Ecomate Holdings Bhd (Trading Buy)

• After falling to a low of RM0.40 on 8 March 2022, ECOMATE’s share price subsequently bounced off from the trough to plot an ascending channel.

• The shares will now likely break out from an intermediate sideways pattern to continue its upward trajectory following: (i) the uptrend in the Parabolic SAR, (ii) the stochastic’s %K line crossover above the %D line, and (iii) the climb in the DMI Plus to widen its gap from the DMI Minus.

• Based on the Fibonacci extension lines, the stock could rise to challenge our resistance levels of RM0.605 (R1) and RM0.665 (R2), representing upside potentials of 13% and 24%, respectively.

• Our stop loss price level is set at RM0.465 (or a downside risk of 13%).

• Business-wise, ECOMATE – which was listed in Nov 2021 - is involved in the manufacturing of ready-to-assemble furniture products focusing on the export markets (mainly in Asia and North America).

• The group reported a net profit of RM3.8m in 4QFY22, which brought its full-year FY February 2022’s net profit to RM7.1m.

• Forward earnings growth will likely be driven by: (i) higher average selling prices in tandem with the higher raw material costs, (ii) the strengthening US Dollar as c.80% of its export sales are denominated in the US Dollar, (iii) a ramp-up in productivity on the back of the resumption of economic activities, and (iv) an expansion of its clientele base across more export markets.

Tambun Indah Land Bhd (Trading Buy)

• After showing a sideways trend (with support seen at RM0.71) since end-Dec 2021, TAMBUN’s share price broke away in early-Feb 2022 to form a sequence of higher highs and higher lows.

• On the chart, the stock is expected to extend its uptrend pattern given the positive technical signals arising from: (i) the rising Parabolic SAR, (ii) the DMI Plus movements above the DMI Minus, and (iii) the bullish MACD signal as illustrated by the strong histogram.

• Following which, the stock could rise to challenge our resistance levels of RM1.12 (R1; 13% upside potential) and RM1.22 (R2; 23% upside potential).

• We have pegged our stop loss at RM0.88, representing a downside risk of 12%.

• TAMBUN is involved in property development and management services with a geographical focus mainly in Penang.

• Earnings-wise, the group reported a net profit of RM28.3m (+272% QoQ) in 4QFY21, taking its full-year FY December 21’s bottomline to RM60.7m (+150% YoY), mainly lifted by higher property sales recognition following the easing of the movement restrictions.

• Going forward, on the back of more property sales billings, consensus is forecasting TAMBUN to report net profit of RM54.7m in FY December 2022 and RM60.1m in FY December 2023, which translate to forward PERs of 8.0x and 7.3x, respectively.

• Based on its most recent book value per share of RM1.61 as of end-December 2021, the stock is currently trading at Price/Book Value multiple of 0.6x.

Source: Kenanga Research - 26 May 2022