Sunway Bhd (Technical Buy)

• After retracing from a recent high of RM1.72 in mid-September to as low as RM1.54 end-September, SUNWAY shares – which ended at RM1.56 yesterday – could stage a technical rebound ahead.

• The upward bias stance is backed by our trading system, which is built on the RSI indicator to trigger buy signals when the share price crosses back above pre-set oversold line. Based on an exit rule of either a 13% profit or 10% stop loss (whichever comes first) from the trigger levels, the back-tested results showed that 33 of the 45 buy alerts generated by the trading system since 2015 had turned out to be profitable trades (i.e. it has correctly predicted the ensuing share price gains of 13% or more), representing a hit rate of 73%.

• Following the appearance of seven buy alerts since end-September last year, the trading system is currently signalling that the stock could advance to the RM1.77 – RM1.93 price range or higher going forward.

• We have set our resistance thresholds at RM1.77 (R1; 13% upside potential) and RM1.93 (R2; 24% upside potential). Our stop loss price level is pegged at RM1.39 (representing an 11% downside risk).

• Fundamentally speaking, as a leading conglomerate with core business interests across key industries, namely property development, property investment & REIT, leisure, hospitality, construction, healthcare, education, trading & manufacturing, quarry and building materials, SUNWAY offers diversified and resilient income streams.

• Earnings-wise, the group announced net profit (from continuing operations) of RM168.9m (+291% YoY) in 2QFY22, lifting 1HFY22 bottomline to RM309.0m (+252% YoY). Going forward, according to consensus estimates, SUNWAY is projected to make net earnings of RM494.8m in FY December 2022 and RM594.4m in FY December 2023.

• In terms of valuation, this implies forward PERs of 15.4x this year and 12.8x next year, respectively with its 1-year forward rolling PER currently hovering just slightly below its historical mean.

MMS Ventures Bhd (Technical Buy)

• Following a 29% pullback from a high of RM0.915 on 19 August this year to close at an intra-day low of RM0.66 yesterday (or back to where it was in early August 2022), MMSV shares may plot an intermittent rally ahead.

• An upward reversal in the stock price is anticipated by our trading system, which is built on the stochastic indicator to trigger buy signals when the %K line crosses above the %D line in the oversold territory. Based on an exit rule of either a 13% profit or 10% stop loss (whichever comes first) from the trigger levels, the back-tested results showed that 26 of the 35 alerts generated by the trading system since 2015 were profitable trades (i.e. it has correctly predicted the subsequent share price gains of at least 13%). This represents an accuracy rate of 74%.

• Therefore, given the recent appearance of a buy signal early this month, our trading system is now predicting that MMSV’s share price could climb to at least RM0.78 going forward. On the chart, we have placed our resistance targets at RM0.75 (R1; 14% upside potential) and RM0.78 (R2; 18% upside potential).

• Our stop loss price level is set at RM0.59 (or an 11% downside risk from its last traded price of RM0.66).

• A manufacturer of high-tech automation system (such as inspection and testing machines) with a customer base operating in the LED (for applications in smart phones and automotive), semiconductor and OEM/ODM segments, MMSV announced net profit of RM4.8m (+90.1% YoY) in 2QFY22, taking its cumulative net earnings to RM7.5m (+92.5% YoY) for the six-month period ended June 2022.

• The group’s financial position is backed by a debt-free balance sheet with cash holdings & quoted investments of RM31.1m (translating to 15.7 sen per share or nearly a quarter of its existing share price) as of end-June 2022.

Source: Kenanga Research - 12 Oct 2022