Kim Hin Joo (Malaysia) Bhd (Trading Buy)

• A retracement from a high of RM0.33 in August last year to as low as RM0.20 in late June this year, which was subsequently followed by sideway swings, may set the stage for KHJB shares to plot a technical rebound ahead.

• On the chart, an upward shift is now anticipated in view of: (i) the share price moving back above the lower Bollinger Band, and (ii) the DMI Plus crossing over the DMI Minus.

• With that, the stock – which has seen a pick-up in trading activity lately – could be making its way towards our resistance thresholds of RM0.245 (R1; 20% upside potential) and RM0.28 (R2; 37% upside potential).

• We have pegged our stop loss price level at RM0.17 (representing a downside risk of 17% from the last done price of RM0.205).

• KHJB – a leading retailer of baby, children and maternity products in Malaysia under the Mothercare brand with a network of more than 530 distribution points – offers exposure to the growing demand from the rising number of young families in the country. This comes as retail sales for “children & baby products” saw an annual growth of 2.5% in 1Q22 and 41.2% in 2Q22 based on data compiled by the Retail Group Malaysia.

• Profit-wise, the group logged net earnings of RM0.9m (-50% YoY) in 1QFY22 after announcing net profit of RM4.6m (-14% YoY) in FY December 2021.

• With a debt-free balance sheet, KHJB’s financial position is backed by net cash holdings & short-term investments of RM21.3m (5.6 sen per share or slightly more than one-quarter of the existing share price) as of end-March this year.

OM Holdings Ltd (Trading Buy)

• Listed on the stock exchanges in Australia and Malaysia, OMH’s share price has fallen from a high of RM4.07 in October last year before bouncing off from a low of RM1.83 in late July.

• The price reversal will probably carry on as the DMI Plus is in the midst of cutting above the DMI Minus while the MACD has crossed over the signal line.

• On the back of the strengthening momentum, an extension of the upward trajectory could take the stock to reach our resistance thresholds of RM2.40 (R1; 15% upside potential) and RM2.56 (R2; 23% upside potential).

• Our stop loss price level is set at RM1.78 (or a 14% downside risk).

• OMH is a manganese and silicon company with vertical exposure in mining and trading. The group is engaged in the business of trading raw ores, smelting and marketing of processed ferroalloys and is a leading supplier of manganese ores and ferroalloys to major steel mills and other industries.

• After reporting net profit of AUD81.8m (a YoY jump of more than 15-fold) in FY December 2021, the group is forecasted to make net earnings of AUD82.4m in FY22 and AUD123.0m in FY23 based on consensus expectations. This translates to forward PERs of 5.7x and 3.8x, respectively.

Source: Kenanga Research - 3 Aug 2022