NCT Alliance Bhd (Technical Buy)

• NCT’s share price has slid from a recent high of RM0.425 in February this year, down by 22% to a low of RM0.33 in March before rebounding marginally to close at RM0.37 on Wednesday.

• Chart-wise, we believe the share price will shift upward as the Stochastic indicator is in the midst of climbing out from the oversold zone while the share price has moved back above the lower Bollinger Band.

• Hence, we expect the stock to rise and test our resistance thresholds of RM0.42 (R1; 14% upside potential) and RM0.45 (R2; 22% upside potential).

• Conversely, our stop loss price has been identified at RM0.32 (representing a 14% downside risk).

• NCT is a real estate developer offering property development services for various housing projects with a geographical presence mainly in Genting Highlands and Penang.

• Earnings-wise, the group reported a net profit of RM12.8m (+14% QoQ) in 4QFY22, which took FY22 bottomline to RM43.2m (versus net profit of RM33.7m previously).

• In terms of valuation, the stock is currently trading at Price/Book Value multiple of 0.8x (or approximately at 0.5 SD below its historical mean) based on its book value per share of RM0.43 as of end-December 2022.

Power Root Bhd (Technical Buy)

• PWROOT shares have surged 99% since March 2022 to as high as RM2.31 in December 2022 before closing at RM2.16 on Wednesday. With the share price currently hovering near the lower end of the ascending price channel, an extended upward trajectory is anticipated.

• On the chart, the share price is expected to continue its positive momentum backed by: (i) the rising Parabolic SAR trend, (ii) the DMI Plus crossing above the DMI Minus, and (iii) the 12-day moving average still hovering above the 26-day moving average following the recent MACD golden cross.

• A technical breakout could then lift the stock to challenge our resistance levels of RM2.40 (R1; 11% upside potential) and RM2.50 (R2; 16% upside potential).

• Our stop loss level is pegged at RM1.94 (representing a 10% downside risk).

• Fundamentally speaking, PWROOT is a manufacturer and distributor of beverage products specialising in staple drinks (such as coffee, tea, chocolate malt drinks and herbal energy drinks).

• Earnings-wise, the group reported a net profit of RM11.3m in 3QFY23 compared with a net profit of RM15.6m in 2QFY23 mainly due to lower revenue from the local and export markets as well as lower foreign exchange gain. This took 9MFY23 bottomline to RM42.2m (versus net loss of RM13.6m previously).

• Based on consensus forecasts, PWROOT’s net earnings are projected to come in at RM55.9m in FY March 2023 and RM60.7m in FY March 2024, which translate to forward PERs of 16.5x this year and 15.2x next year, respectively.

Source: Kenanga Research - 5 May 2023