Bermaz Auto Bhd (Technical Buy)

• From a low of RM0.77 in March 2020, BERMAZ’s share price has been riding on an uptrend since the COVID pandemic and closed at RM2.02 last Friday, showing an increment of 162%. The stock is already rebounding from the major support level of RM1.99 highlighted by the MA 200.

• A technical rebound could be on the horizon in view of the positive technical signals as suggested by the strengthening of Stochastic RSI indicator as well as early signs of the Bollinger bounce off the lower band.

• The stock will likely climb towards our resistance thresholds of RM2.24 (R1; 11% upside potential) and RM2.40 (R2; 19%upside potential)

• Our stop-loss level is pegged at RM1.84 (representing a 9% downside risk).

• From the fundamental point of view, the core focus of BAUTO centres on the distribution, after-sales service, and supply of spare parts for highly esteemed international automotive brands in Malaysia.

• Earnings-wise, the group reported a profit of RM100.6m in 4QFY23 compared with a profit of RM78.7m in 4QFY22 primarily due to its strong order book which enables the group to experience steady revenue growth.

• Based on consensus forecasts, BERMAZ’s net earnings are projected to come in at RM255.8m in FY April 2024 and RM271.2m in FY April 2025, which translate to forward PERs of 9.25x and 8.73x, respectively.

Cape EMS Berhad (Technical Buy)

• Listed in 10 March this year with an IPO offer price of RM0.90, CEB saw a 58% jump in its share price on its Main Market debut. Conversely, CEB’s share price has retraced 47% from a high of RM1.54 in mid-April to a low of RM1.05 last Wednesday before recovering to close at RM1.16 last Friday.

• Chart-wise, we believe a technical rebound is on the horizon as: (i) the share price is hovering over the lower end of the Keltner Channel, and (ii) an anticipated RSI and Stochastic RSI reversal from the oversold zone.

• That said, the stock is expected to climb towards our resistance thresholds of RM1.26 (R1; 9% upside potential) and RM1.39(R2; 20% upside potential).

• Thus, we have pegged our stop-loss price level at RM1.06 (representing a downside risk of 9%).

• CEB engages in the manufacturing of electronics through its subsidiaries along with providing aluminium die casting &electronics manufacturing services, and supply of electronic products and other related activities.

• Earnings-wise, the group reported a core net profit with the inclusion of listing expenses of RM12.6m in 1QFY23 fromRM8.9m in 4QFY22, with the increase mainly due to higher sales and orders from new EMS customers and for consumer electronic products and die casting manufacturing in the current quarter.

• Based on consensus forecasts, CEB’s net earnings are projected to come in at RM57.4m in FY December 2023 and RM74.0m in FY December 2024, which translate to forward PERs of 18.7x and 14.5x, respectively.

Source: Kenanga Research - 31 Jul 2023