Kenanga Research & Investment

Daily technical highlights – (FRONTKN, SLVEST)

Publish date: Fri, 01 Jul 2022, 10:16 AM

Frontken Corporation Bhd (Trading Buy)

• A retracement from its recent high of RM3.30 on 23 March this year has brought FRONTKN shares to close at RM2.29 yesterday, near its 52-week low of RM2.19.

• With the appearance of a possible double-bottom reversal pattern (as the price has fallen close to the previous low in March 2022 ) and the Money Flow Index approaching the oversold area, we believe the share price will probably show a technical rebound ahead.

• On the way up, the stock could advance towards our resistance thresholds of RM2.60 (R1) and RM2.75 (R2), which represent upside potentials of 14% and 20%, respectively.

• Our stop loss level is pegged at RM2.06 (or a 10% downside risk).

• Business-wise, FRONTKN is principally involved in the provision of surface and mechanical engineering solutions to a variety of heavy industries clientele such as oil and gas, power generation, semiconductors and marine industries.

• In terms of profitability, the group reported net profit of RM26.5m in 1QFY22 (up 15.7% YoY), continuing the earnings momentum that had earlier lifted its bottomline by 25.4% YoY to RM104.5m in FY December 2021.

• The strengthening financial performance is expected to continue with consensus currently forecasting FRONTKN to make net earnings of RM125.5m in FY December 2022 before rising further to RM151.5m in FY December 2023, translating to forward PERs of 30.1x and 23.6x, respectively.

Solarvest Holdings Bhd (Trading Buy)

• After a collapse from its previous peak of RM1.30 in the beginning of January this year, the downtrend is expected to change direction as SLVEST’s share price (which is currently near its 52-week low) may bounce off from a possible double-bottom reversal pattern.

• And with the Money Flow Index showing a rebound from the oversold zone, the stock is on track to climb towards our resistance targets of RM0.78 (R1; 18% upside potential) and RM0.87 (R2; 32% upside potential).

• We have set our stop loss price level at RM0.59 (representing a downside risk of 11% from its last traded price of RM0.66).

• On the fundamental front, SLVEST – which is engaged in the provision of Engineering, Procuring and Commissioning (EPC) services of solar photovoltaic solutions – saw its net profit declining to RM3.7m in 4QFY22 (down 41.2% YoY), taking full-year FY22’s bottomline to RM6.9m (compared with net profit of RM16.1m in FY21).

• Going forward, consensus is anticipating the group to show a rebound in net earnings to RM20.4m in FY March 2023 and RM28.0m in FY March 2024, translating to forward PERs of 21.3x and 15.0x respectively.

Source: Kenanga Research - 1 Jul 2022

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