HLG Research sees more upside for LION Industries

HLG Research said LION INDUSTRIES CORPORATION [], which had undertaken massive restructuring exercises, had turned around from FY01 net loss of RM473 million to strong FY10 net profit of RM364 million.

In a research note issued on Friday, Sept 17 that Lion Industries’ net gearing position also improved from 2.9 times in FY06 to below 0.2x in FY10.

Lion Industries has been trading above the uptrend line (UTL) since March 2009 but was trapped in a downtrend line (DTL) triangle consolidation from its five-year high of RM3.10.

“However, there are signs of impending breakout above DTL given its positive trend and momentum readings and building its base above the 200-day SMA (around RM1.60) for the past three months.

“We see this as a precursor of more upside ahead, with immediate resistance levels at RM2.03 (38.2% FR), followed by RM2.23 (50% FR) and RM2.44 (61.8% FR). Meanwhile, major support levels are RM1.60 and UTL of RM1.50. Cut loss below RM1.60,” it said.

HLG Research said at RM1.71, Lion Industries is trading at cheap valuations of 4.1 times FY11 P/E (industry 6.6) and 0.3 times (industry 1.0 times).

“ACCUMULATE Lion Industries with a six month technical price target of RM2.23, implying a 5.4 times FY11 P/E (five-year average P/E is 5.5 times),” it said.