Hextar Industries Bhd (Trading Buy)

• HEXIND’s business portfolio comprises: (i) the handling of heavy machineries and quarry supplies, (ii) rental solutions, and (iii) the manufacturing and distribution of fertilisers.

• In 3QFY21, HEXIND returned to profitability with a net profit of RM0.9m due to the resumption of business activities when compared to the marginal net loss of RM0.7m in 3QFY20 (which was negatively impacted by the Movement Control Order).

• Chart-wise, the stock closed at RM0.36 yesterday, which represents a retracement of 33% from its 52-week peak of RM0.54.

• Technically speaking, a buy signal may have been triggered following the: (i) 9-day moving average line cutting above the 35- day moving average line, and (ii) uptrend pattern in the Parabolic SAR indicator.

• In view of the aforementioned bullish technical signals, the stock could climb to challenge our resistance targets of RM0.42 (R1) and RM0.45 (R2), which represents projected returns of 17% and 25%, respectively.

• We have pegged our stop loss price at RM0.31, translating to a downside risk of 14%

ATA IMS Bhd (Trading Buy)

• ATAIMS operates in the Electronic Manufacturing Service (EMS) industry, providing a diverse array of services ranging from: (i) Design & Engineering Solutions, (ii) Mould Design & Fabrications, (iii) Plastic Injection Moulding, (iv) Filter Manufacturing and many other electronic engineering services.

• ATAIMS’ key strengths are: (i) its wealth of knowledge gained from providing various EMS services over the years, and (ii) a diversified customer base (in the home-care, environmental care, lightings, Internet of Things (IOT) and automotive sectors), which puts the group in a position to capitalise on the growth potentials of the various sectors.

• In terms of recent corporate news flows, ATAIMS’ management has come out to deny allegations of forced labour at its factories (an accusation that had previously caused its shares to tumble from a high of RM3.48 in mid-April to RM2.16 towards the end of May this year). Following which, the share price has partially recovered to close at RM2.74 yesterday.

• Earnings-wise, the group saw its net profit increased to RM26.9m (+4,881% QoQ) in 4QFY21 in tandem with a rise in revenue to RM967.9m (+34% QoQ). This took full-year net earnings to RM150.1m (+92% YoY) for FY March 2021.

• Moving forward, consensus is projecting ATAIMS to make stronger net profit of RM181.5m in FY March 22 and RM219.2m in FY March 23, which translate to forward PERs of 18.1x and 15.0x, respectively.

• Technically speaking, the Keltner Channel is currently indicating a bullish trend as the stock hovers around the upper band.

• In addition, with the rising ADX indicator also signalling an uptrend pattern, ATAIMS shares could climb towards our resistance thresholds of RM3.14 (R1; 15% upside potential) and RM3.30 (R2; 20% upside potential).

• Our stop loss price is set at RM2.39 (representing a 13% downside risk).

Source: Kenanga Research - 12 Aug 2021