MR D.I.Y. Group (M) Bhd (Technical Buy)

• Following a breakout from the downward sloping trendline to pull away from the RM1.97 resistance hurdle on 20 October, MRDIY is on the verge of forming an inverted head and shoulder pattern after closing at RM2.00 yesterday.

• Riding on the positive momentum, the bullish technical view on the stock is backed by: (i) the upward Parabolic SAR trend, (ii) the higher lows plotted by the RSI indicator, and (iii) the MACD crossing above the signal line.

• Ergo, the stock will likely challenge our resistance targets of RM2.22 (R1; 11% upside potential) and RM2.36 (R2; 18% upside potential).

• We have pegged our stop loss price level at RM1.78 (or an 11% downside risk).

• As a well-known retail chain of hardware stores, MR D.I.Y. provides a variety of product offerings ranging from hardware, electrical, household products to car accessories with 993 stores located across Malaysia and Brunei.

• The group registered a net profit of RM135.2m (+35% QoQ) in 2QFY22, taking its 1HFY22 bottomline to RM235.7m (+14% YoY).

• Based on consensus expectations, the group is projected to report net profit of RM517.6m for FY December 2022 and RM627.9m for FY December 2023, which translate to forward PERs of 36.4x and 30x, respectively.

Pecca Group Berhad (Technical Buy)

• After a fall from a recent high of RM0.925 on 4 October to as low as RM0.80 in mid-October – a support level that was previously tested in August this year - PECCA’s share price saw a subsequent rebound.

• Technically speaking, the stock is expected to extend its upward momentum in view of the positive signals triggered by: (i) the appearance of several long lower shadow candlesticks, (ii) an upward Parabolic SAR trend, (iii) the golden cross in the MACD indicator, and (iv) a rising Keltner Channel.

• Having said that, the bullish strength could propel the stock price towards our resistance thresholds of RM0.98 (R1: 11% upside potential) and RM1.05 (R2: 19% upside potential).

• Our stop loss price level is set at RM0.78 (representing an 11% downside risk from yesterday’s close of RM0.88).

• Earnings-wise, PECCA – a manufacturer and distributer of leather upholstery for automobile seat covers – posted net profit of RM8.2m in 4QFY22 (+315% YoY), lifting its full-year bottomline to RM22.9m (+19% YoY).

• Moving forward, consensus is anticipating the group would maintain the momentum to post net profit of RM27m for FY June 2023 before rising further to RM32m for FY June 2024. This translates to forward PERs of 25x and 21.2x, respectively.

Source: Kenanga Research - 2 Nov 2022