Dominant Enterprise Bhd (Trading Buy)

• Since mid-August 2021, DOMINAN’s share price started to move up to form a sequence of higher highs and higher lows before seeing a sharp fall of 26% from RM1.29 on 21 Feb 2022 to a low of RM0.915 on 8 Mar 2022.

• Following which, the chart recently showed a bounce off from the trough with the upward momentum likely to continue based on the positive technical signals arising from: (i) the rising Parabolic SAR trend, (ii) the MACD crossover, and (iii) the unwinding of the RSI indicator from the oversold position.

• With that, DOMINAN’s share price could climb towards our resistance threshold of RM1.13 (R1; 14% upside potential) and RM1.29 (R2; 30% upside potential).

• Our stop loss price level is set at RM0.88 (or a downside risk of 12%).

• DOMINAN is engaged in the manufacturing, distribution and sale of wood products (such as laminated wood panel products, wrapped medium density fibreboard molding & others) as well as the provision of management services.

• Earnings-wise, the group reported a net profit of RM13.8m in 3QFY22 (up from RM2m in 2QFY22) mainly due to the resumption of business activities to fulfill backlog orders following the lifting of the Full Movement Control Order (FMCO) restriction. This brought 9MFY22’s bottomline to RM21.8m (+88% YoY).

Mieco Chipboard Bhd (Trading Buy)

• From a technical perspective, MIECO’s share price has been in a consolidation stage from Dec 2018 to Sep 2020 before plotting an uptrend to peak at RM0.70 on 7 May 2021. Thereafter, the shares pulled back to a low of RM0.41 on 9 Dec 2021.

• A recent rebound from the trough to form a sequence of higher highs and higher lows may signal a resumption of the uptrend pattern.

• With both the Parabolic SAR and MACD indicators pointing to an upward momentum, the share price is expected to shift higher ahead.

• Based on the Fibonacci extension lines, the stock could rise to challenge our resistance levels of RM0.76 (R1; 13% upside potential) and RM0.86 (R2; 28% upside potential).

• We have pegged our stop loss at RM0.60, which represents a downside risk of 10%.

• MIECO is involved in the manufacturing and sales of wood-based products, focusing mainly on the local market.

• Based on the latest quarterly result in 4QFY21, its revenue rose 132% QoQ to RM134.8m thanks to: (i) higher average selling prices which rose in tandem with the surge in raw material costs, and (ii) the resumption of operation after the lockdown ended in 3QFY21. Consequently, the group returned to the black with a core net profit of RM28.1m (vs. core net loss of RM8.2m previously), taking its full-year bottomline to RM27.5m (vs. core net loss of RM4.4m in FY20).

Source: Kenanga Research - 24 Mar 2022