The Alpha Trader

MESINIAGA BERHAD (5011)- A GOOD TRADE SETUP

TheAlphaTrader
Publish date: Tue, 27 Feb 2024, 02:34 PM
With over 20 years of trading experience in financial markets, this blog is intended to share with fellow traders how I identify good trade setups from a combination of fundamental, technical and situational considerations

In my last article I shared a stock, Paragon Bhd which falls under the “new owner new business” trade setup. The stock has done very well since, rising from RM3.32 to RM3.64 at time of writing after touching a high of RM4.05. Identifying good trade setups can indeed be tricky but very profitable, if successful. You have to put on your sharp observation glasses and get in early on these trending trades to catch the “meat’” of the move. 

Another trade setup that has worked well for me is to group stocks that have similar characteristics like being in the same industry, market capitalisation size or similar stock price correlations. So if a stock moves big in the group, there are usually opportunities to trade the laggards. 



WHY MESINIAGA BHD?

Therefore on my watchlist, I have grouped Mesiniaga together with 2 other stocks, namely Edaran Bhd and Heitech Padu. All 3 stocks have the these same characteristics of being in the technology sector, a small share base and similar market capitalisation. Lets look at the respective charts of these 3 stocks:


1) Edaran Bhd


Edaran is on the move again in recent days, trading at a new high of RM1.45 yesterday. At the current price of RM1.35,it is up a whopping 47% year to date.


2) Heitech Padu Bhd 


Heitech share price has just broken up from its pivot breakout point of RM1.20 in recent days, and is poised to test higher levels with increased volume. It is currently at RM1.55, up 7% for the day and up 73% year-to-date.


3) Mesiniaga Bhd


Mesiniaga has just started its new uptrend move this week breaking the pivotal RM1.50 level yesterday with increasing volume. At time of writing, it is up 8% for the day at RM1.70 but only 24% up year to date. 

Although all 3 stocks have moved up recently with positive momentum, Mesiniaga is clearly lagging by at least 30%!



OTHER SALIENT POINTS ON MESINIAGA 


1) Small Free Float

Mesiniaga has a very small share base of only 60 million shares. Based on the latest Annual Report, the top 30 shareholders alone own about 70% of the shares, with the biggest shareholder Shapadu Capital Sdn Bhd owning 28%.Tightly held stocks with low level of free float could lead to sudden explosive price action.


2) Decent Valuations

Mesiniaga is trading at an undemanding trailing PER of 21x, which is fair for a small cap technology stock. It also trades below its Net-Tangible-Asset of RM1.80 per share.



CONCLUSION

Given that the technology sector is very much in play, and the lagging status of Mesiniaga, this trade setup offers a very good risk to reward setup. Assuming a 30% catchup to its peers, would put a potential upside target of RM2.24, with a chart induced stop-loss of RM1.49, giving a risk to reward trade ratio of 2 to 1!




Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments

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2 people like this. Showing 2 of 2 comments

Dkk08

AT.. you are gusan la.. tq

1 month ago

Lsly88

huat ,heng,ong ar

1 month ago

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