Sedania Innovator Bhd (Technical Buy)

• A recent bounce-off from a horizontal support line that stretches back to May last year has set the stage for SEDANIA’s share price – which jumped 6.0% to close at RM0.355 yesterday on heavy trading interest – to extend its upward trajectory ahead.

• The positive momentum is expected to be driven by bullish technical signals triggered by: (i) the rising Parabolic SAR trend, (ii) the DMI Plus crossing above the DMI Minus, and (iii) the MACD cutting over the signal line.

• Hence, continuing its run-up from a recent low of RM0.29, the stock could be on its way to advance towards our resistance thresholds of RM0.415 (R1; 17% upside potential) and RM0.47 (R2; 32% upside potential).

• We have placed our stop loss price level at RM0.295 (which represents a downside risk of 17%).

• SEDANIA is an ESG play focusing on projects and businesses that enable corporations and consumers to reduce their carbon footprint. The group is organised into five operating segments, comprising: (i) sustainable energy (which provides green technology and internet of things solutions for sustainable and environmentally friendly products and services), (ii) sustainable healthcare (via the provision of consumer products specialising in healthcare, personal care, household and baby & childcare products as well as health technologies specialising in preventative healthcare technology solutions), (iii) financial technology (i.e. the provision of financial technology solutions for the banking industry), (iv) telco technology (by providing the technology on airtime sharing for telecommunication providers), and (v) others (such as the provision of big data analytics services and operations).

• Earnings-wise, it made net profit of RM0.5m (-79% YoY) in 2QFY22, taking its first half’s net earnings to RM0.8m (-88% YoY).

• Its balance sheet is backed by net cash holdings & short-term funds of RM4.9m (or 1.4 sen per share) as of end-June 2022.

Evergreen Fibreboard Bhd (Technical Buy)

• EVERGRN shares might have hit a bottom already following the slide from a peak of RM0.80 in end-April this year to as low as RM0.44 in mid-July.

• On the chart, after a recent rebound to close at RM0.495 yesterday – the share price is currently treading near an intermediate ascending trendline and the 50-day SMA, indicating relatively limited downside risk from the current price level.

• And with the stochastic indicator showing the %K line crossing over the %D line in an oversold zone, the upward shift in the shares is expected to persist.

• With that said, the stock will probably climb further to challenge our resistance targets of RM0.55 (R1; 11% upside potential) and RM0.60 (R2; 21% upside potential).

• Our stop loss price level is pegged at RM0.44 (or a downside risk of 11%).

• EVERGRN’s main business activities are in the manufacturing of medium density fibreboard, particle board, added value panel boards, ready-to-assemble furniture, solid wood products and wood pellets.

• The group reported net profit of RM18.3m (up more than 4-fold YoY) in 2QFY22, bringing its 1HFY22 bottomline to RM35.9m (+159% YoY).

• Assuming an annualised net earnings of RM71.8m for FY December 2022, this implies that the stock is presently trading at a P/E multiple of 5.8x this year.

Source: Kenanga Research - 13 Sept 2022