Duopharma Biotech Berhad (Trading Buy)

• DPHARMA is a pharmaceutical company that develops and markets generic drugs. Recently, DPHARMA has been granted conditional registration approval for Sinopharm’s Covid-19 vaccine, which is intended for distribution to the private sector in Malaysia.

• With the deal projected to contribute positively to DPHARMA’s profits, consensus is expecting the group to achieve a net profit of RM71m (+20% YoY) in FY21 and RM77m (+10% YoY) in FY22.

• These translate to forward PERs of 26.0x this year and 23.9x next year, respectively.

• Technically speaking, after having corrected 35% from a high of RM3.60 in June 2021 to a low of RM2.35 in August, the stock has found support along the 61.8% Fibonacci retracement level of RM2.40.

• Since then, the stock has staged a rebound with the uptrend likely to resume based on positive technical signals.

• The Heikin Ashi candles are showing that the stock’s negative momentum has waned, as the stock is currently at a nascent stage of riding an upward trajectory.

• With the MACD, Stochastic and Parabolic SAR indicators all showing signs of rising momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM2.90 (R1; 11% upside potential) and RM3.18 (R2; 22% upside potential).

• We have pegged our stop loss at RM2.33 (or an 11% downside risk).

Gamuda Berhad (Trading Buy)

• GAMUDA is Malaysia’s leading engineering, infrastructure and property group.

• In FY July 20, GAMUDA achieved a core net profit of RM520m. On the back of lower construction and property progress billings as well as weaker tolled highway traffic flows, consensus is expecting GAMUDA to achieve a net profit of RM485m (- 7% YoY) in FY July 21 before increasing to RM591m (+22% YoY) in FY July 22.

• These translate to forward PERs of 14.5x this year and 11.9x next year, respectively.

• Technically speaking, the stock has corrected 35% from a high of RM4.00 in March 2021 to a low of RM2.60 in mid-August, which is close to the trough of RM2.36 during the March 2020 crash.

• Since then, the stock has staged a rebound as the share price could be in the midst of making a trend reversal based on positive technical signals.

• With the Heikin Ashi candles showing that the stock’s negative momentum is waning, the stock is currently in a position to stage a rally ahead.

• And as both the MACD and Parabolic SAR indicators are showing signs of rising momentum, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM3.13 (R1; 12% upside potential) and RM3.26 (R2; 16% upside potential).

• We have pegged our stop loss at RM2.52 (or a 10% downside risk).

Source: Kenanga Research - 20 Aug 2021