BSL Corporation Bhd (Technical Buy)

• BSLCORP’s share price has fallen 95% since early February 2021 from its peak of RM2.43 to close at RM0.125 yesterday. With the share price currently hovering near its key support level of RM0.115, a technical rebound could be anticipated.

• Chart-wise, we believe the share price will shift upward as both the Stochastic and RSI indicators are set to climb out from the oversold zone.

• Hence, we expect the stock to rise and test our resistance thresholds of RM0.16 (R1; 28% upside potential) and RM0.18(R2; 44% upside potential).

• Conversely, our stop loss price level has been identified at RM0.10 (representing a 20% downside risk).

• BSLCORP is mainly involved in the stamping and manufacturing of precision metal parts, fabrication of tools, forge base metal components, dies, the assembly of printed circuit board as well as electrical and electronics components.

• Earnings-wise, the group reported a net loss of RM3.7m in 5QFY22, which brought its 15MFY22 net loss to RM0.2m.

• In terms of valuation, the stock is currently trading at Price/Book Value multiple of 0.24x (or approximately 0.5 SD below its historical mean) based on a book value per share of RM0.51 as of end-November 2022.

Melewar Industrial Group Bhd (Technical Buy)

• MELEWAR’s share price slid from a peak of RM0.78 in May 2021 to as low as RM0.22 in October last year before bounding since then to close at RM0.325 yesterday.

• On the chart, the share price is expected to continue its upward momentum backed by: (i) the rising Parabolic SAR trend, (ii)the DMI Plus pulling away from the DMI Minus, and (iii) the 12-day moving average still hovering above the 26-day moving average following the MACD golden cross in January this year.

• A resumption of the uptrend could lift the stock to challenge our resistance levels of RM0.36 (R1; 11% upside potential) and RM0.40 (R2; 23% upside potential).

• Our stop loss level is pegged at RM0.29 (representing an 11% downside risk).

• Fundamentally speaking, MELEWAR is involved in the mid-stream segment of the steel industry, focusing mainly on the manufacturing of: (i) cold rolled coil steel sheets, and (ii) steel tubes & pipes. Its other businesses are in the supply of industrialised building system (IBS) to niche markets and the trading of food products.

• Earnings-wise, the group reported a lower net profit of RM0.6m in 1QFY23 (versus net profit of RM6m previously) mainly due to the weak market conditions faced by the domestic steel industry and the downstream manufacturing sector.

• In terms of valuation, the stock is currently trading at Price/Book Value multiple of 0.28x (or approximately 0.5 SD below its historical mean) based on a book value per share of RM1.14 as of end-September 2022.

Source: Kenanga Research - 2 Feb 2023