TEXCHEM’s share price has pulled back from a peak of RM3.99 in June 2022 which was followed by a recent rebound from a
low of RM2.38 (down by 40%) before closing at RM2.94 yesterday.
On the chart, the price will likely continue to trend upwards based on the positive technical signals arising from: (i) the rising Parabolic SAR trend, (ii) the DMI Plus cutting above the DMI Minus, and (iii) the MACD indicator crossing above the signal and zero lines. Hence, the stock could rise to challenge our resistance levels of RM3.27 (R1; 11% upside potential) and RM3.70 (R2; 26% upside potential).
Kenanga has pegged its stop loss at RM2.625, representing a downside risk of 11%. Business-wise, TEXCHEM is involved in four segments: (i) Industrial (i.e. chemicals trading), (ii) Restaurant (under Sushi King), (iii) Polymer Engineering, and (iv) Food.
Fundamental-wise, the group reported net profit of RM13.1m in 1QFY22 (-21% QoQ, +98% YoY), lifted by stronger profit
contributions from the restaurant and food divisions, which mitigated the higher raw material cost effective in the polymer
engineering segment.
Going forward, on the back of the implementation of new transformation strategies for the individual divisions, the consensus is forecasting TEXCHEM would make net profit of RM43 m in FY December 2022 and RM47 m in FY December 2023, which translate to forward PERs of 8.2x and 7.4x, respectively.
