Engtex Group Berhad (Trading Buy)

• ENGTEX is principally involved in: (i) the wholesale and distribution of pipes, plumbing materials, steel-related products, general hardware products and construction materials, (ii) manufacturing of steel-related products, (iii) property development, and (iv) provision of hospitality services.

• In the first quarter ended March 2021, ENGTEX recorded a net profit of RM20.8m, an 845% surge compared to the same quarter last year, boosted by an increase in demand for its metal-related trading products and manufactured steel products, as well as higher metal prices. With metal prices staying elevated currently, the group’s coming quarters will likely see a continuation of strong earnings.

• Technically speaking, the stock peaked at RM0.925 in early-May and subsequently corrected 64% before bottoming out at RM0.595 in late May.

• After hovering above the support level of RM0.62 since bottoming out in late-May, the stock has recently started gaining upward momentum as signalled by the increasing parabolic SAR indicator.

• With the MACD indicator showing signs of rising momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM 0.76 (R1; 14% upside potential) and RM 0.83 (R2; 25% upside potential).

• We have pegged our stop loss at RM 0.60 (10% downside risk).

CAB Cakaran Corporation Berhad (Trading Buy)

• CAB breeds, processes, markets and trades broiler chicken. The group also cultivates timber crops, operates fast food franchising business and trades poultry feeds and other farm consumables.

• In the 6-month ended March 2021, CAB recorded a net loss of RM2.5m, an improvement compared to the RM12.5m loss in the same period in the year before. The smaller loss was driven by a 9% increase in revenue, which was lifted by higher selling price of broiler chicken. CAB had also lifted their selling prices of feed products to pass on the higher cost of feed to their customers.

• Technically speaking, the stock has been forming higher lows to plot an upward sloping support line since March 2020. During the troughs in May and July 2021, the stock also found support along the 200-day SMA, suggesting that the stock is still in a long-term uptrend pattern.

• With the MACD indicator showing signs of rising momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM0.55 (R1; 17% upside potential) and RM0.60 (R2; 28% upside potential).

• We have pegged our stop loss at RM0.40 (15% downside risk).

Source: Kenanga Research - 30 Jul 2021