Dialog Group Bhd (Technical Buy)

• After pulling back from a peak of RM2.73 in January 2023, DIALOG’s share price has subsequently rebounded from a low of RM2.21 that was followed by the appearance of several bullish candlesticks.

• We believe the share price – which ended at RM2.42 yesterday - will likely climb further as: (i) the stock has moved back above the lower Bollinger Band, (ii) the MACD line has crossed above the signal line, and (iii) the DMI Plus has crossed over the DMI Minus.

• Thus, the stock could rise to challenge our resistance levels of RM2.70 (R1; 12% upside potential) and RM2.81 (R2; 16% upside potential).

• We have pegged our stop loss price at RM2.18, representing a downside risk of 10%.

• DIALOG is an integrated technical service provider to the upstream, mid-stream and downstream segments in the oil & gas and petrochemical industry.

• Earnings-wise, the group recorded a net profit of RM127.2m (-1% QoQ) in 2QFY23, which brought 1HFY23’s bottomline to RM252.9m (-1.5% YoY).

• According to consensus estimates, DIALOG is expected to report a net profit of RM567.9m in FY June 2023 and RM619.7m in June 2024. This translates to forward PERs of 24.2x and 22x, respectively.

Notion VTech Bhd (Technical Buy)

• NOTION’s share price has bounced off from a recent low of RM0.33 that was backed by the subsequent appearance of several bullish candlesticks after pulling back from its peak of RM0.455 in February 2023.

• The share price – which has since rebounded to close at RM0.355 yesterday – will likely resume its uptrend based on the following positive technical signals: (i) the stochastic indicator is reversing from the oversold zone, (ii) the stock has moved back above the lower Bollinger Band, and (iii) the emergence of an uptick by the Parabolic SAR.

• Thus, we believe that NOTION’s share price could climb towards our resistance thresholds of RM0.39 (R1) and RM0.425 (R2), representing upside potentials of 10% and 20%, respectively.

• Our stop loss price is set at RM0.32 (or a downside risk of 10%).

• NOTION is principally involved in the design and production of high precision metal components, which are segregated into 3 business segments: (i) hard disk drive (HDD) for data centres and computing, (ii) automotive, and (iii) engineered products such as EMS accessories.

• Earnings-wise, the group reported a net loss of RM3.7m in 1QFY23 (versus net loss of RM6m in 1QFY22).

• Based on its book value per share of RM1.04 as of end-December 2022, the stock is currently trading at Price/Book Value multiple of 0.34x.

Source: Kenanga Research - 10 Mar 2023