Aurelius Technologies Bhd (Trading Buy)

• After plotting a sequence of lower highs to fall from a peak of RM2.88 on 10 January this year, we believe the sell-down in ATECH’s share price – which closed at its IPO offer price of RM1.36 yesterday – may be coming to an end soon amid the declining transacted volumes in recent days.

• With the stochastic indicator showing the %K line crossing above the %D line, and as the 5-day EMA approaches the 15- day EMA, the share price will likely show an upward bias ahead.

• A technical breakout from the negative sloping trendline could then lift the stock towards our resistance thresholds of RM1.55 (R1) and RM1.65 (R2), which represent upside potentials of 14% and 21%, respectively.

• Our stop loss level is pegged at RM1.20 (a 12% downside risk).

• An Electronics Manufacturing Services (EMS) provider focusing on industrial electronic products and semiconductor components, ATECH – which was listed in mid-December last year – posted net profit of RM5.0m (-2% QoQ) in 1QFY23 as its productivity was affected by supply chain disruptions.

• Going forward, on the back of strong backlog orders and capacity expansion in 2HCY22, consensus is predicting that ATECH would report a net profit of RM33.3m in FY Jan 2023 and RM47.3m in FY Jan 2024, which translate to forward PERs of 14.6x and 10.3x, respectively.

Axiata Group Berhad (Trading Buy)

• A retracement from its previous peak of RM4.00 in mid-February this year has brought AXIATA shares to close at RM2.65 yesterday, near its 52-week low of RM2.63, which forms a key price support level.

• With the stochastic indicator anticipated to climb out from the oversold zone and the 5-day EMA approaching the 15-day EMA, the stock will likely bounce up towards our resistance targets of RM2.97 (R1; 12% upside potential) and RM3.06 (R2; 15% upside potential).

• We have set our stop loss price level at RM2.38 (representing a downside risk of 10% from its last traded price of RM2.65).

• A provider of mobile communication and network transmission related services, AXIATA reported a net loss of RM43m (- 137% QoQ, -157% YoY) in 1QFY22, mainly affected by lower prepaid and post-paid revenue and lumpy foreign exchange losses.

• Moving forward, in anticipation of a business recovery, consensus is expecting AXIATA to report a net profit of RM1.2b in FY Dec 2022 and RM1.4b in FY Dec 2023, translating to forward PERs of 19.8x and 16.8x, respectively.

• In terms of corporate development, AXIATA is on track to proceed with the proposed merger of the telecommunication operations of Celcom Axiata and Digi.com after receiving a Notice of No Objection recently from the Malaysian Communications and Multimedia Commission.

Source: Kenanga Research - 7 Jul 2022