GHL Systems Berhad (Trading Buy)

• GHL – which provides online transaction services focusing on payment and transaction processing – is a proxy to the fastgrowing e-payments industry trend.
• In FY20, GHL’s revenue fell 4% to RM335m but its core net profit rose by 10% to RM32m.
• Looking ahead, with e-payments gaining popularity and often deemed as a safer way for payment transactions amidst the pandemic, consensus is expecting GHL to grow rapidly by 18% and 38% to RM37m in FY21 and RM51m in FY22, respectively. This translates to forward PERs of 57.4x this year and 41.6x next year respectively, compared to the 5-year historical mean of 51.7x.
• Technically speaking, the stock has been on an uptrend since end-2019, hitting a peak of RM2.17 in November 2020. Since then, the stock has formed a symmetrical triangle with the share price currently on the edge of staging a breakout to extend the uptrend.
• With the MACD indicator showing strengthening upward momentum, we believe the share price could potentially challenge our resistance levels of RM2.10 (R1; 12% upside potential) and RM2.25 (R2; 20% upside potential).
• We have pegged our stop loss price at RM1.65 (12% downside risk).

IOI Corporation Berhad (Trading Buy)

• IOICORP is principally involved in: (i) the cultivating and processing of oil palm and rubber, and (ii) property development and investments.
• In FY June 2020, the group’s core net profit rose 11% to RM843m as revenue was up 6% to RM7.8b, mainly driven by high CPO price. The earnings momentum carried over to 9MFY21, with its core net profit rising 17% to RM712m mainly on the back of higher CPO price and production recovery.
• Moving forward, consensus is expecting IOICORP to achieve net profit of RM1.1b (+30% YoY) in FY21 and RM1.09b (-0.3% YoY) in FY22. These translate to forward PERs of 22x for both years, which are below its 5-year historical mean of 39.2x.
• Over the last week, IOICORP’s share price has dropped 5% likely due to falling CPO price following the price weakness in the soybean oil market.
• Technically speaking, the stock is oversold, as shown by: (i) the share price falling below the lower boundary of the Bollinger band and (ii) the RSI indicator sliding into the oversold zone.
• With yesterday’s close showing a bullish hammer candlestick, we believe that the share price has bottomed out and could be due for a technical rebound soon.
• An anticipated rise in the share price could challenge our resistance levels of RM4.25 (R1; 10% upside potential) and RM4.39 (R2; 14% upside potential).
• We have pegged our stop loss price at RM3.52 (9% downside risk).

Source: Kenanga Research - 18 Jun 2021