PENTA
Pentamaster Corporation Berhad
Company Background
Remisier note
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
*Pentamaster Corp (BUY/RM3.30/Target: RM3.90)*
• *Within expectations.* Pentamaster Corp reported a weaker 4Q24 core net profit of RM15.1m (-38% qoq, -35% yoy), bringing 2024 core net profit to RM79.5m (-10%) which accounts for 96% of our/consensus full-year estimates respectively. Note that 2024 core earnings have been adjusted for the unrealised forex losses (RM14.6m) and other one-off impairment related to inventory and expected credit loss allowance on receivables.
• *2024 revenue dropped 10% yoy,* as higher growth from its factory automation solutions (+61% yoy) was offset by slower sales in its automated test equipment segment (-48% yoy). Segment-wise, while sales in the medical segment were particularly strong (+2.1x) on strong take-up for its intelligent automated robotic manufacturing system (i-ARMS), the automobile segment, which was the largest contributor in 2023, saw its sales halved. Meanwhile, core net profit dropped by a similar quantum of 10%, cushioned by a better product mix from the medical segment.
• *Orderbook remained muted at RM400m; medical as the main contributor.* The group’s 4Q24 orderbook stood at RM400m (on a rolling basis). There was a slight drop of 5% compared with end-Sep 24; we gather that any substantial improvement could be seen only in 2H25 with the absence of strong visibility in the automobile segment.
• This is attributed to a shift in consumer demand amid market fluctuations and bipolarisation in the EV industry. In terms of order mix, the higher-margin medical-related orders from its factory automation solutions commanded the lion’s share, followed by automobile.
• *Unlocking strategic synergies and valuation benefits through the privatisation of its Hong Kong unit.* Pentamaster together with Puga Holdings (Puga) as joint offerors, has proposed the privatisation of its 63.90%-owned subsidiary, Pentamaster International (PIL) which is currently listed on the Hong Kong Stock Exchange (HKSE). Under the joint offerors’ agreement, PCB will increase its stake in PIL from 63.90% to 71.00% through the acquisition of an additional 170.4m shares (or 7.1%), while Puga will acquire the remaining 29.00% (696.1m shares).
• *Upon privatisation,* PIL will be delisted from the HKSE. We view the privatisation initiative as net positive, as it:
a) addresses the valuation disparity between PIL and PCB, which also provides earnings accretion to PCB and a premium monetisation opportunity to PIL shareholders;
b) reduces compliance costs and regulatory burdens associated with the separate listing of PIL; and
c) unlocks strategic synergies through Puga’s shareholders, leveraging their deep expertise and extensive networks in the semiconductor and technology sectors,
which positions PCB to expand its automated test equipment and factory automation solution segments.
• *After model updates, we cut our 2025 earnings by 12%* to account for weaker automobile and semiconductor sales.
• *Upgrade to BUY with a lower target price of RM3.90 (from RM4.40).* This is based on a lower 30.0x 2025F PE (at -1SD below the industry’s five-year forward PE). While 1H25 could continue to see a sluggish demand recovery in the automobile and semiconductor segments, value has emerged on undemanding valuations (implied forward PE of 26x at -1.5SD below mean) with a firmer sign of recovery towards 2H25.
Thanks.
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Research Report by RHB
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Research by CGS
HOLD – TP RM4.15
" Upside hinges on rev-up of automotive unit”
■ We cut FY24-26F EPS by 17-24% to factor in weaker ATE shipment numbers amid soft automotive demand, and a relatively weak 1H24 performance.
■ Traction at its medical segment is encouraging with ramp-up of automation works for its main medtech customer, and onboarding of new customers.
■ Maintain Hold with a lower GGM-derived TP of RM4.15. We think the stock is fairly valued at 29.2x FY25F P/E
Analyst:
Shafiq KADIR
shafiq.abkadir@cgsi.com
Dharmini THURAISINGAM
dharmini@cgsi.com
Nomura turns positive on Malaysia, upgrades their call to overweight from neutral
https://cutt.ly/temhurRP
Malaysia continues to remain positive in the eyes of the global public, and I personally feel as Malaysians we ought to support our own companies where we can.
Nomura cites constructive domestic factors that makes Malaysia an attractive investment exposure to Emerging Markets, including our solid economic growth, increasing FDI, stronger MYR, liquidity from domestic funds and other supportive elements here. They also highlighted that not much foreign funds have invested into Bursa yet.
Key areas of focus include increasing FDI on supply chain shift and cloud and AI infrastructure being developed here.
They pick very famous and big names here, including $CIMB / 1023 (CIMB GROUP HOLDINGS BERHAD), $GAMUDA / 5398 (GAMUDA BERHAD) and $PENTA / 7160 (PENTAMASTER CORPORATION BERHAD) .
Nomura is arguably one of the more optimistic foreign entities positioned in Malaysia, and they were one of the first ones to turn optimistic on Hartalega back in 2022 with a buycall at around RM 1.6-1.8 if I remember correctly.
Take what they say with a pinch of salt, do your own research and analysis, but don't ignore the changing tone of many international organizations towards our country.
$CIMB / 1023 (CIMB GROUP HOLDINGS BERHAD)
$GAMUDA / 5398 (GAMUDA BERHAD)
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Nomura Upgrades Malaysian Stock Market to Overweight on Almost Certain US Rate-cut Cycle
Nomura Global Markets Research has upgraded Malaysian stocks to "Overweight" from "Neutral", on an almost certain US Federal Reserve rate cut cycle which should further ease pressure on the ringgit and stoke a rally in emerging markets.
