Greenyield Bhd (Trading Buy)

• GREENYB is an investment holding group with 3 business segments, namely: (i) plantation inputs (comprising plantation related products such as chemicals and fertilizers, tools and equipment, technical support services, consultancy services), (ii) rubber estate (comprising the production and sale of rubber cup lumps), and (iii) household goods (comprising plant pots and dinnerware).

• Earnings-wise, the group’s revenue rose by 38% from RM33.3m in FY20 to RM45.9m in FY21 thanks to higher sales from the household goods and plantation inputs segments. Nonetheless, despite the jump in revenue, the group recorded only a flattish core profit of RM5.37m from RM5.39m in FY20 (-0.2%) due to the group’s high cost base and higher effective tax rate (of 29%) in FY21 (vs FY20’s 22%).

• The group stands to benefit from strengthening commodity prices including natural rubber prices, which provides for more business opportunities to increase sales of plantation inputs (presently contributes c.50% to overall revenue) during elevated commodity prices.

• Chart-wise, from a peak of RM0.38 in August 2021, GREENYB shares moved in a downward trajectory until early February 2022 before reversing direction to plot an ascending channel.

• The uptrend is likely to continue as: (i) the DMI Plus is treading above the DMI Minus with their gap recently widened further, (ii) the Parabolic SAR is trending higher, and (iii) the 20-day SMA has recently crossed over the 50-day SMA to form a golden cross.

• Thus, the stock could rise to challenge our resistance levels of RM0.33 (R1; 12% upside potential) and RM0.36 (R2; 22% upside potential).

• We have pegged our stop loss at RM0.265, which represents a downside risk of 10%.

LB Aluminium Bhd (Trading Buy)

• Chart-wise, LBALUM’s share price gapped down by 15% in mid-May 2021 after which it trended in a sideways pattern before sliding again to hit a low of RM0.41 in mid-December 2021. Yesterday’s gap-up (of 14%) to close at RM0.60 that was backed by stronger-than-average trading volume suggests renewed buying interest for the shares.

• Based on the Kelter Channel indicator, the stock price is likely to continue strengthening after breaching the upper band of the channel.

• Moreover, with the MACD line recently crossing above the signal line, we expect the stock to climb and challenge our resistance levels of RM0.67 (R1; 12% upside potential) and RM0.72 (R2; 20% upside potential).

• On the downside, our stop loss has been set at RM0.53, which translates to a downside risk of 12%.

• Business-wise, the group manufactures, markets and trades aluminum extrusion and ceiling metal tee products. Through its subsidiaries, the group is also involved in property holdings.

• For its latest results, the group recorded a revenue of RM273.4m in 6MFY22, up from RM238.1m in 6MFY21 (+15%) due to higher average selling price for the aluminum products. Despite the higher YTD revenue, the group’s core profit fell by 27% to RM9.8m from RM13.6m in 6MFY21, dragged down by a poor 1QFY22 results which was adversely affected by lockdowns imposed by the government.

• Still, forward earnings may come in stronger as LBALUM is expected to benefit from rising aluminum prices, which have soared in tandem with some other commodities amid the ongoing war in Ukraine.

Source: Kenanga Research - 4 Mar 2022