Pestech International Bhd (Trading Buy)

• PESTECH is an integrated electrical power technology company with core businesses in electrical system, transmission line & power cables, infrastructure asset management, power generation, rail electrification & signalling and power distribution & smart grid.

• The group is also involved in the provision of electric vehicle (EV) charging solutions (with 18 EV charging stations currently), which stands to benefit from the government’s various tax incentives (relating to EV charging facilities and EV charging facility subscription fees) granted under Budget 2022.

• For the latest FY ended June 2021, PESTECH made net profit of RM66.2m (+29% YoY). Going forward, our fundamental research team is projecting the group to post higher net earnings of RM75.7m in FY June 2022 and RM87.0m in FY June 2023. This translates to forward PERs of 11.6x and 10.1x, respectively.

• Via its listed subsidiary PESTECH (Cambodia) PLC (whose share price has risen 10% YTD to KHR3,190 currently), its market capitalisation equivalent of RM243m accounts for approximately one-quarter of PESTECH’s existing market valuation based on its 94.7% stake.

• From a technical perspective, PESTECH’s share price has rebounded from a recent trough of RM0.835 in early August to reach a high of RM1.28 last Wednesday, plotting a sequence of higher lows along the way. And with the stock still treading above the 50-day SMA following a price crossover in end-August, the uptrend pattern remains intact.

• Hence, the ongoing share price weakness (down 10.2% from the last Wednesday’s high) presents an opportunity for investors to accumulate the shares.

• On the chart, a resumption of the upward trajectory will probably lift the stock towards our resistance thresholds of RM1.28 (R1; 11% upside potential) and RM1.38 (R2; 20% upside potential).

• Our stop loss price level is set at RM1.03 (or 10% downside risk from yesterday’s close of RM1.15).

GDEX Bhd (Trading Buy)

• GDEX shares – which closed at RM0.31 yesterday – may attempt to overcome a negative sloping trendline that stretches back to November last year.

• Technically speaking, an upward shift in the share price will likely be in the horizon following: (i) the occurrence of a bottom failure swing in the RSI (which has charted higher lows in the oversold area amid a flattish share price pattern), and (ii) the stochastic indicator’s anticipated reversal from an oversold position.

• A probable breakout from the descending trendline could then push the stock towards our resistance thresholds of RM0.35 (R1; 13% upside potential) and RM0.40 (R2; 29% upside potential).

• We have set our stop loss price level at RM0.27 (or 13% downside risk).

• In the business of providing express delivery services and logistics services, GDEX is a proxy to the rising e-commerce trend driven by elevated demand for courier services from on-line business activities.

• Earnings-wise, the group saw its bottomline coming in at RM26.1m (+41% YoY) for the 12-month period ended June 2021. Its balance sheet remains stable with net cash holdings & short-term funds of RM218.0m (or 3.9 sen per share) as of end-June 2021.

Source: Kenanga Research - 17 Nov 2021