PETALING JAYA: Pentamaster Corp Bhd’s recent share price outperformance has prompted CGS-CIMB to downgrade the stock to “hold” from “add” previously.
It noted that the stock had gained almost 20% in the past three months.
The brokerage revised the stock’s target price to RM5.60, which is based on a 37 times price to earnings ratio (PER) for the calendar year 2022.
“We continue to peg our valuation to 0.5 standard deviation above the sector’s three-year historical mean PER but update the multiples to 37 times from 36 times previously due to the valuation re-rating of the Malaysian technology sector,” CGS-CIMB said.
Pentamaster declined 20 sen to RM5.45 at its close yesterday.
Commenting on its recently announced financial results, the research house said Pentamaster’s gross profit margin fell 0.8% percentage point from 29.8% in the first quarter of 2021 to 29% in the second quarter.
This is despite a stronger sales performance on higher project delivery from the electro-optical segment given the recovery in smartphone demand.
It noted that its first half (H1) results had missed expectations at 41% and 43% of its and the consensus net profit forecasts for the financial year 2021 due to the lower-than-expected gross profit margins.
CGS-CIMB said it had revised down its forecast for earnings per share expectations for 2021 to 2023 by 5%-7% due to this development but it saw a stronger second half for the company.
“The group is optimistic that H2’21 sales delivery will be stronger, driven by resilient demand for its 3D magnetometer tester given new sensor upgrades in next generation smartphones and order backlog for insulated gate bi-polar transistor assembly and test equipment for e-mobility solutions,” it said.
“It is addressing the equipment delivery issue by setting up assembly facilities in China and Japan, which are expected to start in the fourth quarter of the year,” it added.