Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Thu, 14 Jan 2021, 5:53 PM


Daily Technical Highlights - (FPI, DAYANG)

Author: kiasutrader   |  Publish date: Fri, 15 Jan 2021, 9:55 AM

Formosa Prosonic Industries Bhd (Trading Buy)

  • FPI is a Malaysia-based company that is involved in the manufacturing and sales of speaker systems. The group produces products such as wireless speakers, conventional speakers, musical instrument products and acoustic products.
  • In view of the rising Covid-19 cases globally, we foresee FPI may benefit from upgrades by consumers of their home-office sound systems as they spend more time at home.
  • The group registered a better 3QFY20 sales of RM281.1m (+161% QoQ) following the resumption in business activities post the MCO lockdown. Its net income rose in tandem to RM25.8m (+206%) due to better sales mix and economies of scales which resulted in better operational efficiency. Financially, the group has a strong balance sheet with short term funds and cash holdings of RM226.1m or 91 sen per share as of end-3QFY20.
  • Chart-wise, the stock has been in a range-bound between the 20-day and 50-day SMA lines recently. Yesterday’s bullish engulfing candlestick has lifted the stock to an all-time high of RM2.58. Given that the shorter-term key SMA continues to stand above the longer-term key SMA, we thus believe the stock could continue its upward momentum.
  • Based on our Fibonacci projections, our resistance levels are set at RM2.90 (R1; +14% upside potential) and RM3.10 (R2; +22% upside potential).
  • Meanwhile, our stop loss is set at RM2.20 (-13% downside risk).

Dayang Enterprise Holdings Bhd (Trading Buy)

  • DAYANG operates in the oil and gas industry providing: (i) offshore topside maintenance services, (ii) minor fabrication works, and (iii) offshore hook-up and commissioning services for oil and gas companies.
  • The group has recently secured: (i) a contract extension from Sarawak Shell and Sabah Shell until June 2021, and (ii) a 3- year maintenance contract from Mubadala Petroleum’s Entity MDC Oil & Gas, which would increase earnings visibility going forward.
  • QoQ, the group registered an increase in revenue to RM230.2m (+34% QoQ) in 3QFY20 given the higher work orders received from its top-side maintenance segment. Meanwhile, the group’s net income turned from a net loss of RM985k in 2QFY20 to a net profit of RM36.1m amid better productivity and efficiency in 3QFY20.
  • Chart-wise, the stock has been trading between the range of RM1.10-RM1.30 since late December last year. Ichimoku-wise, we believe the stock is heading for a “Kumo-Bounce” to continue trending upwards.
  • With that, our key resistance levels are set at RM1.38 (R1; +16% upside potential) and RM1.54 (R2; +29% upside potential).
  • Meanwhile, our stop loss is pegged at RM1.02 (-14%, downside risk).

Source: Kenanga Research - 15 Jan 2021

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Dayang Enterprise Holdings - PM-MCM Contract from Mubadala

Author: kiasutrader   |  Publish date: Fri, 15 Jan 2021, 9:54 AM

DAYANG has received a PM-MCM contract from Mubadala which mainly operates the newly developed Block SK320. While we are positive on the contract win, we guesstimate the contract value to be rather smallish. Meanwhile, the upcoming 4QFY20 may post sequentially weaker results, given the monsoon season, while Petronas Activity Outlook had also suggested flattish activity levels in 2021, from 2020. Downgrade to MP and lower TP to RM1.20. Stock has already chalked returns of 14% since our OP call in Nov 2020.

PM-MCM contract from Mubadala. DAYANG announced that it was awarded a contract by Mubadala Petroleum for the provision of Pan Malaysia Maintenance, Construction and Modification (PM- MCM). The duration is effective from 9 Dec 2020, expiring 16 July 2023, with an option to extend one year.

Smallish contract value. While no contract values were disclosed in the announcement, as the actual contract values will be dependent on work orders issued by the client, we guesstimate the total value of the contract to be rather smallish at roughly <RM20m. In context, this is <1% of the group’s order- book of ~RM3.5b. In Malaysia, Mubadala operates the Block SK320 development, offshore Sarawak, which is its first development domestically. This block is a relatively new development, with FID achieved in 2018 and first gas expected only in 3QCY21. As such, we do not expect the platform to require any major maintenance activities in the near future. Nonetheless, we are still positive on the contract win, showcasing DAYANG’s capabilities in securing new clientele.

