Coraza Integrated Technology Bhd (Technical Buy)

• Following a retracement of 28% from the peak of RM0.895 on 13 September to as low as RM0.645 last week, CORAZA’s share price (which closed at RM0.68 yesterday) has probably found an intermediate support after bouncing off from the 61.8% Fibonacci retracement level and an upward sloping trendline.

• The stock is expected to extend its technical rebound in view of the following positive signals: (i) the appearance of a bullish hammer candlestick, (ii) the MACD is anticipated to cross above the signal line based on the upward histogram slant, and (iii) the rising RSI indicator.

• Thus, the share price is poised to challenge our resistance targets of RM0.77 (R1; 13% upside potential) and RM0.84 (R2; 24% upside potential).

• We have set our stop loss price at RM0.60 (representing a 12% downside risk).

• An engineering support services provider, CORAZA is mainly involved in the business of manufacturing metal sheet parts and precision machine components, servicing clients from various sectors including semiconductor, instrumentation, life science etc.

• The group reported net profit of RM4.2m in 2QFY22 (+90% QoQ), lifting its cumulative bottomline by 19% YoY to RM6.4m in 1HFY22.

• Its strong financial performance is expected to continue with consensus currently anticipating CORAZA to make net earnings of RM15.5m in FY December 2022 before soaring further to RM20.2m in FY December 2023. This translates to forward PERs of 18.8x and 14.4x, respectively.

SDS Group Bhd (Technical Buy)

• Chart-wise, SDS’ share price has staged a strong breakout from a bullish pennant pattern, pulling away from the RM0.61 resistance hurdle on Tuesday before closing at RM0.645 yesterday.

• From a technical perspective, a continuation of the rising momentum may be on the horizon based on the positive signals triggered by: (i) the emerging Parabolic SAR uptrend, (ii) the MACD crossing above the signal line, and (iii) an upward shift in the Average Directional Index.

• Ergo, the stock could be making its way to challenge our resistance thresholds of RM0.73 (R1; 13% upside potential) and RM0.79 (R2; 22% upside potential).

• Our stop loss price level is pegged at RM0.57 (representing a 12% downside risk).

• Business-wise, SDS is involved in the manufacturing and distribution of bakery products through its retail and wholesale networks.

• The group reported a net profit of RM4.5m in 1QFY23 (-21% QoQ), dragged down mainly by higher raw material costs and low seasonal demand during the Ramadan period in April 2022. However, this represents a turnaround from a net loss of RM0.5m in the preceding year’s corresponding quarter following the resumption of economic activity post the Covid-19 lockdown and better manufacturing efficiency.

Source: Kenanga Research - 27 Oct 2022