KUALA LUMPUR (Sept 15): Kenanga Research said Yi-Lai Bhd shares may attract renewed buying interest as its new major shareholder (businessman Au Yee Boon who is now the single biggest shareholder with a 13.9% stake) is seeking to jointly venture into IT solutions business.
In its daily technical highlights note today, Kenanga said the diversification strategy will hopefully turn around the Group, whose existing tiles manufacturing business has been loss-making over the past three financial years.
The research said the financially strong with a debt-free balance sheet that is backed by cash holdings & unit trust investments of RM82.7 million (or 57 sen per share which represents almost two-thirds of its current share price of 87 sen) as of end-June, Yi-Lai is well-positioned to scout around for interesting business deals ahead.
“From a charting perspective, after reaching a high of RM1.09 on Aug 11, the stock has retraced to as low as 85 sen last Thursday on declining trading volumes while its RSI is indicating that the share price is reversing out from an oversold territory.
“The appearance of a pennant formation, which is a bullish continuation pattern, also suggests the share price may ride on the positive momentum going forward.
“On the back of a probable technical breakout, Yi-Lai shares could climb towards our resistance thresholds of 99 sen (R1) and RM1.10 (R2).
“This translates to upside potentials of 14% and 26%, respectively. Our stop loss level is set at 78 sen (or 10% downside risk),” it said.