UMW Holdings Berhad (Trading Buy)

• UMW principally imports, assembles and markets passenger and commercial vehicles and related spare parts, as well as provides after-sales, financing and insurance services. Apart from its automotive segment, the group also trades and manufactures light and heavy equipment for the industrial, construction and agricultural sectors. As of FY20, its Automotive segment made up 83% of overall revenue, with the Equipment division contributing 10% and the Manufacturing & Engineering segment making up the remainder 7%.
   
• In the first quarter of FY21, UMW achieved a core net profit of RM80m, a 40% QoQ decline from 4QFY20, likely due to the seasonally stronger 4th quarter.
   
• Nevertheless, consensus is estimating UMW – which has seen YTD car sales (for Jan to June) rise 89% YoY - to achieve a net profit of RM292m (+6% YoY) in FY21 and RM335m (+15% YoY) in FY22 on the back of an eventual economic re-opening and incoming sales from pent-up demand. These translate to forward PERs of 12.2x and 10.6x respectively, which are undemanding relative to its 5-year average of 20.2x.
   
• Technically speaking, after forming a double top pattern (with a peak at RM3.50) in March and April 2021, the stock has corrected 19% to bottom out at RM2.85 recently.
   
• After finding support at the RM2.86 level, the stock has begun to stage a rebound with the formation of a dragonfly doji candlestick 2 trading days ago. And the appearance of another bullish candlestick yesterday has further confirmed that the stock has bottomed out and is currently at the nascent stage of a trend reversal.
   
• With both the MACD and Parabolic SAR indicators showing signs of rising momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM3.37 (R1; 11% upside potential) and RM3.50 (R2; 15% upside potential).
   
• We have pegged our stop loss at RM2.76 (9% downside risk).

IOI Properties Group Berhad (Trading Buy)

• IOIPG is involved in the: (i) development of residential, commercial and industrial properties, and (ii) investments in shopping malls, office complexes and other properties.
   
• In the 9-month period ended March 2021, despite the challenging property market, IOIPG achieved a 22% YoY growth in revenue to RM1.83b and a 7% YoY growth in core net profit to RM476m, partially contributed by the group’s property sales from its two townships (IOI Palm City and IOI Palm International Parkhouse) in China.
   
• Looking ahead, consensus is expecting IOIPG to achieve a net profit of RM646m (+42% YoY) in FY ending June 2021 and RM687m (+6% YoY) in FY ending June 2022, to be driven by strong property sales in China. This represents forward PERs of 9.8x and 9.2x, respectively.
   
• Technically speaking, the stock has corrected 28% from a high of RM1.49 in early-April to a low of RM1.08 in mid-July. Since then, the stock has formed a bullish dragonfly doji candlestick with a higher low of RM1.10 in late-July, signalling that the stock might have already bottomed out.
   
• With both the MACD and Parabolic SAR indicators showing signs of rising momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM1.30 (R1; 13% upside potential) and RM1.42 (R2; 23% upside potential).
   
• We have pegged our stop loss at RM1.02 (11% downside risk).

Source: Kenanga Research - 6 Aug 2021