Bumi Armada Bhd (Trading Buy)

• Business-wise, ARMADA is an international offshore energy facilities and services provider which owns and operates offshore vessels to support oil & gas exploration and production activities.

• For the latest quarter of 3QFY21, amid disruptions in vessel availability, ARMADA reported a revenue of RM545.7m (-3.3% YoY) while net profit increased to RM153.4m (+79.2% YoY). This brought 9MFY21’s net earnings to RM456.0m (versus 9MFY20’s net loss of RM18.5m).

• As Brent crude oil prices are currently hovering around USD89 per barrel, consensus is expecting ARMADA to post a net profit of RM633.7m this year and RM603.4m next year, which translate to forward PERs of 5.1x and 5.4x, respectively.

• Chart-wise, the stock plunged to a low of RM0.145 (in mid-Dec 2018), registering a decline of 81% from its peak of RM0.75 (in end-July 2018). Subsequently, the stock recouped its losses partially and tried to challenge the RM0.55-RM0.56 range from mid-November 2019 to beginning-January 2020. The failure to break above this range then led the stock to retrace to RM0.11 (in mid-March 2020).

• Following that, the stock then plotted higher lows to form an ascending triangle pattern before closing at RM0.55 on Monday.

• On the back of the crossover by the shorter-term MA above the longer-term MA and coupled with the Parabolic SAR indicator trending upwards, ARMADA’s stock price will probably continue to rise by breaking out from the ascending triangle formation.

• As such, the stock could climb to challenge our resistance thresholds of RM0.605 (R1; 10% upside potential) and RM0.64 (R2; 16% upside potential).

• We have pegged our stop loss price at RM0.50 (or a 9% downside risk).

Wah Seong Corporation Bhd (Trading Buy)

• From a technical perspective, WASEONG’s share price is currently riding an uptrend after cutting above the 200-day MA recently. The rising momentum is also supported by an upward trend by the Parabolic SAR indicator.

• Therefore, we anticipate the stock could extend its uptrend and test our resistance levels of RM0.79 (R1; 12% upside potential) and RM0.825 (R2: 17% upside potential).

• We have pegged our stop loss at RM0.63 (representing a downside risk of 11% from Monday’s close of RM0.705).

• WASEONG – whose core business encompasses 2 main divisions, namely Oil and Gas Division and Industrial Services Division - offers a wide spectrum of services such as pipe-coating, manufacturing of spiral welded steel pipes, metal roofing services etc.

• The group reported a narrower net loss of RM5.9m in 3QFY21, lifted by lower operating expenses and the absence of an one-off adjustment compared to a loss of RM255.8m in 3QFY20. This brought its 9MFY21’s cumulative net profit to RM4.7m (versus a net loss of RM329.8m in the preceding period).

• Consensus is currently projecting WASEONG to register a net loss of RM6.6m in FY Dec 2021 before returning to profitability in FY Dec 2022 with a net profit of RM47.9m.

Source: Kenanga Research - 3 Feb 2022