Axiata Group Bhd (Technical Buy)

• From a low of RM2.24 in October 2022, AXIATA’s share price surged 42% to its peak of RM3.17 in early March this year before reversing into a downtrend, closing at RM2.59 last Friday.

• A technical rebound could be on the horizon in view of the positive technical signals as suggested by the strengthening of Stochastic and RSI indicators coupled with the existence of a bullish MACD divergence.

• That said, the stock will likely climb towards our resistance thresholds of RM2.85 (R1; 10% upside potential) and RM3.10 (R2;20% upside potential).

• Our stop loss level is pegged at RM2.33 (representing a 10% downside risk).

• Fundamentally speaking, AXIATA is a leading telecommunications group in Asia that engages in the provision of mobile communication, telecommunication infrastructure, and digital services.

• Earnings-wise, the group reported a profit of RM73.9m in 1QFY23 compared with a net loss of RM43.0m in 1QFY22, mainly due to higher top lines and lower foreign exchange loss.

• Based on consensus forecasts, AXIATA’s net earnings are projected to come in at RM922.7m in FY December 2023 and RM1.2b in FY December 2024, which translate to forward PERs of 25.8x and 20x, respectively.

Farm Fresh Bhd (Technical Buy)

• Listed in March 2022 at an IPO offer price of RM1.35, FFB subsequently retraced 35% from the high of RM1.58 in late-May2023 to as low as RM1.03 on 12 July 2023 before inching up to close at RM1.09 last Friday.

• Chart-wise, we believe the share price will shift upward due to the following factors: (i) it is hovering over the lower end of the Keltner Channel, (ii) an anticipated rebound from the share price climbing out of the RSI oversold area, (iii) a bullish Stochastic signal.

• Thus, we believe FFB’s share price will rise to challenge our resistance thresholds of RM1.22 (R1; 12% upside potential)and RM1.30 (R2; 19% upside potential).

• Conversely, our stop-loss price is identified at RM0.97 (representing an 11% downside risk).

• Fundamentally speaking, FFB is engaged in the production and distribution of various dairy and plant-based products such as ready-to-drink (RTD) milk and yoghurt products.

• Earnings-wise, the group reported a net profit of RM4.9m in 4QFY23 compared with a net profit of RM17.7m in 4QFY22, mainly due the increase in input costs including key dairy raw materials, labour costs as well as minimum wages. This took FY23 bottom line to RM50.1m (versus net profit of RM79.9m previously).

• Consensus is projecting the group would deliver a net profit of RM82.8m in FY March 2024 and RM106.9m in FY March 2025. From a valuation standpoint, this translates to forward PERs of 24.9x and 19.3x, respectively.

Source: Kenanga Research - 17 Jul 2023