Lion Industries Corporation Bhd (Technical Buy)

• LIONIND’s share price gapped down from the prior day’s closing of RM0.41 to as low as RM0.34 on 8 December (as the market adjusted on the ex-date for a bonus issue exercise of 1 warrant for every 2 ordinary shares held) before inching up slightly to end at RM0.35 yesterday.

• We believe the stock could stage a technical rebound ahead to fill the price gap as the share price may find support based on the Ichimoku Cloud indicator while the stochastic indicator is on the verge of climbing out from the oversold zone amid the existence of a Doji candlestick.

• Ergo, we anticipate that the stock could rise towards our resistance targets of RM0.39 (R1; 11% upside potential) and RM0.42 (R2; 20% upside potential).

• We have set our stop loss price at RM0.315 (representing a 10% downside risk).

• A niche player in the steel industry with exposure in both the long steel and flat steel products, LIONIND posted a net loss of RM162.5m (-431% QoQ) in 3QFY22, hit by the steep fall in steel prices and higher raw material cost. This took 9MFY22 bottomline to a net loss of RM224.

• Valuation-wise, based on its book value per share of RM2.31 as of end-September 2022, the stock is currently trading at a Price/Book Value multiple of 0.15x (or at 0.5 SD below its historical mean)

Aemulus Holdings Bhd (Technical Buy)

• AEMULUS’ share price – which has staged a breakout from an immediate resistance level – is set to climb higher after closing at RM0.505 yesterday.

• A continuation of its upward momentum may be on the horizon due to the following bullish technical indicators: (i) the existence of a positive Parabolic SAR trend, (ii) the MACD indicator is pulling away from its signal line, and (iii) the shift in direction (to above zero) by the Chaikin Oscillator is indicating rising buying interest.

• Riding on the positive signals, the stock could rise to challenge our resistance targets of RM0.56 (R1; 11% upside potential) and RM0.61 (R2; 21% upside potential).

• Our stop loss price level is placed at RM0.45 (or an 11% downside risk).

• Fundamentally, AEMULUS is primarily involved in the design, engineering and development of automatic test equipment (ATE) products for semiconductor manufacturers and OSAT (outsourced semiconductor assembly and test) players, focusing on the testing and assembly of semiconductor wafer and packaged devices into various electronic appliances.

• The group posted a net profit of RM1.7m (-59% YoY) in 4QFY22, which then lifted its full-year earnings to RM12.5m (+20% YoY).

• Moving forward, consensus is projecting AEMULUS to make net profit of RM12.6m in FY September 2023 before surging to RM20m in FY September 2024, which translate to forward PERs of 26.8x and 16.9x, respectively.

Source: Kenanga Research - 15 Dec 2022