Mi Technovation Berhad (Trading Buy)

• MI is principally involved in the designing, development and manufacturing of wafer level chip scale packaging sorting machines and related spare parts for the semiconductor industry.

• In 1QFY21, the Group registered a 54% YoY revenue growth to RM54.2m, as the strong demand for electronics needed to study and work from home drove demand for its flagship product, Mi series. However, its net profit fell 34% YoY to RM4.7m due to higher costs.

• The disappointing 1QFY21 results, coupled with the imposition of MCO 3.0 and renewed fears of a stricter lockdown, has caused the stock to fall sharply since late April.

• Still, moving forward, consensus expects the Group, which recorded a net profit of RM54m in FY20, to achieve rising net profit of RM74.4m in FY21 and RM98.9m in FY22, translating to YoY increase of 38% and 33%, respectively. This implies forward PERs of 34.4x in FY21 and 25.9x in FY22.

• Technically speaking, the stock may have found support at the 78.6% Fibonacci retracement level during the recent correction. We believe that the stock has fallen too much too quickly and may be bound for a technical rebound as the RSI indicator is showing that the stock has been oversold.

• With the MACD histogram gradually recovering, signalling waning downward momentum, an anticipated upward movement in the share price could challenge our resistance levels of RM3.59 (R1; 15% upside potential) and RM3.95 (R2; 27% upside potential).

• We have pegged our stop loss price at RM2.71 (13% downside risk).

Pentamaster Corp Berhad (Trading Buy)

• PENTA manufactures automated and semi-automated machines and equipment, designs and manufactures precision machinery components, as well as assembles and installs computerised automation systems and equipment.

• In 1QFY21, the Group registered a 15% YoY revenue growth to RM115.2m, mainly driven by its Automated Testing Equipment and Factory Automation Solutions segments. However, its net profit declined by 4% YoY to RM16.1m due to higher costs.

• Moving forward, consensus expects the Group, which recorded a net profit of RM70.9m in FY20, to achieve net profit of RM92.4m in FY21 and RM128.2m in FY22, representing YoY increase of 30% and 39%, respectively. This translate to forward PERs of 35.5x in FY21 and 25.6x in FY22.

• Since the end of April, PENTA’s share price has fallen sharply from RM6.17 likely due to the disappointing 1QFY21 results, profit-taking pressure and general negative market sentiment from a resurgence of Covid cases in Malaysia.

• Technically speaking, we reckon the stock has found support around its current price of RM4.60. We believe that the share price correction is overdone with the RSI indicator showing that the stock has been oversold.

• We believe that the stock is bound for a technical rebound soon as the waning downward momentum suggests that there are interested buyers ready to bargain hunt at the current price level.

• With the MACD histogram gradually recovering, an anticipated upward movement in the share price could challenge our resistance levels of RM5.19 (R1; 13% upside potential) and RM5.70 (R2; 24% upside potential).

• We have pegged our stop loss price at RM4.03 (12% downside risk).

Source: Kenanga Research - 21 May 2021