Eonmetall Group Bhd (Technical Buy)

• EMETALL’s share price – after falling from the peak of RM0.745 in early January 2023 – recently rebounded from a low of RM0.635 amid the appearance of bullish candlesticks to close at RM0.67 yesterday.

• Backed by positive technical signals arising from: (i) the MACD line crossing above the signal line, (ii) the DMI Plus overcoming the DMI Minus, and (iii) an emerging Parabolic SAR uptrend, the stock is expected to move higher ahead.

• Thus, the stock could rise to challenge our resistance levels of RM0.745 (R1; 11% upside potential) and RM0.805 (R2; 20% upside potential).

• We have pegged our stop loss price at RM0.60, representing a downside risk of 10%.

• EMETALL is principally involved in the designing and fabrication of metal works and industrial process machinery & equipment (such as palm oil related machines) as well as steel storage systems.

• Earnings-wise, the group’s net profit has improved by 30% QoQ to RM6.1m in 3QFY22, taking its 9MFY22’s net profit to RM30.1m (+64% YoY).

SDS Group Bhd (Technical Buy)

• Chart-wise, SDS’ share price (which has been trending up since December 2021) recently broke out from its resistance level of RM0.805 in December 2022 to close at a record high of RM0.84 yesterday. Riding on the ascending channel, the share price may extend its uptrend pattern.

• We expect the upward momentum to continue based on the positive technical signals arising from: (i) the rising Parabolic SAR trend, (ii) the DMI Plus crossing above the DMI Minus, and (iii) the MACD line crossing above the signal line.

• Thus, we believe that SDS’ share price could climb towards our resistance thresholds of RM0.93 (R1) and RM1.02 (R2), representing upside potentials of 11% and 21%, respectively.

• Our stop loss price is set at RM0.75 (or a downside risk of 11%).

• SDS is involved in the manufacturing and distribution of bakery products through its retail and wholesale networks.

• Earnings-wise, the group reported a net profit of RM8.7m in 2QFY23 (+128% QoQ), which brought its 1HFY23 bottomline to RM13.2m (or a jump from 1HFY22’s net earnings of RM0.1m only).

• Based on consensus projections, the group is expected to report net profit of RM28.1m in FY March 2023 and RM35.7m in FY March 2024, which translate to forward PERs of 12.2x and 9.7x, respectively.

Source: Kenanga Research - 10 Feb 2023