Malaysian Bulk Carriers Bhd (Trading Sell)

• Amid the prevailing jittery market sentiment, MAYBULK’s steep price run-up to as high as RM0.855 last Friday before closing at RM0.72 yesterday has prompted us to recommend a Trading Sell / Take Profit on the stock.

• The share price has now jumped 41% to surpass both our technical target prices of RM0.60 (R1) and RM0.68 (R2) since we made our previous Trading Buy call on 23 February this year.

• Technically speaking, a price retracement could be on the cards as: (i) the stock has just crossed back below the upper Bollinger Band after climbing over it previously, and (ii) the stochastics indicator has triggered a bearish divergence signal (by forming two declining peaks in the overbought area as the price continued to move higher) while the %K line cut below the %D line in the overbought zone during the same period.

• With that, MAYBULK shares will probably pull back to challenge our support thresholds of RM0.61 (S1) and RM0.52 (S2), which represent downside potentials of 15% and 28%, respectively.

• Our stop loss price is set at RM0.81 (translating to an upside risk of 12%).

• In terms of earnings performance, MAYBULK – which is principally engaged in international dry bulk shipping services – logged net loss of RM49.8m in 4QFY20 (versus 4QFY19’s net profit of RM11.7m). This brought its full-year earnings to RM20.8m (which implies a historical PER of 34.6x) in FY December 2020 (compared with FY19’s net loss of RM7.3m) as the underlying result was adversely impacted by impairment loss on vessels, reduced hired days and lower charter rates.

HPMT Holdings Bhd (Trading Sell)

• We are recommending a Trading Sell / Take Profit on HPMT shares, which have hit a peak of RM0.67 in the middle of last month before entering a consolidation phase.

• This follows our previous Trading Buy call that was made on 2 March this year based on technical target prices of RM0.56 (R1) and RM0.61 (R2) as the current share price (of RM0.605) has appreciated by 23% since our report date.

• On the chart, the stock is expected to retrace following the occurrence of a top failure swing by the RSI indicator (with its subsequent peak failing to surpass a previous peak in the overbought area that was followed by the plotting of a lower low than a previous trough).

• And with the momentum indicator still declining after crossing below the zero line recently, HPMT shares could be on the way to test our support lines of RM0.51 (S1; 16% downside potential) and RM0.44 (S2; 27 downside potential).

• We have pegged our stop loss price at RM0.68 (or an upside risk of 12%).

• On the fundamental front, HPMT – which is in the business of manufacturing and distribution of cutting tools as well as trading of auxiliary cutting tools, equipment and accessories for metalworking (which are mainly used by electronic and automotive manufacturers) – reported net profit of RM8.3m (+6% YoY) in FY December 2020, implying a historical PER of 23.9x.

Source: Kenanga Research - 12 May 2021