Cocoaland Holdings Bhd (Trading Buy)

• The current share price pullback of COCOLND – which stopped at RM1.14 yesterday after touching a high of RM1.27 on Monday – offers a trading buy opportunity for investors.

• On the chart, the stock is expected to resume its upward trajectory following: (i) its breakout from a symmetrical triangle pattern, (ii) the onset of an uptrend by the Parabolic SAR indicator, and (iii) the rising momentum indicator (which has just crossed above the zero-line).

• On the way up, COCOLND shares could advance towards our resistance targets of RM1.25 (R1; 10% upside potential) and RM1.33 (R2; 17% upside potential). Our stop loss price level is pegged at RM1.05 (representing a downside risk of 8%).

• In terms of news flows, according to one business weekly media, two interested foreign parties (from Asia and Europe) are eyeing to buy over a controlling stake in COCOLND (a manufacturer of sugar confectionery products such as chocolate, candy, snack, wafer, cookies, soft drinks, nuts, crackers, gummy and jelly). If the rumour turns out to be true, it is expected to stir up buying interest in its shares (which ended at RM1.07 last Friday before the news report was published).

• Profit-wise, despite the business disruptions due to the Covid-19 pandemic last year, the group has registered steady quarterly net earnings of RM5.7m in 1QFY21, RM3.3m in 2QFY21 and RM4.1m in 3QFY21. This brought its 9MFY21’s cumulative net profit to RM13.0m (- 18% YoY).

• Consensus is currently forecasting COCOLND to make net earnings of RM26.4m in FY December 2021 and RM32.4m in FY December 2022 (or translating to a forward PER of 15.8x this year).

• Financially sound, the group’s debt-free balance sheet is backed by cash holdings of RM65.8m (or 14.6 sen per share) as of end September last year.

Samchem Holdings Bhd (Trading Buy)

• An upward shift in SAMCHEM’s share price is anticipated as the stock is in a position to bounce off from a positive sloping trendline that stretches back to March 2020.

• And the shares will probably find added strength to continue its rising momentum after crossing back above the lower Bollinger Band while the stochastic indicator’s %K line has also cut above the %D line in the oversold zone.

• With that, the stock could climb towards our resistance thresholds of RM0.93 (R1; 11% upside potential) and RM1.01 (R2; 20% upside potential).

• We have set our stop loss price level at RM0.76 (or a 10% downside risk).

• Business-wise, as a leading regional industrial chemicals and lubricants distributor, SAMCHEM supplies approximately 500 different petrochemicals and services to more than 7,000 clients from industries such as automotive, paints & inks, oil & gas and agriculture across the region (mainly in Malaysia, Indonesia, Vietnam and Singapore).

• Against a backdrop of Covid-19-triggered disruptions for most parts of last year, the group still managed to show steady quarterly performance with net profit coming in at RM19.0m in 1QFY21, RM19.2m in 2QFY21 and RM12.6m in 3QFY21. This took 9MFY21’s cumulative net earnings to RM50.8m (up 125% YoY).

Source: Kenanga Research - 26 Jan 2022