Greenyield Bhd (Trading Buy)

• GREENYB is an indirect play on escalating commodity prices. The elevated commodity prices – particularly for crude palm oil and natural rubber – could drive new demand for the group’s plantation inputs business, comprising products such as chemicals & fertilizers, tools & equipment, technical support services and consultancy services.

• Additionally, its rubber estate segment (which covers rubber plantation estates in Kelantan and the production & sale of rubber cup lumps) may benefit directly from higher natural rubber price (up a further 12% since end-2020 to USD165/kg currently). The group is also involved in the manufacturing and marketing of household goods (such as plant pots & dinnerware and plastic-related products).

• In terms of recent corporate development, GREENYB announced on 21 March 2022 a proposal to acquire a 65% stake in Greenyield Rubber Holdings (M) Ltd (GRHM) (which owns plantation properties located in PNG) from related parties for a purchase consideration of up to RM87.8m to be satisfied via a combination of: (i) cash (RM3.0m), (ii) GREENYB shares (at an issue price of RM0.29 per share) amounting up to RM65.5m, and (iii) an issuance of new irredeemable convertible preference shares (ICPS) in GREENYB (at an issue price of RM0.29 per ICPS) amounting up to RM19.3m.

• Earnings-wise, the group made net profit of RM1.5m (+19% YoY) in 4QFY21, bringing FY21’s bottomline to RM5.4m (flat YoY). Its balance sheet is backed by net cash holdings of RM4.0m (or 1.2 sen per share) as of end-December 2021.

• On the chart, GREENYB has found support on an ascending trendline since early August 2020. Following a recent bounce-off from the positive sloping trendline, which is further reinforced by a golden cross by the 50-day SMA above the 100-day SMA and the appearance of a bullish stochastic divergence pattern, the share price will likely strengthen further ahead.

• Riding on the upward trajectory, the stock could advance towards our resistance thresholds of RM0.32 (R1; 19% upside potential) and RM0.35 (R2; 30% upside potential). We have set our stop loss price level at RM0.23 (or a 15% downside risk).

Lii Hen Industries Bhd (Trading Buy)

• LIIHEN – which is involved in the manufacturing and sale of furniture products as well as rubber tree plantations – stands to benefit from a strengthening USD against the Ringgit (up 4.3% since early March this year to RM4.36 per USD currently).

• Approximately 93% of the group’s revenue (of RM931.6m) in FY December 2020 was transacted in USD, as its furniture products are catered mainly to the overseas market, especially North America (which constituted c.91% of FY20’s turnover) while the Middle Eastern region, Asia, Africa, Latin America, Europe and Australia (together contributed about 6%) and the local market (accounting for 3%) made up the remaining sales.

• For the most recent quarter ended December 2021, LIIHEN logged net profit of RM13.5m (-23% YoY), taking full-year’s bottomline to RM37.7m (-50% YoY) as its underlying performance was adversely affected by plant shutdowns (to curb the spread of Covid-19 virus), higher raw materials cost and a weaker USD versus the Ringgit.

• Financially strong, the group’s balance sheet is backed by net cash holdings of RM123.5m (translating to 68.6 sen per share or nearly a quarter of its existing share price) as of end-December last year.

• From a technical standpoint, after sliding from a peak of RM4.62 in November 2020 to RM2.97 currently, LIIHEN shares could attempt to stage a trend reversal ahead.

• On the chart, an ensuing technical rebound may be on the cards following: (i) a golden cross by the 50-day SMA above the 100-day SMA, and (ii) the bullish stochastic crossover in an oversold territory.

• With that, the stock could be on its way to challenge our resistance targets of RM3.30 (R1; 11% upside potential) and RM3.61 (R2; 22% upside potential).

• Our stop loss price level is pegged at RM2.68 (or a 10% downside risk).

Source: Kenanga Research - 26 Apr 2022