Hot Stock Salcon rises 5.7% on undervaluation, technicals

by **Cals** Thu 05 Jun 2014, 03:14

Hot Stock Salcon rises 5.7% on undervaluation, technicals

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Wednesday, 04 June 2014 12:48

KUALA LUMPUR (June 4): Salcon rose as much as 5.7% after a report by CIMB Investment Bank Bhd said the company was undervalued and under-researched.

TA Securities' technical analysis also called for a "buy" on the stock.

At 12.30 pm noon break, Salcon was traded at 82.5 sen, up 4 sen or 5.1% with some 34.0 million shares done.

Earlier, the stock was the top active stock on Bursa Malaysia and had risen as much as 4.5 sen or 5.7% to a high of 83 sen.

In a note today, CIMB analyst Sharizan Rosely said that the company’s shares could be worth RM1.12 each, after taking into account the company’s cash which constitutes 76% of the firm’s market value.

“We believe Salcon's story remains relatively underappreciated. What will drive profitability and a new stream of recurring income over the coming years are its domestic prospects,” said Sharizan.

He said the company would be focusing on spillovers from the restructuring of water and sewerage assets in Peninsular Malaysia, a key driver for its orderbook growth.

Sharizan added that the company’s all-time high outstanding orderbook of RM642 million and tenderbook of RM2.2 billion still have upsides.

Potential awards include the Rapid raw water supply (RM170 million) project, the Rapid water treatment plant package 16B (RM240 million) and the Langat sewerage treatment plant (RM200 million).

Meanwhile, Sharizan expects Salcon’s property development segment to begin growing this year, with its potential RM1.2 billion GDV joint venture with Eco World Development Bhd to develop a mixed development project in Johor.

From a technical perspective, TA Securities Holdings Bhd said that the stock has a 30-day moving average price of 76 sen, and has advised a “short-term buy” as the stock approaches 81 sen.