Kenanga Research & Investment

Daily technical highlights – (CCK, E&O)

Publish date: Wed, 29 Mar 2023, 09:18 AM

CCK Consolidated Holdings Bhd (Technical Buy)

• Following a pullback from its recent peak of RM0.795 in early March this year to close at RM0.695 yesterday, CCK’s shareprice is poised to plot a technical rebound ahead.

• According to our trading system, which is built on the RSI to trigger buy signals when the indicator crosses back above theoversold threshold – the stock is anticipated to resume its upward trajectory. Based on an exit rule of either a 9% profit or 9%stop loss (whichever comes first) from the trigger levels, the back-tested results showed that 46 of the 56 buy alerts generatedby the trading system since 2015 were profitable trades (i.e. it has correctly predicted the subsequent share price gains of 9%or more), translating to an accuracy rate of 82%.

• And in view of the appearance of 2 buy alerts on 16 March and 20 March this year, the trading system is currently signallingthat the shares could reach the RM0.76 – RM0.77 price range or higher going forward.

• On the chart, we have pegged our resistance targets at RM0.77 (R1; 11% upside potential) and RM0.83 (R2; 19% upsidepotential). Our stop loss price level is set at RM0.63 (representing a downside risk of 9%).

• Fundamental-wise, CCK (which is involved in retailing and poultry farming) posted net profit of RM13.0m (+81% YoY) in4QFY22, bringing full-year bottomline to RM62.1m (up 2.5-fold YoY). Based on consensus expectations, the group isforecasted to make net earnings of RM58.6m for FY December 2023 and RM64.8m for FY December 2024, translating toforward PERs of 7.4x this year and 6.7x next year, respectively (with its 1-year rolling forward PER presently hovering at 2SDbelow its historical mean).

• Meanwhile, the government’s plan to lift the price controls on chickens and eggs after June this year under an initiative toovercome food shortage may benefit CCK under a deregulated business environment.

Eastern & Oriental Bhd (Technical Buy)

• After overcoming a negative sloping trendline that dates back to mid-October 2021, E&O shares may strive to swing higherahead.

• Technically speaking, an upward shift in the share price will likely be forthcoming following the positive crossovers by the DMIPlus above the DMI Minus and the stochastic indicator’s %K line above the %D line in the oversold territory.

• On the back of the rising momentum, the stock could be making its way towards our resistance thresholds of RM0.36 (R1;16% upside potential) and RM0.39 (R2; 26% upside potential).

• Our stop loss price level is placed at RM0.27 (representing a downside risk of 13% from yesterday’s closing price of RM0.31).

• A premier property developer with a geographical presence in Kuala Lumpur, Penang, Johor and London, E&O reported netprofit of RM30.1m (+284% YoY) in 3QFY23, which lifted 9MFY23 bottomline to RM28.5m (a turnaround from net loss ofRM15.3m previously).

• According to consensus estimates, the group will likely register net earnings of RM34.3m for FY March 2023 and RM39.2mfor FY March 2024.

• Valuation-wise, the stock is presently trading at Price / Book Value multiple of 0.25x (or just marginally above the minus 2SDthreshold from its historical mean) based on its book value per share of RM1.23 as of end-December 2022.

Source: Kenanga Research - 29 Mar 2023

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