It said key reasons for its upgrade were the strength of Malaysia's economic growth, artificial intelligence (AI) fuelled investments and appreciating ringgit.
Year-to-date, it said the ringgit has been the best-performing currency in Asia ex-Japan, gaining about five per cent.
Nomura's economics team also expects above-consensus full-year 2024 GDP growth of 5.2 per cent for Malaysia.
It said market internals are positive, with very light foreign investor positioning, rising trading volumes driven by institutional flows rather than retail, resilient and stable index earnings, and reasonable valuations with stocks trading at a forward price-to-earnings ratio of 14.1 times, below the post-2015 average of 15 times.
Additionally, Nomura said the ringgit has appreciated, aided by the broader weakness of the US dollar.
Overall, the firm's foreign exchange (FX) strategy team forecasts continued broad US dollar weakness in the coming months.
"We think this should also aid returns for US dollar-based investors. "Key risk to our view if the AI thematic slows or rolls over, we think, it could also negatively impact some of Malaysia's high-flying AI/data-centre-related names that are part of the index," it added.
Nomura recommends investing in CIMB Group Holdings Bhd, Gamuda Bhd and Pentamaster Corp Bhd.
$CIMB / 1023 (CIMB GROUP HOLDINGS BERHAD) $GAMUDA / 5398 (GAMUDA BERHAD) $PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Source: https://cutt.ly/Temq1gTD
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Research by RHB
Buy – TP RM5.95
“Capturing Growth From Diverse Sectors; BUY"
Keep BUY with new MYR5.95 TP from MYR6.16, 29% upside and 0.4% FY24F yield. Post briefing, management has adopted a more conservative tone for FY24 due to the slower-than-expected automotive sector performance. It is now anticipating a flattish YoY revenue, with earnings to be cushioned by slightly better margins. Nevertheless, we remain upbeat on Pentamaster’s outlook as it stands to benefit from the proliferation of power semiconductor devices driven by advancements in AI, automotive electrification, and medical manufacturing automation.
Analysts:
Miza Izaimi
miza.izaimi@rhbgroup.com
Lee Meng Horng
lee.meng.horng@rhbgroup.com
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Research by RHB
Buy – TP RM6.16
“Strength In Factory Automation Solutions; Keep BUY"
Maintain BUY and MYR6.16 TP, 26% upside with 0.4% FY24F yield. Pentamaster’s 1H24 core net profit of MYR40.3m (+20.3% YoY) met expectations – given the anticipation of stronger quarters ahead from continued growth of its factory automation solutions (FAS) segment. We continue to favour Pentamaster due to its expanding presence in the medical devices industry, which offsets the slower-than-expected automotive recovery and mitigates the cyclical nature of the semiconductor market.
Analysts:
Miza Izaimi
miza.izaimi@rhbgroup.com
Lee Meng Horng
lee.meng.horng@rhbgroup.com
$MPI / 3867 (MALAYSIAN PACIFIC INDUSTRIES BERHAD) $DUFU / 7233 (DUFU TECHNOLOGY CORP. BERHAD) $PENTA / 7160 (PENTAMASTER CORPORATION BERHAD) $VITROX / 0097 (VITROX CORPORATION BERHAD)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - LEMBAGA TABUNG HAJI
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - LEMBAGA TABUNG HAJI
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - LEMBAGA TABUNG HAJI
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
$PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)
Research by RHB
Buy – TP of MYR 6.16
“Twin Growth Engines To Spur Growth; Initiate BUY”
Initiate coverage with BUY and a TP of MYR6.16, 25% upside with 0.4% FY24F yield. Our TP is pegged to 33x FY25F P/E (at +0.5SD from the 5-year mean) and includes a 2% premium, based on its ESG score of 3.1. We are optimistic about Pentamaster Corp's near-term earnings potential, driven by heightened demand in the factory automation solutions (FAS) segment and the recovery in the semiconductor space in the early upcycle, which should boost its automated test equipment (ATE) unit.
Analyst(s):
Miza Izaimi
miza.izaimi@rhbgroup.com
Lee Meng Horng
lee.meng.horng@rhbgroup.com
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Key Takeaways from $PENTA / 7160 (PENTAMASTER CORPORATION BERHAD)'s 22nd AGM
📌 As of the first quarter of this year, the company has an outstanding order book totaling RM400 million, with the breakdown of business sectors as follows: 45% in medical, 30% in automotive, 11% in semiconductor, 9% in electro-optical, and 5% in consumer and industrial products.
📌 The productivity of the first and second factories exceeds 100%, so management will relocate FAS production lines to the newly built third factory to maximize efficiency.
📌 The third factory has been completed and will commence operations in July; however, due to relocation, the medical business will need to reapply for licenses, and production is expected to begin in August, with significant profits anticipated next year.
📌 Management aims to maintain double-digit growth in the company's business over the next three years. They also note that this year's business is somewhat flat.
📌 Management indicates that the company currently employs over 900 staff, with over 600 being engineers. Each engineer generates an average revenue of approximately RM1.2 million.
📌 Management is confident that the business in 2025 will surpass this year's performance.