Listed Malaysian company, Karex Berhad is engaged in investment holding. The Company’s principal business activities include investment holding, manufacture and sale of condoms, latex probe covers, sterile catheters and other rubber products. The Company’s segments include condoms, catheters, and probe covers, lubricating jelly and others. The Company’s products include condoms, lubrication jelly, probe cover and foley balloon catheter. The lubrication jelly is greaseless, non-toxic and water soluble, and is suitable for gynecological use or when additional vaginal lubrication is needed. The probe cover product is specially designed for flexibility and safety during intracavity examinations with ultrasound. The foley balloon catheter product is specially designed for transurethral drainage of the urinary bladder, commonly used on patients anesthetized or sedated for surgery or other medical care. The Company operates in Malaysia, Thailand and the United States. At market close on 13 March 2017, Karex’s share price has fallen to a year low of RM1.98. Karex’s share price has been on a declining trend ever since the announcement of its latest quarterly result on 24 February 2017, in which there was a decline in q-o-q earnings.
From a personal perspective, I may consider this current price may present a good potential trading opportunity due to the following key reasons:
1.Trading Below Keltner Channel
The underlying presumption behind Keltner Channel is the importance of mean reversion. As shown below, Karex appears to be in oversold position, with a number of trading candles below that of the lower band of Keltner Channel. Assuming mean reversion principle applies in this case, we may see a potential rebound in Karex’s share price.
2. Management’s Prospects
According to Management, things do not appear to be as bad as they are.
3. Insiders Trades
Recent buy by one of the directors – at RM2.18 per share
4. Analysts’ Views
Some support from analysts, with a mean target price of close to RM2.40:
Well, one may consider RM2.35 as a potential resistance level to take-profit, whilst RM1.56 may serve as potential support point.
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