SCGM Berhad (Trading Buy)

• SCGM manufactures food & beverage packaging, namely takeaway trays and plastic containers for fresh foods in supermarkets. In 2020, SCGM diversified into the manufacturing of face shields and face masks.

• In FY April 2021, SCGM registered net profit of RM34m, a 94% YoY growth. In the 6-month period ended October 2021, despite showing a 20% revenue growth, its net profit fell 16% YoY to RM16.3m mainly due to higher raw material costs.

• Nevertheless, consensus is still expecting SCGM to achieve a higher net profit of RM36m in FY April 2022 (+8% YoY) and RM39m in FY April 2023 (+8% YoY). These translate to forward PERs of 11.9x and 11.2x, respectively.

• Chart-wise, from its 2021 peak of RM2.83 in November, the stock fell 26% to bottom out at RM2.09 two days ago.

• After testing the RM2.10 support level, the stock staged a strong rebound the next day, suggesting a firm rejection of lower prices.

• The MACD indicator is also showing waning downward momentum, suggesting that the stock has likely bottomed out, setting the stage for the share price to shift higher ahead.

• On its way up, we believe the stock could challenge our resistance levels of RM2.55 (R1; 14% upside potential) and RM2.80 (R2; 26% upside potential).

• We have pegged our stop loss level at RM1.96 (or a 12% downside risk).

UEM Sunrise Berhad (Trading Buy)

• UEMS is a property developer which is involved in a range of projects including industrial, commercial, residential, healthcare and mixed used properties, government offices and universities.

• Battered by lower sales in FY20, UEMS registered a core net loss of RM121m compared to a core net profit of RM308m in FY19. However, with an earnings recovery already underway, as seen in the shrinking core net loss (9MFY21’s RM56m vs 9MFY20’s RM93m), consensus is expecting UEMS to record a smaller net loss of RM75m in FY Dec 21.

• Looking ahead, consensus is anticipating UEMS to turn around with a net profit of RM55m in FY22, which translates to a forward PER of 31x.

• Technically speaking, after forming a descending triangle starting in June 2020, the stock broke below the RM0.36 support line in November 2021. The stock recently hit a bottom at RM0.30, as indicated by the MACD’s weakening downward momentum and its subsequent upward momentum reversal.

• With the Parabolic SAR and Heikin Ashi candles suggesting that an uptrend is currently underway, the stock could continue to rise to challenge our resistance levels of RM0.395 (R1; 16% upside potential) and RM0.43 (R2; 27% upside potential).

• We have pegged our stop loss level at RM0.29 (or a 15% downside risk).

Source: Kenanga Research - 14 Jan 2022