Kenanga Research & Investment

Daily technical highlights – (NOVA, ULICORP)

Publish date: Wed, 22 Dec 2021, 09:27 AM

NOVA Wellness Group Berhad (Trading Buy)

• NOVA principally develops and sells nutraceutical and skin care products, dietary and herbal supplements, and functional foods.

• Despite the pandemic-related disruptions, NOVA achieved a net profit of RM13m (+19% YoY) in FY June 20 and RM15m (+12% YoY) in FY June 21.

• The positive earnings momentum continued into the 3-month period ended Sept 2021, with its net profit almost doubling YoY from RM2.7m to RM5.2m.

• With a resumption in consumption spending, NOVA’s fundamental is poised to ride on Malaysia’s economic recovery.

• Chart-wise, the stock has formed a rounding bottom pattern since May this year, indicating a reversal of the downtrend that began in August 2020.

• Coupled with the golden SMA cross in November and the stock’s recent bounce off from the 50-day SMA, the stock is in the midst of a long-term uptrend.

• With the MACD indicator also showing waning downward momentum, we believe the stock could continue to trend upwards.

• On its way up, the stock could challenge our resistance levels of RM1.11 (R1; 14% upside potential) and RM1.25 (R2; 28% upside potential).

• We have pegged our stop loss level at RM0.85 (or a 13% downside risk).

United U-Li Corp Bhd (Trading Buy)

• ULICORP manufactures and trades cable support systems, integrating ceiling systems, steel roof battens, electrical lighting & fittings and related industrial metal products.

• With the Covid-19 pandemic hitting the smaller industry players hard, ULICORP has benefited from market share gains at their expense. With less competition, this has also given ULICORP better product pricing power.

• In the 9MFY21, ULICORP achieved a core net profit of RM27m, up multiple folds from the RM0.1m in 9MFY20.

• Moving forward, our research team is estimating ULICORP to make a net profit of RM41.3m in FY Dec 21 (+638% YoY) and RM40.6m in FY Dec 22 (-2% YoY). These translate to forward PERs of 6.9x and 7.0x, respectively.

• Technically speaking, the stock has been treading in an ascending channel throughout 2021. It is currently hovering at the lower boundary of the channel, setting the stage for the share price to shift higher ahead.

• With the stock’s long-term uptrend intact (after having recently found support along the 200-day SMA), we believe the stock is in a position to rebound towards the upper boundary of the ascending channel.

• With the MACD indicator also showing early signs of an upward momentum, we think the stock could continue its rise to challenge our resistance levels of RM1.47 (R1; 13% upside potential) and RM1.60 (R2; 23% upside potential).

• We have pegged our stop loss level at RM1.14 (or a 12% downside risk).

Source: Kenanga Research - 22 Dec 2021

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