Monsoon quarter ahead. We firmly believe the upcoming 4QFY20 results may post sequentially weaker earnings given the monsoon season. Going into FY21, Petronas in their latest Activity Outlook had guided flattish demand for offshore maintenance, and hook-up and commissioning in 2021, versus 2020 levels. This will likely impact contractors operating in this space, such as DAYANG.

Downgrade to MARKET PERFORM, lowered TP of RM1.20. Since our upgraded OUTPERFORM call in Nov 2020, the stock had already managed returns of +14%. As such, we feel the share to be fairly valued at the moment, especially considering the flattish activity outlook as guided by Petronas. We trimmed our FY21E earnings by 11% after lowering our work order recognition assumptions. Our TP is also lowered to RM1.20, from RM1.35 previously, as we lowered our ascribed valuations from 0.9x PBV to 0.8x PBV – roughly at -0.5SD from mean levels.

Risks to our call include: (i) stronger-than-expected work orders, (ii) stronger-than-expected margins, and (iii) higher-than- expected vessel utilisation.

Source: Kenanga Research - 15 Jan 2021

Labels: DAYANG
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Thong Guan Industries Bhd - Beaten Down Too Much

Author: kiasutrader   |  Publish date: Fri, 15 Jan 2021, 9:53 AM

After a con-call with management, we came away feeling optimistic about FY21 as business remains busy (>80% utilization, save for PVC at c.60%) and order visibility is longer than usual (2m vs. 1m) on the back of lower resin prices (-5%) since its recent peak in December 2020. Going forward, the continued growth of their high-margin products will help sustain CNP margins of 7-8% in FY20-21. Lower FY20E CNP by 2.3%, while FY21 remains unchanged. A 25% share price correction since Nov-2020 implies an attractive 11x PER. Reiterate OP on unchanged TP of RM3.25 on 14.5x PER.

Prudent management of resin costs and forex risk. While resin costs have risen since bottoming in May 2020 (LDPE: +81%, LLDPE: +47%, HDPE: +48%), the spot prices do not directly translate into TGUAN’s cost as they have been managing resin costs prudently: (i) taking delivery of old orders of LLDPE at USD860/MT (vs. spot price of USD1,030/MT) from the U.S. and LDPE at USD1,000/MT (vs. spot price of USD1,230/MT) from the Middle East, (ii) altering the resin composition of its products to achieve favourable costs, (iii) procuring from the spot market only whatever is necessary. (refer overleaf)

Busy start to FY21. The Group’s stretch films (SF) (both conventional & premium) and garbage bags are seeing greater orderbook visibility of up to 2 months compared to the usual 1 month as local and European customers are buying more SF as they expand, while Japanese customers are stocking up on garbage bags to avoid shortages during the Chinese New Year holiday. Additionally, the courier bag business continues to fare well. (refer overleaf)

Elevated margins moving forward. We believe that the growing segments of premium-SF and courier bags augurs well for TGUAN as they continue transforming into a value-driven business. In the preceding quarters prior to the multi-year low resin prices in 2QCY20, TGUAN has consistently grown their margins. Although 4Q20 CNP margins (est.7%) may not be as attractive as 2Q/3Q20 (8%), we believe that moving forward, the more premium-product mix can help the group sustain GP margins of at least 16% and CNP margins of 7-8%.

Decrease FY20E CNP by 2.3% to reflect a weaker 4QFY20. Maintain FY21E CNP at RM85.2m. We are revising our FY20E CNP down by 2.3% from RM76.7m to RM74.9m to reflect a marginally weaker 4QFY20 QoQ, on a less favourable cost environment in 4QFY20 as LLDPE (70-80% of TGUAN’s total resin consumption) prices rose 25% in 4QFY20.

