JF Technology Berhad (Trading Buy)

• After peaking at a high of RM2.41 in January this year, the stock fell 51% to a low of RM1.18 in March. The sharp correction also broke below the 100-day SMA in March, signifying JFTECH’s downtrend.

• Since then, the stock has been forming higher highs and higher lows. Together with its cross above the 100-day SMA in July, along with its numerous rebounds off the 100-day SMA during the subsequent tests, the stock is likely on an uptrend again.

• With the stock price hovering near the lows of the recent swing low, coupled with the rising parabolic SAR indicator, we believe the stock could continue trending upwards to challenge our resistance levels of RM1.68 (R1; 13% upside potential) and RM1.86 (R2; 25% upside potential).

• We have pegged our stop loss level at RM1.32 (or 11% downside risk).

• Business wise, JFTECH designs, manufactures and assembles test probes and test sockets for the semiconductor industry.

• In FYE June 2021, JFTECH’s net profit rose 89% to RM15m on the back of a 43% rise in revenue to RM38m.

• Looking ahead, JFTECH will likely continue to ride on the resilient and strong demand for semiconductors.

Southern Cable Group Bhd (Trading Buy)

• Yesterday, cable and wire manufacturer SCGBHD announced that it has secured a rectifier system supply contract worth RM30m (~5% of FY20 revenue) from Telekom Malaysia, a long-time client of SCGBHD.

• Despite the 26% decline in net profit to RM21m (on a 14% revenue decline) in FY20, the Group is confident that it is well positioned to support Malaysia’s 5G roll-out plan with the supply of its rectifier systems and other communications and related equipment to telcos such as TM.

• We think that as a provider of the necessary equipment for the 5G infrastructure, SCGBHD may ride on the recent excitement around telecommunications infrastructure stocks.

• Moreover, having transferred to Bursa’s Main Market yesterday, the stock could see greater investor participation.

• Technically speaking, after peaking at a high of RM0.60 in February this year, the stock formed lower highs and bottomed at RM0.39 in August.

• Since then, the stock has been forming higher highs and higher lows.

• In September alone, the stock trod above both the 50-day and 100-day SMAs, indicating that the stock is on a strong uptrend. This is further supported by the 50-day SMA recently crossing above the 100-day SMA.

• With the MACD showing waning downward momentum and favourable price-action movements, we think that the stock will continue to trend upwards to challenge our resistance levels of RM0.59 (R1; 15% upside potential) and RM0.65 (R2; 26% upside potential).

• We have pegged our stop loss at RM0.455 (12% downside risk).

Source: Kenanga Research - 29 Oct 2021