Optimax Holdings Berhad (Trading Buy)

• OPTIMAX provides eye care services such as cataract surgery, lens exchange, glaucoma, diabetic eye disease treatment and retinal detachment.

• Adversely affected by the pandemic, OPTIMAX’s earnings fell 28% YoY to RM6m in FY20. Nonetheless, based on the strong 9MFY21 net profit of RM5.4m (+109% YoY), consensus is expecting OPTIMAX’s net profit to rebound to RM12m (+113% YoY) in FY21 and RM16m (+32% YoY) in FY22. These translate to forward PERs of 31x and 24x, respectively.

• Chart-wise, since its August 2020 listing, the stock has risen to a high of RM1.87 in March this year before subsequently falling 38% to bottom out at RM1.16 in July.

• Since then, the stock has been forming higher lows on its way up.

• Recently, the stock has also been hovering around the 25-day SMA, with its most recent price correction finding support along the dynamic support line, suggesting that the short-term uptrend is intact.

• With the formation of higher lows, we believe that its downside risks are limited given the emergence of buying support at the increasingly higher price levels.

• On its way up, the stock could challenge our resistance levels of RM1.56 (R1; 13% upside potential) and RM1.80 (R2; 30% upside potential).

• We have pegged our stop loss level at RM1.21 (or a 12% downside risk).

Genting Malaysia Bhd (Trading Buy)

• GENM operates a tourist resort in Genting Highlands that includes hotels, restaurants, casinos and recreational & amusement facilities. The group, through its subsidiaries, also develops and leases property and operates leisure & hospitality services.

• In FY20, GENM was battered by the pandemic-triggered disruptions as it suffered a core net loss of RM1.4b (vs core net profit of RM1.3b in FY19).

• However, on the back of narrowing losses as the worst is probably over, as seen from the RM1b net loss in 9MFY21 vs RM1.3b net loss in 9MFY20, consensus is expecting GENM to post a lower net loss of RM1.1b in FY21 before returning to a net profit of RM816m in FY22, which translates to a forward PER of 20x next year.

• After peaking at RM3.30 in mid-October, the stock fell 15% over the last two months on concerns of the emergence of the Covid-19 Omicron variant. As the variant has shown to cause less severe illness at this juncture, the ongoing price weakness may offer long-term investors an attractive entry point with the stock likely to rebound when sentiment recovers.

• Technically speaking, the recent 15% share price correction may have reached its trough already as the Heikin Ashi candles are showing early signs of a double-bottom pattern.

• The MACD indicator is also showing that the negative momentum has waned following its positive crossover above the signal line.

• With the Parabolic SAR and Heikin Ashi candles showing indicative signs of an uptrend, we think the stock could continue to rise to challenge our resistance levels of RM3.13 (R1; 11% upside potential) and RM3.31 (R2; 18% upside potential).

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

Source: Kenanga Research - 23 Dec 2021