Dialog Group Bhd (Technical Buy)

• Following a steep fall from RM2.43 in the beginning of September to as low as RM1.92 a few days ago, DIALOG shares (which closed at RM2.00 yesterday) may stage a technical rebound ahead.

• On the chart, the shares will probably form a double-bottom reversal pattern and shift higher as the share price has crossed back above the lower Bollinger Band while the stochastic indicator is in the midst of climbing out from the oversold zone.

• Thus, the stock is anticipated to rise and challenge our resistance targets of RM2.29 (R1) and RM2.40 (R2), translating to upside potentials of 15% and 20%, respectively.

• Our stop loss is pegged at a price level of RM1.80 (or a 10% downside risk).

• An integrated technical service provider to the upstream, mid-stream and downstream segments in the oil & gas and petrochemical industry, DIALOG recorded net profit of RM118.2m in 4QFY22 (-11% QoQ), lifting its full-year bottomline to RM508m (-6.4% YoY) in FY22.

• Moving forward, consensus is expecting the group to report higher net earnings of RM591.5m in FY June 2023 and RM636m in FY June 2024. This translates to forward PERs of 19.6x and 18.3x, respectively.

Sime Darby Bhd (Technical Buy)

• After sliding from RM2.37 in early September to plot a sequence of lower highs, SIME shares rebounded subsequently from a low of RM2.12 to close above the descending trendline at RM2.20 yesterday.

• Riding on the positive trajectory, the share price will likely move higher from the lower end of a sideways trading range backed by bullish technical indicators arising from: (i) the Parabolic SAR’s first uptick signalling an upward trend, (ii) the stochastic indicator’s reversal from the oversold territory, and (iii) the positive MACD crossover.

• Ergo, the stock could climb towards our resistance thresholds of RM2.48 (R1; 13% upside potential) and RM2.58 (R2; 17% upside potential).

• We have set our stop loss price level at RM1.96 (representing an 11% downside risk).

• A conglomerate with businesses in the industrial, automotive, healthcare and logistic sectors, SIME posted net profit of RM278m (+14% QoQ) in 4QFY22, bringing its full-year FY22 core net earnings to RM1.1b (-23% YoY).

• According to consensus estimates, SIME is expected to register higher net profit of RM1.2b for FY June 2023 and RM1.3b for FY June 2024, which translate to forward PERs of 12.3x and 11.5x, respectively.

Source: Kenanga Research - 6 Oct 2022