Kobay Technology Bhd (Trading Buy)

• After tumbling 47% from its previous peak of RM4.73 on 25 March to RM2.50 currently, which is near the 52-week price support level, KOBAY shares may stage a technical rebound ahead.

• On the chart, an upward shift in the share price is anticipated in view of the positive technical signals triggered by: (i) the stochastic %K line crossing above the %D line, and (ii) a likely move to cross back above the lower Bollinger Band.

• An ensuing reversal could then propel the stock to challenge our resistance thresholds of RM2.90 (R1; 16% upside potential) and RM3.16 (R2; 26% upside potential).

• We have placed our stop loss price level at RM2.18 (representing a 13% downside risk).

• Fundamentally speaking, KOBAY – which is principally involved in the manufacturing of precision metal components – stands to benefit from post-Covid economic recovery. Reflecting this, the group reported net profit of RM15.1m (a two-fold YoY increase) in 3QFY22, lifting its cumulative bottomline by 215% YoY to RM39.3m in 9MFY22.

• The strong financial performance is expected to continue with consensus currently anticipating KOBAY to make net earnings of RM51.9m in FY June 2022 before rising further to RM77.8m in FY June 2023. This translates to forward PERs of 15.6x and 10.4x, respectively.

My E.G. Services Bhd (Trading Buy)

• The share price of MYEG has been trending downwards following a head-and-shoulders formation in early January 2022, plotting a sequence of lower lows subsequently before touching RM0.80 yesterday, which is near the 52-week support level.

• We anticipate that MYEG’s share price may stage a technical rebound soon as the stock price is set to cross back above the lower Bollinger Band and bounce off from the lower range of its negative sloping channel while the stochastic indicator reverses from the oversold position.

• A technical rebound could then pave the way for the shares to climb towards our resistance thresholds of RM0.925 (R1) and RM0.99 (R2), which translate to upside potentials of 16% and 24%, respectively.

• Our stop loss price level is set at RM0.69 (or a 14% downside risk).

• A SaaS group that offers solutions in the development and implementation of Electronic Government Services and has a presence in Malaysia, Philippines, Bangladesh, and Indonesia, MYEG has announced a net profit of RM316m (+17.8% YoY) in FY December 2021. The robust earnings momentum subsequently carried over to 1QFY22 when its bottomline soared to RM84.6m (+11% YoY).

• Following which, consensus is currently projecting the group would post net profit of RM349.1m for FY22 and RM381.6m for FY23, translating to forward PERs of 17x and 15.7x, respectively.

Source: Kenanga Research - 14 Jul 2022