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We have previously written on E.A. Technique Berhad (EA Tech) on its completed white knight rescue plan back in July 2024. From analysing the recent press releases from the company and our channel checks, we can deduce that the classification of EA Tech’s PN17 can be uplifted upon 2 consecutive quarters of profit after the regularisation plan has been approved. The latest QR released last week of RM27.6 million would imply if the next quarterly report shows a profit, the exit from PN17 could take place in 3 to 4 months time

RECENT POSITIVE NEWS FLOW

1) EA Tech reported a net profit of RM27.6 million in the latest quarter, bringing the cumulative profit for the first nine months to RM129.2 million versus RM20.4 million in the corresponding period of 2023, mainly due to write backs to other income from the creditor scheme. Even after deducting the one off items, core earnings for the 9 months FY2024 remained strong at RM19.2 million.

2) In an announcement dated 18 November 2024, the company announced that it has secured  three contract extensions valued at RM63.9 million from Petronas. All three agreements, each spanning  two years, are set to start in November. The group now has a firm order book totalling RM169 million and another RM217.2 million in optional contracts.

TECHNICAL ANALYSIS 

Looking at the daily chart, EA Tech is clearly trading in a sideways trading pattern, gyrating between RM0.29 and RM0.31 since August 2024. Despite a brief spike in early October to RM0.335, any upside has proved unsustainable for now.

In classical technical analysis, the longer a sideways patterns is formed, the magnitude of the next potential motive move in price is correlated to the length of duration in which the price remained rangebound. Pivot points to take note would be RM0.335 and RM0.25. Hence, a decisive move above or below these 2 pivot points would likely set a new price trend in the stock for the medium term.

CASE STUDIES OF AIR ASIA X BHD AND CAPITAL A BHD

Air Asia X had its PN17 status uplifted back in 22 November 2023. News flow on the company’s possible exit from PN17 started coming out in July 2023. The price was trading at around the RM1.70 range for the month of July. Fast forward 3 months later, the price traded to a high of RM2.42 on the first day of trading after exiting PN17. That is very good return of 42% in 4 months!

An article in The Edge on 24 Oct 2024 quoted that Capital A is on the verge of exiting PN17, which could take place as early as December 2024. Looking back 4 months ago, we can see the stock traded around the RM0.75 level. At the current price of RM1.05, that’s a whopping 40% return on the same theme.

CONCLUSION

Based on the 2 case studies above, we believe EA Tech could present itself as an interesting trade setup on its impending exit from PN17, which could take place as soon as February 2025. If a similar pattern is derived from the above, we could potentially see a price of RM0.45 in 3 to 4 months. For the more conservative traders who may seek technical confirmation, entering the trade upon breaking out from the current consolidation range may also be considered.

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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