CCK Consolidated Holdings Bhd (Trading Buy)

• Bouncing up from a trough of RM0.29 in March last year, CCK shares have charted a sequence of higher highs and higher lows since then. With the uptrend pattern still intact, the current share price correction (down 11% from a recent peak of RM0.76 in mid-April) offers a trading opportunity for investors to take a long position.

• In essence, the stock’s positive technical outlook is affirmed by our trading system, which is built on a 2-period moving average (MA) indicator to trigger buy signals when the fast MA crosses above the slow MA. Based on an exit rule of either a 10% profit or 8% stop loss (whichever comes first) from the trigger levels, its back-tested results showed that 14 of the 17 alerts that appeared since 2015 have turned out to be profitable trades (i.e. it has correctly predicted the ensuing share price gains of 10% or more), which represents a hit rate of 82%.

• With the emergence of a buy signal most recently in mid-March this year, the trading system is indicating that CCK’s share price could advance to at least RM0.77 going forward. We have set our resistance thresholds at RM0.77 (R1; 13% upside potential) and RM0.82 (R2; 21% upside potential).

• Our stop loss level is pegged at RM0.60 (or 12% downside risk from the last traded price of RM0.68).

• In terms of earnings outlook, after announcing net profit of RM37.5m (+13% YoY) in FY December 2020, consensus is forecasting CCK (which sells basic food items such as fresh dressed chicken & chicken parts, frozen products, table eggs, fresh fruits and vegetables, in addition to operating a chain of retail stores) to register net earnings of RM36.1m for FY21 and RM38.8m for FY22. This translates to forward PERs of 11.8x this year and 11.0x next year, respectively.

MMS Ventures Bhd (Trading Buy)

• After a sharp price pullback – down from a peak of RM1.44 in mid-January this year to RM0.845 currently – MMSV shares are currently looking technically attractive from a risk-return perspective.

• Our trading system – which is driven by a simple moving average (SMA) indicator to trigger buy signals when the share price cuts above the SMA line – is forecasting that the stock will probably shift higher ahead. Using an exit rule of either an 8% profit or 9% stop loss (whichever comes first) from the trigger levels, the back-tested results showed that the trading system has correctly identified 23 out of the 29 buy signals that were triggered since 2015 as profitable trades, translating to a hit rate of 79%.

• Based on the latest buy alert that surfaced in late April this year, the trading system is anticipating that MMSV’s share price could rise to RM0.97 or higher going forward. On the chart, our resistance thresholds are pegged at RM0.97 (R1; 15% upside potential) and RM1.06 (R2; 25% upside potential).

• We have placed our stop loss price at RM0.75 (or 11% downside risk).

• On the fundamental front, MMSV – a manufacturer of high-tech automation system (such as inspection and testing machines) with a customer base operating in the LED (for applications in smart phones and automotive), semiconductor and OEM/ODM segments – posted net profit of RM0.8m (down 69% YoY but up 563% QoQ) in 4QFY20, which took full-year earnings to RM1.8m (-76% YoY) in FY December 2020.

• In addition, the group is in a financially steady position with a debt-free balance sheet that is backed by net cash & quoted investments of RM33.3m (or 16.8 sen per share) as of end-December 2020.

Source: Kenanga Research - 11 May 2021