FoundPac Group Bhd (Trading Buy)

• A recent rebound has led FPGROUP’s share price to break above a descending channel that was formed since Nov 2021, indicating the return of buying interest in the shares.

• Backed by a bullish MACD signal and the DMI Plus hovering above the DMI Minus, the stock is expected to ride on the prevailing Parabolic uptrend and shift higher ahead.

• Hence, the stock could rise to challenge our resistance levels of RM0.62 (R1; 16% upside potential) and RM0.69 (R2; 29% upside potential).

• We have pegged our stop loss at RM0.46, representing a downside risk of 14%.

• Business-wise, FPGROUP is engaged in the design and manufacturing of precision engineering parts and laser stencil.

• The group reported net profit of RM2.7m (-13% QoQ) in 3QFY22, which brought 9MFY22 net profit to RM8.2m (-1% YoY), dragged by higher operating cost from its new accessory cable segment.

• Going forward, consensus is forecasting FPGROUP would make net profit of RM12.8m in FY June 2022 and RM16.7m in FY June 2023, which translate to forward PERs of 22.3x and 17.8x, respectively.

Texchem Resources Bhd (Trading Buy)

• TEXCHEM’s share price has pulled back from a peak of RM3.99 in June 2022 that was followed by a recent rebound from a low of RM2.38 (down by 40%) before closing at RM2.94 yesterday.

• On the chart, the price will likely continue to trend upwards based on the positive technical signals arising from: (i) the rising Parabolic SAR trend, (ii) the DMI Plus cutting above the DMI Minus, and (iii) the MACD indicator crossing above the signal and zero lines.

• Hence, the stock could rise to challenge our resistance levels of RM3.27 (R1; 11% upside potential) and RM3.70 (R2; 26% upside potential).

• We have pegged our stop loss at RM2.625, representing a downside risk of 11%.

• Business-wise, TEXCHEM is involved in four segments: (i) Industrial (i.e. chemicals trading), (ii) Restaurant (under Sushi King), (iii) Polymer Engineering, and (iv) Food.

• Fundamental-wise, the group reported net profit of RM13.1m in 1QFY22 (-21% QoQ, +98% YoY), lifted by stronger profit contributions from the restaurant and food divisions, which mitigated the higher raw material cost effect in the polymer engineering segment.

• Going forward, on the back of the implementation of new transformation strategies for the individual divisions, consensus is forecasting TEXCHEM would make net profit of RM43.0m in FY December 2022 and RM47.0m in FY December 2023, which translate to forward PERs of 8.2x and 7.4x, respectively.

Source: Kenanga Research - 4 Aug 2022