Chin Hin Group Bhd (Trading Buy)

• CHINHIN is involved in building materials manufacturing, construction & engineering, property development and the provision of home and living solutions.

• For its recent reporting period of 3QFY21, the group’s net profit declined by 22% YoY to RM2.5m as all of the group’s manufacturing plants had to incur high overheads during the FMCO period when business operations were disrupted. This brought its 9MFY21’s bottomline to RM21.3m (+75% YoY).

• Going forward, consensus is forecasting the group to register net profit of RM34.6m and RM68.0m for FY21 and FY22, respectively. This translates to forward PERs of 62.8x for FY21 and 31.8x for FY22.

• Chart-wise, the stock saw a pick-up in momentum in late October 2021 and has been forming higher highs and higher lows since then. Moreover, the stock’s trajectory has found support at its 20-day SMA since 2021 with a recent bounce-off indicating that its short-term upward momentum is still intact.

• With the Parabolic SAR indicator recently shifted direction to trend upwards and coupled with the stock treading above its short-term SMA, the stock may continue to build on its upward momentum.

• Based on the Fibonacci extension lines, the stock may rise to challenge our resistance levels of RM2.75 (R1; 12% upside potential) and RM3.19 (R1; 30% upside potential).

• We have pegged our stop loss at RM2.27, which represents a downside risk of 7%.

Datasonic Group Bhd (Trading Buy)

• DSONIC provides ICT solutions that include smart card personalization such as secure ID or chip-based credit/debit bank cards.

• In 2QFY22, the group’s revenue dropped by 34% YoY to RM28.7m due to the absence of supplies of smart cards and consumables that also hit contributions from the maintenance services and personalisation services. In tandem with the lower revenue, the group’s net profit plunged 87% to RM1.0m, taking its 1HFY22’s bottomline to net loss of RM4.6m (-138% YoY).

• Still, the worst seems to be over as consensus is projecting the group’s net earnings to jump by 257% to RM26m in FY Mar 22 to be followed by a further rise of 185% to RM74m in FY Mar 23. This translates to forward PERs of 65.0x this year and 17.5x next year, respectively.

• Chart-wise, the stock was previously moving in a sideways pattern since October 2021 before slipping to bottom out in December 2021. After which, the emergence of a couple of bullish dragonfly doji candlesticks has indicated that a trend reversal may be underway.

• In addition, the occurrence of a bullish ADX divergence towards the end of November 2021 (as shown by the ADX indicator trending upwards but the share price was moving in the opposite direction) – which was followed by the stock bouncing off its new low of RM0.41- confirms the prevailing trend reversal.

• Coupled with an uptrend of the Parabolic SAR, the bullish momentum could lift the stock to challenge our resistance levels of RM0.50 (R1; 10% upside potential) and RM0.555 (R1; 22% upside potential).

• On the downside, our stop loss has been set at RM0.41, which translates to a downside risk of 10%.

Source: Kenanga Research - 28 Jan 2022