EKOVEST: Brace for a rebound

Following a 39.3% slump in EKOVEST’s share price from 52-week high of RM0.62 to yesterday’s RM0.445, we believe its risk-to-reward ratio has turned favourable for investors to accumulate. We identify two major catalysts that could potentially drive its share price higher:

Monetization of DUKE Phase 1 and Phase 2. EKOVEST's strategic plan to monetize DUKE Phase 1 and Phase 2 is considered a potent driver for the group's share price. These assets hold substantial value, possibly even double the company's current market capitalization. The projected disposal gains from these assets could reach RM2-3bn based on consensus estimates.

Construction segment. The construction segment of EKOVEST recorded a 5% YoY increase in 1QFY24, primarily driven by higher contributions from the completion of the SPE highway. This upward trajectory is anticipated to persist, fuelled by the acceleration of progress billings for the Johor Baharu-Singapore Rapid Transit System Link (RTS) project. Furthermore, EKOVEST's tender book currently stands at RM4.7bn, encompassing projects such as the KL Bund and the Istana Link of DUKE Phase 2A.

Back to support; pending for a rebound. Following the formation of a double top on 2 Feb 2024, followed by retracement to the targeted double top target price of RM0.45-0.46, EKOVEST is currently grossly oversold with indicators on the mend. The oversold indicators, combined with the anticipated strong support at the RM0.43-0.45 levels, are likely to draw strong buying interest in the stock, potentially leading to an oversold rebound. A successful breakout above RM0.47 could further reinforce bullish sentiment and drive the stock price higher toward RM0.48-0.52-0.55 region. Cut loss at RM0.39.

Collection range: RM0.42-0.43-0.445

Upside targets: RM0.48-0.52-0.55

Cut loss: RM0.39

Source: Hong Leong Investment Bank Research - 7 Mar 2024