Media Chinese International Ltd (Technical Buy)

• MEDIAC is a proxy to an anticipated rebound in the tourism market as Hong Kong and China are set to re-open their borders (beginning from as early as 8 January 2023).

• In particular, the group’s travel and travel related services segment is expected to see an income boost from the sales of travel packages and provision of tour services. Prior to the Covid-hit period, this business division had raked in operating profit of USD4.6m in FY March 2019 and USD3.4m in FY March 2020.

• On account of a pick-up in international travel activity, an earnings recovery for the travel and travel related services segment is in sight after breaking even in 2QFY23 (bringing 1HFY23’s segmental operating loss to USD0.3m).

• Overall, MEDIAC – which is principally involved in the publication, printing and distribution of newspapers, magazines, books and digital contents primarily in the Chinese language – made net profit of USD1.3m (-3% YoY) in 2QFY23, taking 1HFY23 bottomline to USD1.0m (vs 1HFY22’s net loss of USD0.5m). Consensus is forecasting net earnings of USD2.4m in FY23 and USD3.0m in FY24.

• Moreover, the group’s balance sheet is backed by net cash holdings of USD68.4m (representing slightly more than its entire market cap) as of end-September 2022. In terms of valuation, based on its book value of 8.8 US cents (or RM0.41) per share as of end-September 2022, the stock is presently trading at a Price/Book Value multiple of 0.40x (which is at 0.5SD below its historical mean).

• On the chart, after swinging sideways inside a rectangle pattern since end-August last year, an upward shift is probable following a golden cross by the 50-day SMA above the 100-day SMA while the stochastic indicator is set to unwind from the oversold area.

• A technical breakout from the rectangle pattern could then propel the stock to reach our resistance targets of RM0.20 (R1; 21% upside potential) and RM0.22 (R2; 33% upside potential). We have pegged our stop loss price level at RM0.13 (or a downside risk of 21%).

Malayan Cement Bhd (Technical Buy)

• After reversing from a recent trough of RM1.84 in early October last year to as high as RM2.24 in late November, plotting a sequence of lower lows along the way, MCEMENT shares could extend the rising trajectory ahead.

• Technically speaking, following the golden cross by the 50-day SMA above the 100-day SMA, the share price (which ended at RM2.11 yesterday) is expected to bounce off from the ascending trendline and the 50-day SMA line.

• An ensuing upward bias will probably lift the stock towards our resistance thresholds of RM2.32 (R1; 10% upside potential) and RM2.50 (R2; 18% upside potential).

• We have set our stop loss price level at RM1.92 (or a 9% downside risk).

• The largest cement manufacturer in Malaysia, MCEMENT turned around with a marginal net profit of RM1.0m in 1QFY23 (from a net loss of RM23.7m previously).

• The improved financial performance will likely persist with consensus currently forecasting the group would make net earnings of RM63.0m in FY June 2023 before jumping further to RM115.8m in FY June 2024.

• Based on its book value per share of RM4.41 as of end-September 2022, the stock is presently trading at a Price/Book Value multiple of 0.48x (which is near the minus 0.5SD level from its historical mean).

Source: Kenanga Research - 4 Jan 2023