KGROUP (0036) KEY ALLIANCE GROUP BERHAD COVID19 TEST KITS SALES TO CONTRIBUTE TO COMPANY'S BOTTOM LINE VERY SOON !!!
COVID19 TEST KITS SALES TO CONTRIBUTE TO COMPANY'S BOTTOM LINE
VERY SOON !!!
Hello to all readers out there. Market is in a retracement mode globally, as COVID19 cases rise in the USA and Dow Jones Industrial Index made a pullback towards its first support of 25,000.
However today, we noticed that our local index had rebounded, with healthcare index leading the way moving up 105.01 points or 4.8%. Some leaders that had moved included TOPGLOVE and SUPERMX.
Having said the above, the stock which I'd like to talk about today is KEY ALLIANCE GROUP BERHAD (KGROUP - Stock Code 0036, ACE Market, Technology - Technology Equipment)
BASIC INFORMATION ABOUT KGROUP
KGROUP was founderd in 1997 with core businesses in a few fields:
i) IT & Cloud Solutions
ii) Trading of Kitchen Appliances, IT and office automation
iii) Property Construction
Market Capitalization : RM 40.83 million
Shares Float : 680.54 million
Website : https://www.kag.com.my/
1. OBTAINED FIRST STAGE APPROVAL TO SELL PCR COVID-19 TEST KITS -
ONLY ONE STEP LEFT BEFORE ABLE TO SUPPLY TO GOVERNMENT
Refer below news link on 19th June 2020, where KGROUP has obtained first stage approval to sell the Care Gene COVID-19 Polymerase Chain Reaction (PCR) test kits manufactured by Well Bio Inc, Korea.
The next immediate step is for KGROUP to obtain the Medical Device Authority (MDA) establishment license, to ensure compliance with local authorities, before being able to distribute the product.
With second wave of COVID-19 rising in China & USA, there is a foreseeable need for regular stock piles of PCR test kits, which the Malaysian government has deemed to be a preferred testing method, as opposed to antibody or antigen rapid test kits.
With the above, the company is getting closer to being able to distribute the test kits and start to generate revenue and profits for shareholders in the near time.
2. HEALTHY ASSET SURPLUS VERSUS LIABILITY
Refer below, the Asset Versus Liability sheet as of latest QR.
As we can see overall assets total RM 125.5 million, and liabilities total to RM 59.8 million. This means a surplus asset of RM 65.7 million.
The total NTA is 12.5c. As at latest closing price of 6c, is about 50% discount from its total NTA
3. TECHNICAL ANALYSIS - BULLISH FLAG PATTERN FORMED - HEALTHY
PULLBACK, BEFORE FURTHER UPTREND
Refer below the basic price and volume chart with key EMAs for KGROUP daily chart :
A few observations on the daily chart chart:
i. Refer Circle 1, KGROUP had hit a peak of 14c in April 2020 on the back of improved trading volume, after which the stock faced a healthy correction downwars
ii. Refer Circle 2, recently upon obtaining first stage approval, the stock had rebounded and hit a price of 8.5c before making another retracement toward its support at 6c
iii. Refer Circle 3, the sellers volume seems to be weak, indicating that shareholders are holding on to the stock rather than selling out of it
iv. In overall, it seems the stock is forming a bullish flag pattern, where the price is consolidating within the flag, and pending for a breakout in the near time
v. The stock is now above its EMA200 and EMA365, indcating that it is on a long term bullish trend
Considering all the above, I opine that current price for KGROUP is attractive due to below:
i) Obtained first stage approval to sell COVID-19 PCR Testing kits, with potential bigger upside in revenue and profit once full approvals obtained and product can start to sell
ii) Healthy asset surplus compared to liabilities, and trading at 50% to its NTA of 12.5c
iii) Chart showing a bullish flag pattern formed, and price is now experiencing a healthy retracement inside the flag pattern, before a significant price movement in near time
LET’S SEE HOW THE SHARE PRICE MOVEMENT IN THE NEAR FUTURE FORBEARING ANY GOOD CORPORATE NEWS.
Disclaimer : The above opinion is never intended to be a BUY CALL whatsoever. I am sharing my observations ONLY based on fundamental; past history; current trading pattern; charts etc. Please make your own informed decision before buying this share or whatever share for that matter.