Southern Steel Bhd (Trading Buy)

• SSTEEL is in the business of steel manufacturing with a diverse array of products (such as billets, steel bars, carbon wire rods and pipes).

• Earnings-wise, SSTEEL reported a net profit of RM32.2m in 1QFY22 versus a net loss of RM28.1m in the previous year quarter. The latest quarter’s earnings improvement is attributed to a higher revenue of RM487.1m (+9.6% YoY), coupled with an increase in other incomes and higher profit contribution from associate company.

• Chart-wise, after sliding from a peak of RM2.45 around mid-November 2017, the stock hit a bottom at RM0.33 around mid March 2020. Thereafter, the stock treaded sideways for around 9 months before spiking to a high of RM1.25 in the beginning of May 2021. Since then, the stock has declined by approximately 34% to close at RM0.82 yesterday, which remains comfortably above the 100-day MA.

• The stock is anticipated to stage a rally ahead as: (i) a golden cross has taken place in which the 50-day MA has crossed above the 100-day MA, and (ii) the ROC indicator has just treaded upwards above the zero-line.

• With that, the stock could challenge our resistance targets of RM0.94 (R1; 15% upside potential) and RM1.04 (R2; 27% upside potential).

• Our stop loss price level is pegged at RM0.72 (or a 12% downside risk).

Able Global Bhd (Trading Buy)

• Chart-wise, ABLEGLOB’s stock has advanced 55% to RM1.60 in end April 2019 from a low of RM1.03 in the beginning of January 2019. Since then, the stock has retraced and treaded sideways for 7 months before reaching a higher high of RM1.90 in mid-February 2020.

• Thereafter, the stock plunged 48% to RM0.98 in mid-March 2020 before reaching a new high of RM2.08 towards the end of December 2020, only to decline again (by 20%) from its peak to close at RM1.66 yesterday.

• A technical rebound may be on the cards as the MACD line is on the verge of crossing above the signal line.

• In addition, the stock is treading above the 200-day EMA (since the beginning of April 2020), signalling that the stock is in a long-term uptrend pattern.

• Riding on the positive momentum, ABLEGLOB shares could climb towards our resistance thresholds of RM1.86 (R1) and RM1.95 (R2), which represent upside potentials of 12% and 17%, respectively.

• We have placed our stop loss at RM1.48, which represents a downside risk of 11%.

• ABLEGLOB’s core business encompasses 2 key segments, namely: (i) speciality metal packaging division, and (ii) food and beverage division.

• In its most recent financial reporting quarter, the group registered a net profit of RM8.8m in 3QFY21 (-23% QoQ), mainly dragged down by lower sales. This then brought its 9MFY21’s net profit to RM29.7m (-5% YoY).

Source: Kenanga Research - 7 Jan 2022