Aemulus Holdings Bhd (Trading Buy)

• AEMULUS is engaged in the designing and assembling of automated test equipment and measurement instruments. The group’s main products are RF (radio frequency) testers, which are expected to see rising demand on the back of increased adoption of 5G applications.

• Earnings-wise, AEMULUS reported revenue of RM18.6m (+7.4% QoQ) in 1QFY22 mainly driven by higher contributions from the tester segment while the group’s net profit rose in tandem by 9.7% QoQ to RM4.5m.

• Chart-wise, an extended upward shift for AEMULUS is anticipated after its share price has bounced off from a recent low of RM0.57 on 8 March, which coincided with a previous trough in January 2021, thus paving the way for the formation of a double-bottom reversal pattern.

• Based on the following technical indicators, the current upward momentum is likely to continue as: (i) the Parabolic SAR is plotting upwards, (ii) the RSI is rising, and (iii) the stochastic’s %K line has crossed over the %D line.

• An upward movement in the share price could then challenge our resistance levels of RM0.92 (R1; 19% upside potential) and RM1.00 (R2; 29% upside potential).

• We have pegged our stop loss at RM0.66, which represents a downside risk of 15%.

Elsoft Research Bhd (Trading Buy)

• ELSOFT is engaged in the research, design and development of test and burn-in systems and application specific embedded systems.

• ELSOFT reported revenue of RM12.9m in 4QFY21(vs. 3QFY21: RM9.6m) thanks to increased sales from both the smart devices and automotive industries while its net profit increased 90% QoQ to RM5.6m, taking its full-year net earnings to RM11m (1602% YoY).

• Based on consensus estimates, the group is projected to record a net profit of RM24m in FY22 and RM29.2m in FY23, which translate to forward PERs of 26.0x and 21.7x, respectively.

• From a technical viewpoint, the stock started to move up in mid-Jun 2021, forming higher highs and higher lows along the way to reach a peak of RM1.20 in Jan 2022. Thereafter, the share price fell by 28% before bouncing up from a recent low of RM0.835 to close at RM0.935 yesterday, possibly bottomed out already.

• With the Parabolic SAR showing its first uptick signal and coupled with the positive stochastic crossover while the DMI Plus is on the rise to widen the gap from the DMI Minus, we anticipate the stock will continue its rebound momentum ahead.

• On the way up, the stock could rise to challenge our resistance targets of RM1.03 (R1; 10% upside potential) and RM1.14 (R2; 22% upside potential).

• Our stop loss price level is pegged at RM0.84, which represents a downside risk of 10%.

Source: Kenanga Research - 18 Mar 2022