Maintain OUTPERFORM with unchanged TP of RM3.25 on an ascribed PER of 14.5x to FY21E FD EPS of 22.4sen. We believe that the multiple of 14.5x is justified as: (i) its courier bag segment, which fetches GP margins of c.20% vs Group GP margin of 17%, is poised for growth as it serves blue-chip e-commerce customers in the US, (ii) its size and economies of scale allows it to absorb cost-pressures, and (iii) its healthy balance sheet and strong net cash position of RM120m support their implicit dividend pay-out ratio of 20-25%. Our FY21E DPS is 5.3sen, implying a dividend yield of 2.2%. The current price of RM2.44 implies a forward PER of 11x, which is below its 5-year historical mean of 12x and our ascribed 14.5x.

Risks to our call include: (i) Higher-than-expected resin prices, (ii) volatile foreign currency fluctuations, and (iii) lower-than-expected orderbook.

Source: Kenanga Research - 15 Jan 2021

Labels: TGUAN
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hoiz6011 how about their target of 1b for 2020? meet or not meet?
15/01/2021 5:21 PM

Daily technical highlights – (OCK, TGUAN)

Author: kiasutrader   |  Publish date: Thu, 14 Jan 2021, 5:53 PM

OCK Group Berhad (Trading Buy)

  • OCK is principally involved in the provision of telecommunication services equipped with the ability to provide full turnkey services. The Group has three other major business divisions: (i) Trading of Telco and Network Products; (ii) Green Energy and Power Solutions; and (iii) M&E Engineering Services.
  • For much of 2020, the Group’s trading and M&E engineering services segments suffered due to movement restrictions implemented locally and regionally to curb the Covid-19 pandemic. Moving forward, the Group’s asset portfolio continues to provide a high level of recurring income (c.70%) from tower leasing and solar farms. The Group could also benefit from future developments in JENDELA (Malaysia’s national digital infrastructure plan), 5G and green energy tenders.
  • Going forward, consensus is expecting OCK to make net profit of RM27.3m in FY Dec 2020 and RM32.8m in FY Dec 2021, which translates to forward PERs of 15.6x and 13.0x, respectively.
  • Technically speaking, the stock appears to be gaining upward momentum as the MACD line is approaching the signal line. The long tail wicks in the most recent swing low also suggests that the stock will find strong support at RM0.40.
  • In addition, a bullish OBV divergence signal is seen where the price bounced up from a previous support level while the OBV formed a higher low.
  • Riding on the recent strong positive momentum, OCK’s share price could hit the resistance levels of RM0.55 (R1; 24% upside potential) and RM0.61 (R2; 37% upside potential).
  • We have pegged our stop loss price at RM0.36 (19% downside risk).

Thong Guan Industries Berhad (Trading Buy)

• TGUAN is principally involved in the manufacturing of plastic products, with stretch films making up a bulk of their sales (c.45%). The Group also produces tea and coffee products.

• In recent years, the Group has been transforming itself from a volume-driven to a value-driven business by producing nanostretch films and courier bags to achieve higher margins. Their courier bag segment is poised for high growth as they serve blue-chip e-commerce clients in the United States.

• Since the sharp market correction in March 2020, the stock has had a fantastic run thanks to multi-year low plastic resin prices (their main cost component). However, the stock subsequently took a beating after resin prices started rising and the MYR started strengthening against the USD.

• Fundamentally, the business remains sound and promising. Plastic resin prices have also started falling, which should lift investor sentiment for plastic manufacturers like Thong Guan.

• Going forward, TGUAN is expected to post net profit of RM79.6m in FY Dec 2020 and RM86.8m in FY Dec 2021 based on consensus numbers, which translates to forward PERs of 11.9x and 11.1x, respectively.

• Technically speaking, the stock has recently reversed from the RSI’s oversold zone. It is currently testing the 20-day SMA, a breakout of which could push the stock to higher levels.

• With the MACD line crossing above the signal line, the stock will probably continue to rise and challenge our resistance targets of RM2.83 (R1; 14% upside potential) and RM3.15 (R2; 27% upside potential).

• We have pegged our stop loss at RM2.21 (11% downside risk).

Source: Kenanga Research - 14 Jan 2021

Labels: OCK, TGUAN
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megat36 Baler 19% downside risk...some one need to learn risk management control...
15/01/2021 7:27 PM

Malaysia Distributive Trade - Growth contraction deepened in November on weakening consumer demand

Author: kiasutrader   |  Publish date: Wed, 13 Jan 2021, 9:58 AM

● Distributive trade sales contracted for the second consecutive month in November (-1.2% YoY; Oct: -0.8%)

- Sales value (RM110.4b; Oct: RM110.5b): fell to its lowest level in four months.

