BP Plastics Holding Berhad (Trading Buy)

• BPPLAS is a specialty polyethylene films and bags manufacturer with both stretch film and blown film capabilities.

• In FY20, BPPLAS registered net profit of RM29.7m, a 40% YoY growth. The robust earnings momentum continued into the 9-month period ended Sept 2021 with net profit coming in at RM34.5m (+55% YoY), driven by higher sales volume and ASPs amid a more premium product mix.

• Going forward, BPPLAS plans to grow its premium stretch film segment from both new and existing customers. Consensus expects BPPLAS to achieve rising net profit of RM46m in FY21 (+55% YoY) and RM53m in FY22 (+15% YoY).

• These translate to forward PERs of 9.6x and 8.4x, respectively, which are attractive relative to its 5-year historical average of 11.6x.

• Technically speaking, following a correction of 31% from a high of RM2.045 in November to a low of RM1.41 in December, the stock has subsequently staged a steady rebound.

• The Heikin Ashi candles and the MACD indicator suggest that an upward momentum is gaining steam.

• With the 200-day SMA indicating that the long-term uptrend is still intact while the Parabolic SAR indicator is signalling an uptrend is currently underway, we believe the stock could continue to rise to challenge our resistance levels of RM1.85 (R1; 17% upside potential) and RM2.05 (R2; 30% upside potential).

• We have pegged our stop loss level at RM1.38 (or a 13% downside risk).

Sime Darby Property Bhd (Trading Buy)

• SIMEPROP is a developer of residential, commercial and industrial properties.

• Battered by lower sales in FY20, SIMEPROP’s core net profit fell 87% YoY to RM67m. With 9MFY21 earnings of RM68m (+117% YoY) showing signs of recovery, the worst is probably over. Consensus is expecting SIMEPROP to achieve a net profit of RM131m in FY21 (+96% YoY) and RM257m in FY22 (+96% YoY).

• These translate into forward PERs of 32.6x and 16.7x, respectively.

• Technically speaking, the stock has been treading within a range of RM0.54 and RM0.80 since June 2020. Recently, the stock has bounced off from the lower boundary of the price range, thus setting the stage for the share price to shift higher ahead.

• The MACD indicator and the Heikin Ashi candles suggest that the stock’s upward momentum could continue while the Parabolic SAR indicator is signalling that an uptrend is currently underway.

• On its way up, the stock could challenge our resistance levels of RM0.73 (R1; 16% upside potential) and RM0.80 (R2; 27% upside potential).

• We have pegged our stop loss level at RM0.55 (or a 13% downside risk).

Source: Kenanga Research - 6 Jan 2022