Aemulus Holdings Bhd (Technical Buy)

• Following its steep fall in share price from RM0.59 since mid-August to find an intermediate support at the 52-week low of RM0.445, AEMULUS subsequently rebounded to close at RM0.48 yesterday.

• Its rising momentum will probably continue on the back of the following bullish technical signals: (i) the RSI indicator is climbing out from an oversold zone, (ii) the share price has crossed back above the lower Bollinger Band, and (iii) the strong buying interest as captured by the price surge that was accompanied by heavy volume on 9 September.

• Hence, this could propel the stock to challenge our resistance thresholds of RM0.545 (R1) and RM0.59 (R2), which represent upside potentials of 14% and 23%, respectively.

• We have pegged our stop loss price level at RM0.43 (translating to a downside risk of 10%).

• AEMULUS is involved in the designing and assembly of automated test equipment and measurement instruments. Its main products are RF (radio frequency) testers.

• Earnings-wise, the group’s net profit plummeted by 63% QoQ to RM1.7m in 3QFY22 (vs. 2QFY22‘s RM4.6m), taking 9MFY22 net profit to RM10.8m (+69% YoY).

• Going forward, consensus is forecasting AEMULUS to make net earnings of RM15.5m for FY September 2022 and RM22.5m for FY September 2023. This translates to forward PERs of 20.9x and 14.5x, respectively.

V.S. Industry Bhd (Technical Buy)

• VS shares could be near an intermediate support level following the retracement from a high of RM1.11 on 18 August before stopping at RM1.03 yesterday.

• On the chart, a technical rebound is anticipated backed by bullish technical signals arising from: (i) the appearance of a dragonfly doji candlestick two days ago, (ii) the share price pulling away from the positive sloping trendline after crossing over the 15-day EMA, and (iii) the probable formation of a bullish cup-and-handle pattern.

• Thus, the stock could rise towards our resistance thresholds of RM1.16 (R1; 13% upside potential) and RM1.25 (R2; 21% upside potential).

• Conversely, our stop loss price level is set at RM0.92 (representing a downside risk of 11%).

• Business-wise, VS is a leading integrated Electronic Manufacturing Services (EMS) provider in the region, offering one-stop manufacturing solutions to global brand names for office and household electrical & electronic products.

• The group posted net profit of RM51.3m (+15% QoQ) in 3QFY22, bringing 9MFY22’s bottomline to RM135.2m (-34% YoY).

• Going forward, consensus is projecting VS to make net earnings of RM187.8m for FY July 2022 and RM286.6m for July 2023 which translate to forward PERs of 21x and 13.7x, respectively.

Source: Kenanga Research - 15 Sept 2022