Kenanga Research & Investment

Daily technical highlights – (JAG, HIBISCS)

Publish date: Thu, 19 May 2022, 09:28 AM

JAG Bhd (Trading Buy)

• Following a fall from a peak of RM0.54 in May 2021, JAG shares then trended sideways before plunging to a low of RM0.28 in January 2022. The stock subsequently plotted a sequence of higher highs to stage an intermediate trend reversal.

• With increasing trading volume (as indicated by the rising OBV indicator) backing the price reversal, the stock has closed above the Keltner Channel’s mid-line, suggesting that the stock’s uptrend is intact.

• We believe the stock will likely strengthen further on the back of the positive technical signals arising from: (i) the rising OBV indicator, and (ii) the stock treading above both the 50-day SMA and the Keltner Channel’s mid-line.

• Thus, the stock could rise to challenge our resistance levels of RM0.41 (R1; 12% upside potential) and RM0.475 (R2; 30% upside potential).

• We have pegged our stop loss at RM0.33, which represents a downside risk of 10%.

• Business-wise, the group is one of Malaysia’s leading total waste management services providers with a niche in the recovery and recycling business of e-waste (electrical & electronic wastes). In addition, it is involved in coin-operated laundry services, property development & software solutions.

• For FY21, the group’s revenue jumped by 41% to RM223.8m from RM159.0m in FY20 thanks to higher sales of precious metals due to a stronger demand for commodities. In tandem with the rise in revenue, the group’s core profit rose by >100% to RM19.2m from RM9.2m in FY20.

• Valuation-wise, based on its book value per share of RM0.35 as of end-December 2021, the stock is currently trading at a Price/Book Value multiple of 1.04x (or at 1SD below its 3-year historical mean).

Hibiscus Petroleum Bhd (Trading Buy)

• Chart-wise, following the golden cross (by the 20-day SMA over the 50-day SMA) in January 2022, HIBISCS’ share price has been in an uptrend pattern with the 50-day SMA currently acting as a support line.

• With the stock trending above both the key SMAs and the MACD indicator is on the rise, we believe that the stock will likely strengthen further to challenge our resistance levels of RM1.68 (R1; 13% upside potential) and RM1.97 (R2; 32% upside potential), which are derived based on the Fibonacci extension lines.

• On the downside, our stop loss price has been set at RM1.34, which translates to a downside risk of 10%.

• Business-wise, HIBISCS – which has operations in the Middle East, Norway and Oceania regions – is involved in the exploration and development of oil and gas activity.

• For 1HFY22, the group’s net profit soared by >100% to RM90m from RM22m in 1HFY21, thanks to an improved operational performance and higher crude oil prices.

• Going forward, on the back of elevated crude oil prices, consensus is predicting the group to report a higher core net profit of RM304.0m in FY Jun 22 and RM541.8m in FY Jun 23. This represents forward PERs of 10.3x this year and 5.7x next year, respectively.

Source: Kenanga Research - 19 May 2022

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