Aug 24, 2016

DRB-HICOM – Trading Sell Opportunity

Stock Code: 1619. Shooting star patterns and toppish indicators may induce more profit taking

DRB-HICOM’s Daily Chart: Shooting Star Patterns signal price tops and reversals

DRB-HICOM daily chart
DRH_HICOM Weekly Chart: Downside bias amid extremely technically overbought
DRB_HICOM weekly chart

  • Positives are likely priced in. Positive news that DRBHCOM’s plans to sell a stake in Proton to a foreign strategic partner and the disposal of a 90% equity interest in Corwin Holding Pte Ltd (which owns a leasehold property known as The Verge in Singapore) to Lum Chang Holdings has boosted its share prices from monthly low of RM0.90 to as high as RM1.43 before ending at RM1.35 yesterday.
  • While we are overall positive on the planned disposals, as part of DRB’s rationalization objective to improve its balance sheet and realize its investments gain, the recent surge in share prices could have priced in the positives as the group is still likely to record a huge loss of RM301m in FY17 before returning to black in FY18 with a small RM17m profit.
  • Losing momentum. We believe the recent 50% surge in share prices from monthly low has triggered concern about price sustainability, compounded by the grossly overbought daily and weekly indicators. In addition, the shooting star patterns and weakening volume in the daily and weekly charts are bearish reversal signals.
  • Front technical perspective, we see Trading Sell opportunity with an immediate support near RM1.30 (23.6% FR). A decisive breakdown below RM1.30 will trigger further decline towards RM1.27 (10-d SMA) and RM1.22 (38.2% FR). On the flipside, any rebound will see upside capped at RM1.40, RM1.43 (YTD high on 22 Aug) and RM1.45 (52-week high).
source: Hong Leong Investment Bank – 24/08/2016
The Company an investment holding company trades in vehicles. The Company is involved in design and construction of the Electrified Double Track Project between Rawang and Ipoh. It also holds investments in the automotive property and construction and services sectors.