Ancom Nylex Berhad (Ancom) engages in manufacturing of agricultural chemicals, as well as industrial chemicals, polymers and chemical logistics.

Ancom registered a 21.6% year-on-year increase in its net profit from the latest quarterly results. PAT came in at an impressive RM20.11million vs  RM16.36 million in the comparative quarter. This was attributed to improved margins for its agricultural chemicals and industrial chemical divisions. Ancom currently trades at a trailing PE of 13 times and Price-to-Book of 1.86 times.

1) TECHNICAL ANALYSIS

Ancom daily chart broke up from the downtrend line on 18 April 2024 when it closed at RM1.06. The downtrend line had been in place since Ancom price topped out at RM1.24 in October 2023. For the past 2 months, the price has exhibited a sideways pattern oscillating between RM1.02 and RM1.05. A breakout occurred on 5 June, when the price closed at RM1.07 and further confirmation of the breakout was seen with 3 consecutive days of closing above RM1.05.

On the upside, a test of RM1.20 to RM1.24 is likely, but this zone serves as a formidable resistance zone as seen from the weekly chart, having tested this level on 3 previous occasions. However, a break above this zone opens up a retest of its all time high of RM1.37 and beyond. Strong support level can be found at the RM1.02 level and further below, we see RM0.94 as the last level of critical support.

2) RECENT OBSERVATION OF NOTABLE  INSIDER BUYING

Insider buying or selling is always a gauge of where price is heading. In Ancom’s case, we noticed heavy buying from insiders since May 2024. Disclosures filed with Bursa Malaysia indicate that the CEO, Mr Lee Cheun Wei bought a total of 4 million shares since early May, while substantial shareholder Datuk Siew Ka Wei has also increased his personal stake by close to 2 million shares. Treasury share buyback by the company has also seen a lot of activity with an increase of 2 million shares during the period.

3) MORE UPSIDE BASED ON ANALYST TARGET PRICES

Ancom is a fairly well covered stock by analysts in the market. Looking at consensus analyst reports, we have fair value target prices ranging from RM1.28 to RM1.50, with the most bullish analyst from Kenanga Research giving a target price of RM1.50, while the lowest target price is RM1.28 given by Aminvest.

SUMMARY

We see a lot of positives going for Ancom recently, especially after a long consolidation phase recently. Buying at current levels offer good risk to reward trade setup with downside risk buffeted at the RM1.02 lower boundary of the recent consolidation range while the upside is looking a retest of the RM1.20 to RM1.37 levels.

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.