Shin Yang Shipping Corporation Bhd (Trading Buy)

• SYSCORP is an integrated shipping and shipbuilder operator, which includes ship repair and forwarding agencies as its core businesses.

• Its shipping operations cover dry bulk, liquid bulk, containers and coastal, barges and tug and international shipping segments, which are supported by a fleet of 240 vessels.

• In addition, with 280 acres of shipbuilding yard, SYSCORP has an annual capacity to construct 40 vessels, which enables the group to undertake timely modifications of vessels in order to meet customers’ demands.

• Reflecting the improved outlook of the shipping industry amid the resumption of economic activities, SYSCORP reported a net profit of RM6.2m in 4QFY21 versus a net loss of RM40.2m in the preceding quarter, bringing its full-year net profit ended June 2021 to RM17.3m, a significant improvement compared to the net loss of RM160.4m reported in the previous year.

• SYSCORP’s stock price has pulled back from a high of RM0.405 in end-July 2018 to a low of RM0.115 in the middle of March 2020 before recovering subsequently to hit a new high of RM0.47 in the beginning of May 2021. It closed at RM0.355 yesterday, registering a return of 16.4% YTD.

• We believe a resumption of the upward trajectory for the share price is underway due to the following bullish technical signals: (i) the 50-day MA crossing over the 100-day MA, and (ii) the ROC indicator has just crossed above the zero-line.

• With that, the stock could advance to challenge our resistance thresholds of RM0.42 (R1; 18% upside potential) and RM0.45 (R2; 27% upside potential).

• We have pegged our stop loss price at RM0.30 (or 15% downside risk).

Success Transformer Corporation Bhd (Trading Buy)

• SUCCESS’ core business operation is in the manufacturing of power transformers and electrical apparatus products, namely automatic voltage stabilizers, detuned harmonic circuit filter reactor, battery chargers and testers.

• The Group’s diverse distribution network has enabled SUCCESS to sell its products to customers who are spread geographically over 40 countries.

• SUCCESS reported net earnings of RM4.3m (+377.7% QoQ) in 4QFY21, driven mainly by higher revenue, taking the full year net profit ended June 2021 to RM22.6m (+69.9% YoY).

• Going forward, consensus is expecting SUCCESS to report a net profit of RM22.4m in FY22 and RM24.1m in FY23. This translates to forward PERs of 9.4x and 8.8x, respectively.

• From a high of RM1.95 at the end of August 2017 to a bottom of RM0.40 at the end of March 2020, SUCCESS’ share price has partially recouped its losses since then to close at RM0.925 yesterday.

• Following the occurrence of the stock price cutting above the upper-band of the Keltner Channel, a continuation of the upward trajectory – which is supported by a positive sloping trendline – is anticipated.

• In addition, with the Parabolic SAR indicator trending upwards, SUCCESS’ share price could rise to our resistance targets of RM1.06 (R1) and RM1.14 (R2), which represent upside potentials of 15% and 23%, respectively.

• Our stop loss price has been set at RM0.80, which represents a downside risk of 14%.

Source: Kenanga Research - 30 Sept 2021