KUALA LUMPUR (Dec 7): App Asia Bhd, D'nonce Technology Bhd, RCE Capital Bhd, Supercomnet Technologies Bhd's (Scomnet) and TCS Group Holdings Bhd — these are Rakuten Trade’s top fundamental plays next year.

Also in its radar are AirAsia Group Bhd, Genting Bhd, Genting Malaysia Bhd, Malaysia Airport Holdings Bhd and Tenaga Nasional Bhd, which are its recovery picks for next year.

App Asia — expects to see significant contributions from FY21 onwards
Target price: RM1.18
— Sole service provider for electronic bank confirmation platform (eConfirm.my) in collaboration with Malaysian Institute of Accountants
— Expects to see significant contributions from FY21 onwards; agreement will last for 12 years until 2030, with usage fee of RM15 per successful confirmation
— Anticipates all auditors and banks operating in Malaysia to adopt this e-confirmation platform; it now has 13 major banks and over 400 audit firms participating, covering about 80% of the market
— Next catalyst for growth is their new collaboration with Telekom Malaysia Bhd subsidiary to transform the Yellow Pages Business Directory into a Digital Business Community of e-marketplace
— Presently in a net cash position, with RM13.8 million, and zero borrowings

D'nonce Technology — Riding on the booming glove and E&E sectors
Target price: 88 sen
— Riding on the booming glove sector and electrical & electronics (E&E) sector, seen achieving record earnings in FY21 as their packaging boxes are used by major glove manufacturers
— It makes glove boxes in its Sadao facility in Thailand, where it supplies to major glove makers such as Top Glove Mercator, Halyard, and Sri Trang, with an estimated 30% of the local market share
— Earnings contribution from the Sadao facility will gradually come on stream in 2HFY21 and full contribution from the expansion by FY22
— Also serves the E&E sector with major multinational companies of memory drives and semiconductor manufacturers, providing cleanroom services, box-build assembly, and manufactures plastic components parts mainly used in PCB assembly

RCE Capital — Ample growth room in Malaysia civil servants
Target price: RM2.39
— Provides financing to about 80,000 civil servant customers via salary deduction scheme; ample room to grow given its 5% market share of Malaysia civil servants
— Minimal impact from loan moratorium （less than 0.6% of accounts) as it is a non-bank financial institution providing personal loans
— Benefits from a low interest rate environment, which lowers its cost of funding
— Show consistent improvements of asset quality over the years, while its non-performing loans ratio is at a healthy 4%
— Enjoys net interest margin of about 8%, higher than industry peers; backed by an anticipated dividend yield of over 5%
— Potential inclusion into KLSE Shariah counter by end-2021

Scomnet — Robust earnings growth in medical cables
Target price: RM2.68
— Medical cables to see robust earnings growth on the back of improved demand amidst the Covid-19 pandemic
— Embarking on a multi-year expansion to double production capacity for cables approved by Food & Drug Administration (FDA) and European Medical Agency (EMA)
— Major key clients, namely US-based Edward Lifesciences, Denmark-based Ambu and Mermaid Medical, are major global cardiovascular medical devices companies
— Expected to deliver its strongest-ever performance on record with supercharged growth in earnings per share in FY20 (up 59%) and FY21 (up 68.3%)
— Balance sheet remains healthy with cash pile growing to RM30.8m, and zero borrowings

TCS — Growing orderbook in construction
Target price: RM0.70
— Growing orderbook since July 2020 after listing having secured RM537.7 million new projects with a total outstanding orderbook of RM898.27m with earnings visibility for 3 years.
— Proposed strategic acquisition of 25% stake in Southern Score Sdn Bhd (existing client in property development) for RM30 million via issuance of 60 million new shares at RM0.50. It comes with an aggregate profit of RM60 million over 3 years (RM5 million for TCS based on 25% stake).
— Corporate exercise sweetener of one free warrant for every two shares
— Tenderbook of over RM2 billion, with order book expected grow to over RM1 billion
— Target price of RM0.70 based on 9 times price of earnings ratio FY21

AirAsia — Travel restriction to lift on vaccine development
— Successful development of vaccines will lift cross-borders travel restriction and worldwide travel ban
— While share price is in consolidation mode now following the previous run, Rakuten expects buying momentum to resume as it is a potential recovery play

Genting — Earnings recovery seen moving forward
— Its plantation business under Genting Plantation is expected to benefit from rising crude palm oil prices, while Genting Singapore is expected to see earnings recovery due to well-controlled Covid-19 cases in the country.
— Chart-wise, share price is trading above all key moving averages line, which is a good sign

Genting Malaysia — Paving its road to recovery
— Increasing buying interest seen so far, with anticipation of significant improvement in arrivals to its resorts
— Chart-wise, it is trading above all key moving averages line which is also a positive sign

Malaysia Airports — Airline traffic is expected to improve
—Airline traffic expected to pick up gradually, in tandem with lifting of travel ban on successful vaccine discovery
— Share price has retraced from a recent high of RM5.94, so the current level offers accumulation opportunity for recovery play

Tenaga Nasional — Resilient business model with decent dividend yield 
— Business model remains resilient with a decent dividend yield
— Chart-wise, share price has pulled back from RM11.80, thus present level could be a good entry opportunity for recovery theme stock

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Better corporate earnings and liquidity-driven buying will lift market to 1,770 points in 2021 — Rakuten Trade 
Ringgit to strengthen to 3.80-3.90 against US dollar in 2021 — Rakuten Trade