A safe haven in the Covid-19 crisis
The Beginning of an Uptrend Era
• LKL International is principally involved in the provision of medical/healthcare beds, medical equipment, composite dressing, medical peripherals and accessories.
Current price: 20.5sen
Technical Wave 3 TP: 33sen (see below)
• We have seen a recent rally in LKL International’s share price following news of its RM6.57 million contract win and on the expectation of stronger 3QFY20 results, which announced last Friday (http://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=209153&name=EA_FR_ATTACHMENTS).
• Its earnings jumped more than 4-fold and its revenue rose to a new record high since its listing due to higher sales recorded (1) across products segments in medical/healthcare beds as well as medical peripherals and accessories, and (2) geographical markets. Its export sales to overseas markets accounted for 20.9% of the Group’s total revenue.
More and more profit to come as equipment shortages continue
• Not resting on its laurels, LKL International is strategically positioned to capture new market opportunities on the back of the coronavirus disease (COVID-19) outbreak which has prioritised the need for quality healthcare services. The COVID-19 outbreak could last and take 6 months to contain since March this year!
• The Group has received increasing enquiries and purchase orders for critical-care medical items such as hospital beds, patient monitors, ventilators, PPE, heat detectors, probe covers and portable ultrasound units.
• Governments from many countries have been developing economic stimulus packages to cope with the pressures of this outbreak by investing in quality medical equipment. This creates an uptrend in medical-related expenditure from various markets especially in ASEAN, Europe and U.S., which the Group can tap into.
• Amid critical shortage of health resources, our PM yesterday announced an RM1 billion allocation to purchase medical equipment and services - in addition to funds allocation for Kementerian Kesihatan Malaysia of RM500 million.
• With a proven track record based on a recent contract awarded from Sarawak Government and has also been supplying medical equipment to general hospitals in Peninsular, LKL International is the likely winner for medical supplies from this RM1 billion stimulus package. This should bode well for its 4QFY20 (Feb - April) and FY21 (April 2021 ended) earnings!
• Malaysia is currently the nation with the highest number of confirmed COVID-19 cases in Southeast Asia. The number of cases in other ASEAN nations also continue to spike and are facing shortages of medical supplies.
• In fact, the worst-affected countries - U.S., Italy and Spain have not yet reached the peak of coronavirus contagion. They have run out medical equipment as coronavirus cases surge in the biggest infectious disease crisis. The medical supplies on an international market have been sucked dry.
From a Technical Perspective
• The recent share price rally and followed by its profit-taking last Friday and a possible negative sentiment on weak closing DJIA last Friday is a healthy correction in this major Bullish Wave structure.
• The bull needs a rest before resuming its rally, in the form of Wave 3 structure. This is a great chance to accumulate!
• The bullish landscape remains intact as the share price has maintained above 5, 20, 50 and 200-day S/EMA lines to the extent golden crossover of 5 and 50-day E/SMA. Another potential major significant golden crossover of 20 and 50-day E/SMA is approaching.
• MACD histogram is improving above the zero-line.
https://klse.i3investor.com/blogs/trendtrading2030/2020-03-28-story-h1485695173-This_stock_will_do_VERY_well_in_the_near_term_as_the_best_is_yet_to_com.jsp
