Ancom Nylex Bhd (Technical Buy)

• ANCOMNY’s share price staged a trend reversal after rising from the trough of RM0.90 on 24 November 2022 to break outfrom the immediate resistance line subsequently before closing at RM1.07 yesterday.

• Chart-wise, the stock is set to extend its upward bias on the back of the following positive technical indicators: (i) the MACD isstill hovering above the signal line, (ii) the emerging Parabolic SAR uptrend, and (iii) the rising buying interest as suggestedby the Chaikin Oscillator.

• Ergo, this could then propel the stock towards our resistance thresholds of RM1.20 (R1; 12% upside potential) and RM1.30(R2; 21% upside potential).

• On the contrary, we have pegged our stop loss price level at RM0.95 (representing an 11% downside risk).

• The sole large-scale producer of active ingredients for herbicides in southeast Asia, ANCOMNY registered a net profit ofRM20m (+122% QoQ) in 1QFY23 after posting a full-year earnings of RM68.2m (+185% YoY) in FY May 2022.

• As the only one of two producers of the closest substitute products in Thailand, ANCOMNY stands to benefit from increaseddemand for its active ingredients (AI) in herbicides following the ban of paraquat (an economical chemical-based toxic weedkiller which is also lethal to human and causes environment pollution) in Thailand since 2020.

• Hence, according to Kenanga Research, the group is expected to show strong growth momentum with net profit forecasts ofRM73.7m in FY May 2023 and RM108.9m in FY May 2024, which translate to forward PERs of 13x and 9x, respectively.

Cnergenz Bhd (Technical Buy)

• Following a retracement of 22% from the previous peak of RM1.01 on 6 December 2022 to as low as RM0.785 last week,CNERGEN’s share price is set to bounce off from its immediate support level after closing at RM0.82 yesterday.

• The share price is poised to overcome the Parabolic SAR downtrend, as suggested by the positive technical signals arisingfrom: (i) the MACD on the verge of crossing over the signal line, and (ii) the RSI cutting above the MA line.

• Therefore, we anticipate that CNERGEN shares could climb towards our resistance targets of RM0.92 (R1) and RM0.98 (R2),representing upside potentials of 12% and 20%, respectively.

• Our stop loss price level is pegged at RM0.73 (or an 11% downside risk from the closing price of RM0.82 yesterday).

• Business-wise, CNERGEN is an electronic manufacturing solution provider that specializes in surface mount technology(SMT) manufacturing solutions for the electronics and semiconductor industries.

• The group recorded a net profit of RM7.1m (-24% QoQ) in 3QFY22 mainly due to lower sales of integrated solutions for SMTmanufacturing lines and SMT machines, which then took its 9MFY22 bottomline to RM20m (prior period comparison notavailable as the Company was listed on 24 May 2022).

• Consensus is currently projecting CNERGEN would make net earnings of RM22.8m in FY December 2022 and RM26m in FYDecember 2023. This translates to forward PERs of 18x and 16x, respectively.

Source: Kenanga Research - 6 Jan 2023