. Apart from UMW’s automotive segment, it also trades and manufactures light and heavy equipment for industrial construction and agricultural sectors. As of FY20, its Automotive segment made up 83% of its revenue, with Equipment division contributing 10% and Manufacturing & Engineering segment making up the remainder 7%.

• While UMW’s numerous segments were adversely affected by the series of MCOs, the Group has been showing signs of recovery lately, with its 4QFY20 net profit rising 36% QoQ to RM137m, bringing FY20 net profit to RM205m (-55% YoY).

• Moving forward, consensus expects UMW – which has seen its vehicle sales up 35% YoY for the first quarter of 2021 – to achieve net profit of RM313m and RM346m in FY21 and FY22, respectively. These translate to 13.0x and 11.8x forward PERs, respectively, below its 5-year mean of 20x.

• Technically speaking, its share price chart has been forming higher lows into resistance since bottoming out in March 2020.

• After plotting several swing lows, including the most recent one in March 2021, the share price has moved sideways, suggesting that buyers have been accumulating at increasingly higher prices.

• During the most recent accumulation period, the formation of two consecutive hammer candlesticks suggests the rejection of lower prices to pave the way for a likely price rebound ahead.

• The 100-day SMA has also acted as a dynamic support line for the stock on several occasions.

• With the MACD line treading above the signal line and heading upwards, an anticipated upward movement in the share price could challenge our resistance levels of RM3.85 (R1; 11% upside potential) and RM4.20 (R2; 21% upside potential).

• We have pegged our stop loss price at RM3.11 (11% downside risk).

Source: Kenanga Research - 22 Apr 2021