UMW Holdings Bhd (Technical Buy)

• Follow-through buying interest could lift UMW shares along a positive sloping trendline following a recent bounce-up from a low of RM2.77 in mid-July this year.

• On the chart, the share price may be making its way towards the upper end of a rectangle pattern that has been in existence since December 2020, backed by bullish technical signals arising from the overcoming of the 100-day SMA and the MACD indicator’s crossing above the zero-line.

• Thus, the stock will probably climb further to challenge our resistance targets of RM3.48 (R1; 12% upside potential) and RM3.65 (R2; 17% upside potential).

• Our stop loss price level is set at RM2.77 (representing a downside risk of 11% from yesterday’s close of RM3.12).

• UMW is involved in multiple businesses comprising the automotive, equipment (for the industrial, heavy, marine & power industries) and manufacturing & engineering (of automotive parts and lubricants) sectors.

• Earnings-wise, the group made net profit of RM107.2m in 2QFY22 (reversing from 2QFY21’s net loss of RM3.6m), which then took 1HFY22’s results to RM208.4m (up 174% YoY).

• Based on consensus estimates, it is projected to post net earnings of RM384.1m in FY December 2022 and RM367.9m in FY December 2023. This translates to forward PERs of 9.5x this year and 9.9x next year, respectively with its 1-year forward rolling PER presently hovering slightly above the minus 1SD level from its historical mean.

NTPM Holdings Bhd (Technical Buy)

• After treading sideways inside a tight band since mid-July this year, NTPM’s share price may attempt to break away from the intermediate rectangle formation.

• An upward shift in the share price is likely following the existence of bullish divergence stochastic and MACD patterns as both the indicators plotted rising lows when the price was drifting listlessly.

• A technical breakout could then drive the stock towards our resistance thresholds of RM0.47 (R1) and RM0.51 (R2). This represents upside potentials of 9% and 19%, respectively.

• We have placed our stop loss price level at RM0.39 (or a 9% downside risk).

• A manufacturer and distributor of tissue paper and personal care products, NTPM reported net profit of RM3.5m (-33% YoY) in 4QFY22, bringing its full-year performance to RM28.2m (-55% YoY).

• Going forward, consensus is forecasting the group would make net earnings of RM25.4m for FY April 2023 and RM28.8m for FY April 2024, translating to forward PERs of 19.0x and 16.8x, respectively (with its 1-year forward rolling PER currently standing at 1SD above its historical mean).

• In addition, the stock offers prospective annual dividend yields of 3.7% in the coming two financial years based on consensus DPS estimates of 1.6 sen each for FY23 and FY24, respectively.

Source: Kenanga Research - 21 Sept 2022