PETALING JAYA: Pentamaster Corp Bhd’s stock soared above 6% amid mixed views by analysts on the company’s future.
The company, which provides automated solutions for various industries such as the semiconductor industry, saw its stock gain some 6.1% to finish the day at RM4.35 in a weaker broader market.
In a report to clients, CGS-CIMB said it expected Pentamaster’s earnings to rebound in the second half of FY2020, driven by resumption of testers delivery to countries like Singapore and Taiwan since July.
“Moreover, we see a stronger recovery in telecommunications demand, underpinned by the group’s strategy to expand its exposure in optoelectronics ecosystem and 3D sensing technology, driven by new applications such as 3D LiDAR on Direct time-of-flight platform and behind-OLED sensing for facial authentication, ” it told clients.
It noted that the group was also broadening its automotive portfolio exposure, which now covers silicon carbide (SiC)-based solutions, IGBT and AC/DC power inverters that will benefit from the proliferation of EV and autonomous driving.
“Apart from that, we like the group’s strategy of diversifying into the medical segment, which offers higher margins and helps diversify its exposure beyond telecommunication, ” the research outfit said.
It has upgraded the stock from “hold” to “add” with an unchanged target price of RM4.80.
AmInvestment Bank in its its research report however cut its recommendation for the Pentamaster stock to “underweight” from “hold” with a lower fair value of RM3.21.
It also cut its FY2020–FY2021 forecasts by 2%-10% after accounting for Pentamaster’s weaker-than-expected second quarter results, and its move to diversify into the medical device business by producing single-use medical devices.
It said Pentamaster’s second quarter results came in below expectations at RM17mil, bringing its first half core profit to RM33mil.
“Although we continue to like Pentamaster due to its positive prospects, we deem that the stock is overvalued given the recent run-up in its share price, ” it told clients.
It noted that Pentamaster’s positive prospects are driven by higher demand of smart sensors in devices, the increasing adoption of Industry 4.0 and margin expansion from portfolio diversification efforts across all market segments.
“Meanwhile, key risks include delays in Covid-19 earnings recovery; and the escalation of US-China trade war tensions leading to order uncertainty, ” AmResearch said.
In its report, CGS-CIMB said the Pentamaster stock has fallen by 14% from its year-to-date high on Aug 5.
“We see the recent pullback in its share price as offering a good re-entry opportunity given the stock is still trading at a 15% discount to the Malaysian test equipment FY2021 sector mean of 31 times, ” it said.
Based on its closing price of RM4.35 yesterday, the company is valued at over RM3bil.
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