Kenanga Research & Investment

Daily technical highlights – (HIBISCS, INARI)

Publish date: Wed, 22 Mar 2023, 09:21 AM

Hibiscus Petroleum Bhd (Technical Buy)

• HIBISCS’s share price has slid from a peak of RM1.51 in May 2022 to as low as RM0.785 in July 2022 before making arecovery since then to close at RM0.915 yesterday.

• On the chart, the share price is expected to resume its upward momentum backed by an anticipated reversal in: (i) both theRSI and Stochastic indicators from the oversold area, and (ii) the stock price from the lower Bollinger Band.

• Hence, we expect the share price to rise and test our resistance thresholds of RM1.02 (R1; 12% upside potential) andRM1.08 (R2; 18% upside potential).

• Conversely, our stop-loss price has been identified at RM0.82 (representing a 10% downside risk).

• A listed independent oil and gas exploration and production company with a diversified portfolio of assets and concessionslocated across Malaysia, the United Kingdom, Australia and Vietnam, HIBISCS is a direct proxy to elevated oil prices.

• Earnings-wise, the group reported a stronger net profit of RM70.5m in 2QFY23 compared with a net profit of RM48.5m in2QFY22, lifted mainly by the higher average realised oil price and relatively lower average opex per bbl. This took its1HFY23 bottom line to a net profit of RM205.7m (versus a net profit of RM90m previously).

• Based on consensus forecasts, HIBISCS’s net earnings are projected to come in at RM503m in FY June 2023 andRM481.8m in FY June 2024, which translate to forward PERs of 3.7x this year and 3.8x next year.

Inari Amertron Bhd (Technical Buy)

• The share price of INARI has dropped 45% from a peak of RM4.30 in late November 2021 to close at RM2.36 yesterday.With the share price falling towards its 52-week low, further downside risk may be cushioned by the short-term support line atRM2.28.

• On the chart, a technical rebound is likely in view of both the RSI and Stochastic indicators from the oversold area.

• An upward shift could then propel the stock towards our resistance targets of RM2.60 (R1; 10% upside potential) andRM2.80 (R2; 19% upside potential).

• Our stop-loss level is pegged at RM2.14 (representing a 9% downside risk).

• Fundamentally speaking, INARI is involved in the electronics manufacturing services (EMS) industry, providing outsourcedsemiconductor assembly and test (OSAT) niche services in radio frequency (RF) system in package (SiP) for smart mobiledevices, fibre optic transceivers and other electronics manufacturing services.

• Earnings-wise, the group reported a net profit of RM93.6m in 2QFY23 compared with a net profit of RM107.3m in 2QFY22dragged by comparatively lower loading volume in the optoelectronics business segment. This dragged 1HFY23’s bottom linedown to RM199.9m (versus a net profit of RM214.2m previously).

• Based on consensus forecasts, INARI is expected to record net earnings of RM383.1m in FY June 2023 and RM424m in FYJune 2024, which translate to forward PERs of 23.0x this year and 20.8x next year.

Source: Kenanga Research - 22 Mar 2023

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