Lotte Chemical Titan Holding Bhd (Technical Buy)

• Following a sharp 18% fall from RM1.64 on 26 September, LCTITAN’s share price has subsequently treaded sideways before closing at RM1.36 yesterday.

• On the chart, the stock is poised to make a technical rebound backed by bullish technical signals arising from the appearance of an upward Parabolic SAR trend and the share price crossing back above the lower Bollinger Band.

• Ergo, we believe that the stock will likely climb and challenge our resistance targets of RM1.55 (R1; 14% upside potential) and RM1.65 (R2; 21% upside potential).

• On the other hand, our stop loss price is set at RM1.20 (representing a 12% downside risk).

• Business-wise, LCTITAN – which is principally involved in the manufacture and sale of polyolefin products as well as olefins & derivative products – posted a net loss of RM145.9m in 2QFY22, down 238% QoQ from the preceding quarter hit by increased input costs and losses incurred by associate Lotte Chemical USA Corp. This brought its 1HFY22 bottomline to a net loss of RM41.9m from net profit of RM822.3m previously.

• Valuation-wise, the stock is currently trading at Price/Book Value multiple of 0.24x based on its book value per share of RM5.59 as of end-June 2022.

Optimax Holdings Bhd (Technical Buy)

• Despite the bearish underlying market sentiment, OPTIMAX’s share price has staged a breakout from the resistance level of RM0.65 in early September with a subsequent pullback finding an intermediate support at the 61.8% Fibonacci retracement level. The shares closed at RM0.69 yesterday.

• The stock is anticipated to resume its positive trajectory in view of the following technical signals: (i) the share price has bounced off from the lower Bollinger Band, and (ii) the stochastic indicator is on the verge of climbing out from the oversold zone.

• A technical breakout could then propel the stock to challenge our resistance thresholds of RM0.78 (R1; 13% upside potential) and RM0.85 (R2; 23% upside potential).

• Our stop loss level is pegged at RM0.61 (representing a 12% downside risk).

• A healthcare service provider that specializes in eye care services, OPTIMAX reported a net profit of RM4.6m (+77% QoQ, +130% YoY) in 2QFY22, which lifted its 1HFY22’s bottomline to RM7.2m (+118% YoY).

• Going forward, consensus is forecasting that OPTIMAX would report higher net profit of RM14.4m for FY December 2022 and RM16m for FY December 2023. This translates to forward PERs of 25.8x and 23.3x, respectively.

Source: Kenanga Research - 14 Oct 2022