Kenanga Research & Investment

Daily technical highlights – (GCB, SEDANIA)

Publish date: Thu, 16 Jun 2022, 09:26 AM

Guan Chong Bhd (Trading Buy)

• After hitting a recent peak of RM3.05 in Feb 2021, GCB’s share price has dipped to a low of RM2.23 in May 2022, down by 27%. The shares subsequently bounced off the trough following the formation of several bullish long candlesticks recently, indicating renewed buying interest in the stock.

• With the DMI Plus still trending above the DMI Minus and given the strengthening MACD momentum, the stock is expected to shift higher ahead.

• Thus, we believe that GCB’s share price could climb towards our resistance thresholds of RM2.83 (R1) and RM2.99 (R2), representing upside potentials of 11% and 17%, respectively.

• Our stop loss price is set at RM2.285 (or a downside risk of 10%).

• Business-wise, GCB is involved in the manufacturing, distribution and trading of cocoa-derived food ingredients, namely cocoa mass, cocoa butter, cocoa cake and cocoa powder.

• The group recorded a strong net profit of RM56.5m (+10% QoQ, +75% YoY) in 1QFY22, driven by higher selling prices and sales volume of cocoa solids, which led to positive share price reaction post-announcement.

• Based on consensus estimates, GCB is expected to report higher net profit of RM240.0m in FY Dec 2022 and RM275.0m in FY Dec 2023, translating to forward PERs of 11.1x and 9.8x, respectively.

Sedania Innovator Bhd (Trading Buy)

• SEDANIA’s share price has been in a consolidation stage with the shares hitting a resistance at the price level of RM0.51 before pulling back twice in early May and June 2022.

• Nonetheless, with the DMI Plus still hovering above the DMI Minus and the MACD indicator on the rise, we anticipate the stock could attempt to trend higher again.

• On the way up, the stock could rise to challenge our resistance level of RM0.50 (R1; 20% upside potential) initially, a breakout of which may then push the price towards RM0.55 (R2; 33% upside potential) thereafter.

• We have pegged our stop loss at RM0.345, representing a downside risk of 17%.

• Business-wise, SEDANIA is involved in the sustainable energy & healthcare, telecommunications and information technology businesses.

• In the latest 1QFY22 results, SEDANIA recorded a net profit of RM0.5m (+39% QoQ, -90% YoY) dragged mainly by lower revenue from the sustainable energy segment and higher operating costs.

• Valuation-wise, based on its most recent book value per share of RM0.11 as of end-March 2022, the stock is currently trading at Price/Book Value multiple of 3.8x.

Source: Kenanga Research - 16 Jun 2022

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