Muar Ban Lee Group Bhd (Technical Buy)

• A continuation of MBL’s share price rally – which started from a trough of RM0.335 in early August last year before closing at RM0.515 yesterday – is anticipated as the shares are set to bounce off from the 100-day SMA ahead.

• Riding on the positive momentum and strengthening stochastic signal, the stock could stage a breakout from the pennant pattern.

• An upward shift is expected to lift the shares to climb towards our resistance thresholds of RM0.56 (R1; 9% upside potential) and RM0.60 (R2; 17% upside potential).

• We have placed our stop loss price level at RM0.47 (representing a downside risk of 9%).

• MBL is involved in 3 main business activities, namely: (i) manufacturing division, providing integrated engineering solutionsand supplying oil seed crushing machineries, ancillary equipment and related parts, (ii) automotive division via its operation of 3 Proton dealership outlets, and (iii) plantation division comprising an oil palm plantation in Kelantan and durian plantations in Johor.

• The group reported net profit of RM46.6m (+323% YoY) in 4QFY22, taking FY22’s bottomline to RM67.1m (+268% YoY).

• Its balance sheet – which is backed by net cash position of RM106.3m (translating to RM0.47 per share or 91% of its current share price) – shows that the group is financially stable.

• Based on its book value per share of RM0.91 as of end-December 2022, the stock is presently trading at Price / Book Value multiple of 0.56x (or at 1SD below its historical mean).

• In terms of corporate development, MBL is in the midst of undertaking a bonus issue of 113.8m warrants on the basis of 1 warrant for every 2 existing MBL shares held with the entitlement date to be determined later.

Yew Lee Pacific Group Bhd (Technical Buy)

• After swinging sideways since early February this year, oscillating between a range of RM0.30 and RM0.36, YEWLEE’s share price may shift upwards and attempt to break out from the rectangle pattern going forward.

• This follows the bullish technical signals triggered by the crossover of the MACD above its signal line and the stochastic indicator’s ongoing reversal from an oversold position.

• With that said, the stock could advance to challenge our immediate resistance target of RM0.37 (R1; 14% upside potential) initially before climbing further towards our next resistance threshold of RM0.41 (R2; 26% upside potential).

• Our stop loss price level is pegged at RM0.29 (or a downside risk of 11% from its closing price of RM0.325 yesterday).

• YEWLEE – which is involved in the manufacturing of industrial brushes and trading of industrial hardware and machinery parts – made a slight net loss of RM1.1m in 4QFY22, which brought its cumulative net loss to RM1.5m in FY December 2022,mainly dragged by an one-off listing expenses of RM2.7m (no comparable figures were available prior to the company’slisting in June 2022).

• Post-listing, the group’s balance sheet is backed by net cash & cash equivalents of RM49.3m (or 9.3 sen per share accounting for more than one-quarter of the current share price) as of end-December 2022.

• Valuation-wise, the stock is currently hovering at Price / Book Value multiple of 2.34x (or at 0.5SD below its historical mean) based on its book value per share of RM0.14.

Source: Kenanga Research - 24 May 2023