HeveaBoard Bhd (Trading Buy)

• HEVEA shares could ride on the buying momentum of furniture-related stocks, playing catch-up with its peers as the likes of FIHB (+15.7%), POHUAT (+13.3%) and LIIHEN (+12.8%) saw positive price actions yesterday.
• The stock, which rose 7.9% to end at RM0.41 yesterday, is on the verge of breaking out from a downward sloping price channel that stretches back to April 2018.
• A likely breakout is expected to push the stock towards our resistance target of RM0.50 (R1), before possibly challenging the next resistance threshold of RM0.60 (R2) thereafter. This translates to potential upsides of 22% and 46%, respectively.
• We have pegged our stop loss level at RM0.33 (or 20% downside risk).
• From a fundamental perspective, HEVEA – which made a net profit of RM1.9m (-5.4% YoY) in 1QFY20 – is currently trading at an attractive discount of 45% to its end-March 2020 BV per share of RM0.75, which is backed by net cash & short-term investments of RM116.1m (or 20 sen per share).

Latitude Tree Holdings Bhd (Trading Buy)

• LATITUD is another laggard play on the thematic buying of furniture-related stocks, which are seen as potential beneficiaries of any prolonged US-China trade war.
• Technically speaking, the stock has been trending downwards within a negative sloping price channel since February 2016. Still, an intermediate support could be seen around current price levels as the shares (which rose 7.5% to finish at RM2.15 yesterday) were consolidating inside a tight range recently.
• This could pave the way for the stock to stage a technical rebound to reach our resistance target of RM2.60 (R1) (+21% potential upside) as it climbs towards the upper end of the price channel. A further breakout may then lift the shares to the next resistance line of RM2.95 (R2) (+37% potential upside).
• Our stop loss level is set at RM1.75 (or 19% downside risk).
• Fundamentally, LATITUD – which recently reported a net profit of RM2.6m in 3QFY20 (from a net loss of RM2.1m in the previous year’s quarter) – is presently trading at a steep discount of 65% to its end-March 2020 BV per share of RM6.10, which is backed by net cash & short-term investments of RM81.0m (or 85 sen per share).

Source: Kenanga Research - 2 Jul 2020