Mobilia Holdings Berhad (Trading Buy)

• MOBILIA designs, manufactures and sells furniture and related parts. In the quarter ended March 2021, 53% of its sales were from North America, 28% from Malaysia and the rest from Asia (ex-Malaysia), Europe, Australasia and South America.

• In FY20, MOBILIA registered a revenue of RM76.4m (+1% YoY) and a net profit of RM8.7m (+3% YoY).

• Moving forward, we expect the booming housing market in the US to continue driving growth of MOBILIA’s sales in North America. Mainly an export driven business, MOBILIA is also relatively shielded against any potential delayed economic recovery and depressed consumer spending in Malaysia.

• Technically speaking, the stock fell sharply from a peak of RM0.76 after debuting on the ACE market in February 2021. Since then, the stock has found support along RM0.375 on numerous occasions. The two rallies that began in May and mid-June failed to gain momentum likely due to the announcements of renewed lockdowns in Malaysia.

• After bottoming out at a higher low of RM0.385 in late-June, the stock appears to be in the nascent stages of another rally, suggested by a series of green Heikin Ashi candles with upper-shadows.

• With the MACD and stochastic indicators showing signs of upward momentum, we believe the share price could potentially challenge our resistance levels of RM0.495 (R1; 15% upside potential) and RM0.55 (R2; 28% upside potential).

• We have pegged our stop loss at RM0.365 (15% downside risk), which is slightly below the support of RM0.375.

Flexidynamic Holdings Berhad (Trading Buy)

• FLEXI provides chlorination system to glove manufacturers for the production of powder-free gloves. In Malaysia, its key customers include Hartalega Group and Kossan Group. In the quarter ended March 2021, 60% of FLEXI’s sales were in Malaysia, with the remainder mainly from Vietnam and Thailand.

• In FY20, FLEXI recorded a revenue of RM56.9m (+14% YoY) mainly driven by growth from the design, engineering, installation and commissioning of glove chlorination systems. However, its net profit of RM4.6m remained flat YoY, mainly dragged by higher labour costs, which was a result of higher overtime charges

• Moving forward, despite falling glove ASPs, the glove manufacturers’ continued capacity expansion and volume growth should bode well for FLEXI. FLEXI will also be using part of its IPO proceeds to expand its production capacity.

• Technically speaking, since debuting on the ACE market in March 2021, the stock has fallen sharply from a peak of RM0.72 to a low of RM0.365. Since then, the stock has been trading between a range of RM0.525 and RM0.37.

• After the stock fell close to 30% throughout June, it has once again found support at RM0.37.

• With the MACD and stochastic indicators showing signs of strengthening upward momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM0.445 (R1; 14% upside potential) and RM0.49 (R2; 26% upside potential).

• We have pegged our stop loss at RM0.34 (13% downside risk).

Source: Kenanga Research - 6 Jul 2021