- MoM (-0.1%; Oct: -0.5%): declined for the third straight month, albeit at a softer pace, as consumer spending remained weak following the reinstatement of COVID-19 restriction measures.

● The decline was driven by a further decline in retail trade and weakening motor vehicle sales, but was partially lifted by a softer fall in wholesale trade

- Retail trade (-2.3%; Oct: -1.5%): contraction deepened due to the declining sales of automotive fuels (-14.6%; Oct: -9.6%) amid the inter-state travel ban and a moderation in sales of non-specialised stores (2.3%; Oct: 4.4%).

- Motor vehicles (1.2%; Oct: 2.2%): attributed to a steeper fall in sales of parts & accessories (-7.7%; Oct: -4.5%), and maintenance & repair (-9.5%; Oct: -4.3%)

- Wholesale trade (-0.7%; Oct: -0.9%): contraction softened to its smallest in 9 months, driven by a rise in sales of food, beverages, and tobacco (4.7%; Oct: 3.8%).

● Weaker retail trade performance across most advanced and developing economies

- ID: fell to -16.3% (Oct: -14.9%), reaching its lowest level in five months.

- EA: fell to its lowest in six months (-3.20%; Oct: 3.86%), driven by the reinstatement of COVID-19 containment measures across the continent.

● 2020 distributive trade sales will likely fall slightly below our forecast range -5.5% to -4.5% (YTD: -6.4%; 2019: 5.9%), as COVID-19 restrictions continue to impact consumer spending

- The continuing surge of COVID-19 infections has led to the reinstatement of full Movement Control Orders (MCO) across several key states, until at least 26th January. In the near term, this is expected to stifle an already struggling recovery in consumer spending, despite the trade sector being allowed to operate over this period.

- Nevertheless, private consumption growth is projected to recover on annual basis amid expectation of a wider vaccine rollout and further distribution of fiscal stimulus, in line with a forecasted recovery in 2021 GDP growth, albeit an adjusted 3.9% from 6.1% earlier (2020F: -5.1%).

Source: Kenanga Research - 13 Jan 2021

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Indonesia Retail Sales - Growth plunged to a five-month low in November

Author: kiasutrader   |  Publish date: Wed, 13 Jan 2021, 9:57 AM

● November retail sales fell sharply to its lowest since June (-16.3% YoY; Oct: -14.9%)

− Attributable to a broad-based slowdown led by apparel (-56.6%; Oct: -58.1%), followed by other goods (-51.3%; Oct: -53.5%) and cultural & recreation (-40.3%; Oct: -40.6%).

− MoM: growth contraction eased (-1.2%; Oct: -5.3%) due to smaller decline in stationery & communication (-6.2%; Oct: - 11.8%) and food, drinks and tobacco (-0.5%; Oct: -5.3%).

● Deeper contraction in December expected

− Real Sales Index (RSI) is expected to fall by 20.7% YoY in December, lowest since November 2008 due to a broad-based slowdown across all commodity groups and a base effect. Conversely, growth is expected to rebound on MoM (2.9%; Nov: - 1.2%). This is also in line with the improving consumer confidence index which reached a nine-month high (96.5; Nov: 92.0).

● YoY sales growth are expected to improve for the next three to six months

− 3-month Sales Expectation Index (SEI): to rebound sharply by 8.9% in February (expected Jan: -2.7%).

− 6-month SEI: to expand in May (5.7%; expected Apr: 4.0%).

● Inflationary pressure is expected to remain weak for the next three to six months

− 3-month Price Expectations Index (PEI): to fall at a slower rate in February (-2.7% YoY; expected Jan: -6.3%).

− 6-month PEI: deeper contraction expected in May (-9.1% YoY; expected Apr: -5.7%).

● Surging COVID-19 infections to weigh on growth recovery, but would be supported by vaccine rollout

− The surging COVID-19 cases are expected to continuously weigh on the tourism sector in the near term amid lower purchasing power and continued cross border restriction following the global announcement of new COVID-19 strain. Nonetheless, growth would be supported by the efficacy of vaccine rollout.

Source: Kenanga Research - 13 Jan 2021

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