KUALA LUMPUR (Aug 2): RHB Research expects Pentamaster Corp Bhd (KL:PENTA) to post a better second-half performance, keeping its ‘buy' call on the counter with a target price of RM6.16.
“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,” RHB said.
The research house said this in a note on Friday, after Pentamaster's core net profit for the first half ended June 30, 2024 (1HFY2024) of RM40.3 million, which was 20.3% higher year-on-year (y-o-y), met expectations at 40% of the house's full-year estimate and 36% of the consensus.
Revenue of RM342.2 million for 1HFY2024 was flat y-o-y due to a slow automotive recovery, but this was cushioned by higher revenue from the medical devices segment.
Pentamaster’s order book was maintained at RM400 million, with subdued demand from the automated test equipment segment, while the recovery of orders in the automotive sector was slower than expected.
“The division’s top line fell to RM69.8 million (-4.2% quarter-on-quarter [q-o-q]; -53% y-o-y), largely impacted by the general softness in the automotive end-market.
“The profit before tax margin dropped to 6% (1QFY2024: 16%; 2QFY2023: 28.7%) on lower sales volume, increased employee expenses, provisions for slow-moving inventories, and higher research and development expenditures,” said the house.
Despite this, the automation solutions provider, leveraging on its proprietary intelligent Automated Robotic Manufacturing System (i-ARMS) technology, has seen y-o-y revenue growth in the medical devices industry, due to the prevalence of automation solutions.
RHB highlighted that quarterly core net profit rose to RM23.2 million (+36.1 q-o-q; +92.2% y-o-y) attributed to margin improvement in the factory automated solutions segment, because of favourable changes in the product mix and economies of scale.
At the time of writing on Friday, Pentamaster shares were 15 sen or 3.1% lower at RM4.75, translating into a market capitalisation of RM3.38 billion.