SHORT-TERM BUY (TECHNICAL) on dips for ORIENT (stock code 4006), with stop-loss at RM4.48.
ORIENT reached a significant major weekly Wave 4 low at RM4.30 in late November 2011 with grossly oversold and bullish chart signals. Due to most of its positive indicators, it is likely to surge to its obvious upside Wave 3 and 5 targets (of RM5.17 and RM5.42) and resistance levels above.
The weekly indicators (like the CCI, DMI, MACD and Stochastic) are firmly positive and now depict the fine indications of ORIENT’s prolonged price strength. We expect ORIENT to remain very firm on any weakness (or retracement) to its support levels of RM4.50 and RM4.88. It will attract some minor selling at the key resistance levels of RM5.07 and RM5.48. Our technical upside targets for ORIENT are RM5.17 and RM5.42. Its stop-loss level is at RM4.48.
ORIENT’s share price had made a key daily major Wave-5 low at RM4.30 (21 October 2011), with grossly oversold and bullish divergent signals. Since that low, it surged up to a recent high of RM5.00 on 7 December 2011 (a gain of 16.3% in just over a month). Look to buy ORIENT on any dips to its support areas as the moving averages depict firm daily and weekly up-trends for this stock.
The group has diversified its operations from the automotive distribution business to oil palm plantation and property development. Its oil palm plantation business has close to 60,000ha in Indonesia and this segment
contributed RM151.07m (or 47.8%) of the group’s total profit-before-tax (PBT). Recently, a daily local business newspaper reported that Aberdeen Asset Management now controls about 44.62m shares (or a
7.19%) equity interest in the company. Aberdeen first surfaced as a substantial holder in September 2010, with 31.06m shares (or 5.01%) equity interest.
The group registered RM249.59m in net earnings for the financial year ended 31 Dec 2010. For the 9-month period ended 30 Sep, ORIENT recorded RM179.73m in net profit, up almost 44% from RM124.85m in the same period last year.
Maybank IB does not have fundamental coverage on ORIENT. Consensus data according to Bloomberg reveals that no local research houses have coverage on the stock. The indicated dividend yield for the stock is around 1.84%. The stock currently has trades at a PER of 10.7x, while its historical PER high traded at 18.5x and its historical PER Low traded at 5.9x. Its current traded PER range of 10.7x suggest that ORIENT is trading slightly below its historical average PER of 12.2x. Its last price of RM4.88 is still well below its book value/share of RM6.99. This may also make this stock an attractive investment proposition.
by Maybank IB
