Perak Transit Berhad (Trading Buy)

• Following a drop in its share price from RM0.635 in February 2022 to as low as RM0.52 (-18%) in March 2022, PTRANS has formed higher highs and higher lows since then to reach a xx-month high currently.

• We believe the stock will likely strengthen further on the back of positive technical signals arising from: (i) the rising Parabolic SAR indicator, and (ii) the MACD histogram gaining bullish momentum.

• Thus, the stock could rise further to challenge our resistance levels of RM0.76 (R1; 13% upside potential) and RM0.84 (R2; 25% upside potential).

• We have pegged our stop loss at RM0.58, which represents a downside risk of 13%.

• Business-wise, PTRANS is involved in: (i) integrated public transportation terminal operations, (ii) the provision of public stage bus and express bus services and bus charter services, and (iii) petrol stations operations

• Meanwhile, PTRANS is in the midst of raising RM38.1m (via a private placement exercise comprising the issuance of 63.5m new shares at RM0.60 each) to fund its urban transport electrification projects (UTEPs), new terminal management services projects, construction costs and working capital requirements.

• With the international borders reopened and interstate travel ban lifted, consensus is predicting the group – which posted net earnings of RM53.2m (27% YoY) in FY December 2021 – to report a stronger core net profit of RM56.8m in FY22 and RM59.6m in FY23, which translate to forward PERs of 8.0x and 7.6x for FY22 and FY23, respectively.

YTL Hospitality REIT (Trading Buy)

• Chart-wise, YTLREIT recently saw a reversal to trend higher with the change in direction supported by the Parabolic SAR indicator (which plotted an uptick signal).

• Moreover, the formation of bullish Marubozu candlesticks for three consecutive days suggests high buying interest in the stock.

• With the Parabolic SAR indicator likely to trend up and the MACD indicator on the verge of crossing above the signal line, the recent share price crossing above the 50-day SMA led us to believe that the stock will likely strengthen further to challenge our resistance levels of RM1.09 (R1; 13% upside potential) and RM1.16 (R2; 20% upside potential).

• On the downside, our stop loss price has been set at RM0.84, which translates to a downside risk of 13%.

• Business-wise, YTLREIT – which owns a portfolio of prime hotel and resort properties located in Malaysia, Japan and Australia – stands to benefit from a recovery in the global hospitality industry post the Covid-19 pandemic.

• For the group’s latest quarter, its core net profit soared to RM2.5m in 2QFY22 from a net loss of RM26.4m in 2QFY21 (which was previously hit by unrealized foreign currency translation loss and fair value loss on unbilled lease income).

• Going forward, as consensus anticipates an improvement in the group’s earnings on the back of the resumption of international travelling, consensus is predicting YTLREIT to report a core net profit of RM141.0m in FY22 and RM145.7m in FY23.

• And based on consensus DPS estimates of 3.7 sen for FY Jun 22 and 8.4 sen for FY Jun 23, the stock currently offers attractive dividend yields of 3.8% and 8.7%, respectively.

Source: Kenanga Research - 6 May 2022